Danielle Smith is walking the oil and gas industry into a trap

Loyalty, like beauty, is in the eye of the beholder. For many Canadians, Alberta Premier Danielle Smith’s conspicuous campaign to curry favour with Donald Trump — and favourable treatment for the oil and gas industry — was an affront to Canada’s national interests. As one former federal trade negotiator said, “the fact that Alberta has gone in a different direction through these last few weeks has significantly undermined Canada’s position.”

Smith, though, was spinning this rogue diplomacy as an unqualified success even before Trump pushed pause on the promised tariffs. “The sustained diplomatic efforts and advocacy of the Government of Alberta and industry over the last couple of months is a primary reason why Canadian energy including oil, gas, critical minerals, electricity, and uranium received a reduced tariff of 10 per cent,” she said in an op-ed for the National Post that called for — you guessed it — more pipelines. 

In time, though, this could be a textbook Pyrrhic victory for Alberta’s premier — one that does far more damage to the oil and gas industry than anything this supposedly anti-oil federal government could dream up. There is, first and foremost, the damage it does to her desire to see more pipelines built and more oil and gas produced in Alberta. Her willingness to sacrifice agriculture, forestry, mining and manufacturing sectors may get overlooked in her own province, but the rest of the country will not be nearly as charitable. To them, it will look like Smith went into business for herself at the cost of their own industries, jobs and businesses. 

Why, then, would people in Ontario, Quebec, the Maritimes or British Columbia ever support the new pipelines Smith says are so crucial? If Trump’s tariffs persist and Smith refuses to countenance an export tax on Canadian energy, she will vaporize whatever goodwill there might be right now outside of Alberta toward the idea of new pipeline projects. If anything, she might harden the resolve of those opposed to them, and expand their ranks and reach. 

That’s especially true given the rhetoric being used by some of her closest supporters. “Dear Rest of Canada,” her chief of staff said on social media. “Are you ready to build Energy East and Northern Gateway yet? How about cutting absurd taxes and anti resource development laws to be more competitive? Or are we just going to sit back and listen to this sitting down while wrapped in the flag?”

If Smith and her government actually want to capitalize on this window of opportunity for new infrastructure, they have to put more on the table than just the usual show of petulance and posturing. They could, for example, promise to match any federal investment in a new pipeline on a dollar-for-dollar basis with direct funding for emissions-reducing technology. They could eliminate the anti-renewable energy regulations they’ve imposed. If they really wanted to change people’s minds outside the province they could even embrace the federal government’s emissions cap and start helping industry work towards meeting it. 

That won’t happen, of course. But her province’s never-ending quest for more pipelines isn’t the only potential casualty here. By repeatedly reminding the United States and its MAGA president how much they depend on Alberta’s oil exports, Smith risks giving them a reason to do something about that. In the near term, that might mean a lower tariff on oil exports from Canada. But in the medium and longer ones, it might mean finding ways to replace it entirely, whether that’s with Venezuelan imports or massive subsidies to refineries that allow them to retool and process more American barrels of oil. 

That’s especially true given Trump’s near-pathological obsession with trade deficits. Amid all the talk about fentanyl and immigration and the posturing around turning Canada into the 51st state, it’s his focus on America’s trade deficit with Canada — one driven almost entirely by Alberta’s oil and gas exports — that remains the most consistent. As Rory Johnston, an oil market analyst and Commodity Context newsletter author, told Heatmap’s Robinson Meyer, “I don’t know that anyone has a great sense of where Trump’s true philosophical anchor is, other than that we are now getting a clear picture that he views any and all trade deficits as a sin unto themselves.”

If that’s the case, Smith’s oft-stated goal of doubling oil and gas production will be viewed as a threat, not an opportunity. It’s also one Americans are increasingly able, and willing, to fend off. “Americans, at some level, are convinced that they can spin up a domestic industry in anything they want to,” Canadian political scientist Peter Loewen, who’s now the Harold Tanner Dean of the College of Arts and Sciences at Cornell University, told Paul Wells recently. “They're better at getting stuff done over a 10-year time frame than we are, and they know it.”

This is all ironically reminiscent of the decision by former premier Ralph Klein in 2006 to bring an oilsands mining truck to Washington, D.C. with him for “Alberta week.” By parking the giant truck (at the Smithsonian, of all places), Klein hoped to draw America’s attention to Alberta’s role in supplying their country with oil and gas. Instead, he drew its attention to the environmental mismanagement of the oilsands — and helped paint a giant bullseye on its metaphorical back for U.S. environmental organizations and activists. For all the blame that his successors and federal Conservative colleagues have cast on everyone from Justin Trudeau to Greta Thunberg, it was actually Klein and his hubris that inspired the green movement’s opposition to Alberta’s oilsands. 

Danielle Smith is in the midst of making the same mistake. The only difference is that it won’t be the environmentalists who are the problem. Instead, it will be the very politicians and political movement that she’s trying so hard to curry favour with right now. Yes, trying to replace Canada’s oil exports with domestic production would be ruinously expensive and economically idiotic. But so is the trade war that Trump launched against his two closest neighbours and allies. Does that sound like someone whose rationality we should stake our future on?