Establishing independent Alberta would be costly, unpredictable: government-commissioned report

Alberta’s separation from Canada would be costly in the short term and highly unpredictable in the long term, a new report from the University of Calgary School of Public Policy released Wednesday says.

The report was commissioned by Alberta’s government in June.

It lays out two possible scenarios — a “smooth” option, in which negotiations to exit from Canada would be quick and favourable to Alberta, and a “difficult” option, in which those negotiations would be protracted and unfavourable to the province.

“There is certainly a scenario where Alberta’s economy and finances could be better after separation, once a transition period is over,” the report reads. 

“However, there is also a scenario where Alberta’s economy could be weaker and its finances much worse, not just immediately but for many years to come.”

Earlier this year, Premier Danielle Smith estimated it would cost almost $400 billion in transitional costs, plus somewhere in the neighbourhood of $25 billion to $50 billion in annual costs for Alberta should it separate from Canada.

In the short term, the U of C report states that separation would cause significant economic disruption for Albertans, with the cost of establishing a new country ranging between $50 billion and $170 billion over a five-year period.

The report states that separation would give Alberta the freedom to set its own environmental laws, which could potentially boost the energy sector.

However, independence could also make the province more dependent on shipping its oil through the United States. The U.S. might be co-operative, the report states, or it might try to “take advantage of Alberta’s lack of other options.”

In addition, the report states that an independent Alberta would be vulnerable to swings in oil prices, no matter what eventual situation is worked out in relation to its ability to get oil to markets and its production capacity.

“The panel’s assessment emphasizes that both the scenarios outlined in the report highlight how costly it would be for Alberta to separate from Canada in the short term and also highlight the substantial amount of uncertainty Alberta would face in the long term,” wrote Finance Minister Jason Nixon in a statement.

“Alberta’s government has always been clear: we support a strong and sovereign Alberta within a united Canada, and that is what we will continue fighting for each day.”

Over the past months, various groups ranging from the pro-independence group the Alberta Prosperity Project to the Calgary-based public policy think-tank Canada West Foundation have released reports, trying to sketch out what, exactly, it might look like in practice should Alberta decide to separate.

The APP has estimated a transition cost of approximately $6 billion. For the Canada West Foundation, former Treasury Board senior manager Lennie Kaplan estimated that setting up an independent Alberta would cost more than $200 billion, with ongoing costs of more than $50 billion annually.

Expert advisory panel response

After it picked the University of Calgary to study the potential costs if Alberta were to leave Canada, the provincial government also formed an “expert advisory panel” to review the report and provide its own assessment.

The panel was led by economist Jack Mintz and also included business leaders and former politicians Janice MacKinnon, a former NDP finance minister in Saskatchewan, and Ted Morton, a former Progressive Conservative finance minister in Alberta.

Morton was one of the authors of the well-known “Alberta firewall” letter, which advocated for Alberta to exit the Canada Pension Plan and establish a provincial police force, among other ideas.

The review panel’s assessment was also released Wednesday.

In it, the panel wrote that it agreed with the School of Public Policy’s view that many of the factors related to the outcomes of separation are not easily predictable.

But the panel wrote that it supported the report’s conclusion that significant costs are incurred in the short term and that, in the long run, net economic and fiscal benefits and costs are “highly uncertain.”

“We wish to remind Albertans that separation has important economic and fiscal impacts, not only on Alberta but also the rest of Canada,” the assessment reads.

“As the overview report points out, the separation of Alberta would harm Canada as well. This would especially be problematical at a time when trade uncertainty and geopolitics are challenging enough to Canada and other economies.”

Without Alberta, Canada would be less of a “middle power” with 15 per cent lower GDP, making it about the same size as Australia and Mexico, the report states.

More to come.