The Tenth Question Facing Alberta

Editors’ Note: This column touches on politics, so please note that MarketMinder is intentionally nonpartisan, favoring no party nor any politician, assessing developments solely for their potential market effects.

On October 19, voters in Canada’s energy-rich province of Alberta will head to the polls and vote in a 10-question referendum that is stirring much intrigue north of the border. In it, many see echoes of Brexit on a potentially more complex scale—and worries are growing of uncertainty dogging business investment, the housing market and even Canadian stocks. But, for investors, concern over this seems premature. The question at hand isn’t whether Alberta immediately heads for independence. If, and I mean if, Albertans vote for independence, the issue is likely for 2027 … 2028 … or even later.

While many outside the Great White North seemingly cast Canada as a single monolith, reality and history differ. Its provinces have many regional differences, not dissimilar from the US’s. So talk of a province seeking self-governance isn’t new to Canada. But historically, the issue centered on French-speaking Quebec, which obviously has a cultural and linguistic divide versus the rest of the country. It has long had an independent streak, embodied in federal politics by the Bloc Quebecois party. (The Parti Quebecois is the provincial version, which is leading local polls ahead of October 5 elections.^[i]) The popularity of Quebec secessionism is down in recent years, but the movement lives on.

Alberta’s push differs. The divide is newer, chiefly centering on economic policy. The province is unique in Canada in its mineral riches. It is home to Canada’s huge oil reserves and the industry dominates the region’s economy. Hence, Edmonton’s legendary hockey team is the Oilers. Calgary’s Flames are a carryover from when the team was in Atlanta, but you can make the case that it ties into energy, too.

Most analysts date the Albertan independence push to the early 1980s, when the Iranian revolution spiked oil prices, which the Canadian federal government in Ottawa (like many globally) responded to with energy price caps.^[ii] Capping prices ostensibly benefited the rest of Canada—energy consumers—but at Alberta’s expense. It meant producers couldn’t capitalize on the lofty prices. This was a short-sighted move, given the industry’s long cycles and investment timelines. (Periods of lofty prices make up for times of low prices, helping justify investment that is long-term by nature.) To many observers, this fostered a fledgling independence movement that has never fully gone away.

More recently, environmental policies from Ottawa have incensed many Albertans who see the moves as threatening their lifeblood industries. Now, to be clear, much of that zeitgeist seemed tied to policies from former Prime Minister Justin Trudeau. Current Prime Minister Mark Carney has, by contrast, aimed to cut a middle ground. He seemingly seeks to remake Canada’s image into a sensible, global oil supplier free of the Middle East’s entanglements—a “safe hand” on energy. But it apparently didn’t placate those in the independence movement. Late last year and early this year, they began gathering signatures to hold a referendum on Albertan independence. They needed just under 180,000 signatories on a petition for it to advance. In mid-July, Elections Alberta confirmed they got roughly 280,000. One problem: A court has already ruled the petitions violated Canada’s constitution, which would require the assent of First Nations groups.

When the petitions were circulating, Alberta Premier Danielle Smith sought to ride the seemingly ascendant movement by announcing a nine-question referendum would be held October 19. The questions initially all surrounded immigration and constitutional matters, which would serve as a statement of intent for negotiations to get more quasi-devolved power from Ottawa. But after the court’s ruling, Smith changed tack and added a tenth question. Called the “separation question” it seeks to take the Alberta public’s pulse on leaving Canada. Not physically, of course, that is impossible—Alberta is landlocked. But rather, becoming an independent nation.

Or … sort of. The question Albertans will weigh in October is this:

Should Alberta remain a province of Canada or should the Government of Alberta commence the legal process required under the Canadian Constitution to hold a binding provincial referendum on whether or not Alberta should separate from Canada?^[iii]

So it is a referendum on whether to start the (likely lengthy) legal process to hold a referendum on independence. A vote on whether to have a vote.

Still, coverage of this recalls Brexit, and there are some undeniable parallels. Smith, like the British Tory government that backed the 2016 referendum on EU membership, favors staying in a union with Ottawa. She has been quite clear on that. She says the question is more about giving a voice to the petitioners the court ruling silenced. That is all fine and dandy, but already headlines sweating everything from professional licensing to mortgages to business investment and more abound. Some Canadian observers see it as a source of uncertainty that could weigh on markets. Especially if it further enflames Quebec’s secessionist movement. Already, the Parti Quebecois is promising to hold a referendum within four years if it wins power in October.

In many ways, if Alberta left Canada, it would be much more complex than Brexit. Britain had its own central bank, its own currency, its own bonds and debt. It had its own passports and economic agencies to negotiate with parties abroad. Virtually all that is lacking in Alberta. Besides, what would a map of North America look like? Would the Trans-Canada Highway have to re-route through the Northwestern Territories to link British Columbia to points east?^[iv]

Perhaps the better comparison is the failed 1995 Quebec independence referendum that researchers found stoked significant uncertainty over Quebecois stocks.^[v] The paper found that Quebecois stocks with revenues centered locally suffered before the vote. After, when it eventually became clear 50.6% of voters had voted against the referendum, they reacted positively. Uncertainty cleared, delivering relief. So there is some evidence stocks focused on Alberta could be affected by an independence referendum.

But even this comparison is hasty, if not flawed—for four key reasons.

1. One, again, the question voters will weigh in October is a vote on whether to eventually hold an independence vote. This differs dramatically from the Quebec referendum, which was binary (in or out).
2. Even if there is an eventual independence vote and Alberta elects to leave, the Canadian constitution requires separation negotiations with the federal government. That would be absolutely necessary here, because of Alberta’s important economic footprint and the need to build economic institutions. But this is going far into things that are distant possibilities—not probabilities. Markets weigh the latter over the next 3 – 30 months.
3. Alberta is not Quebec. According to polls, some 60% – 65% of Albertans favor staying Canadian versus independence. It also remains to be seen if Carney’s push to better champion energy will steal some of the movement’s thunder.
4. Most of the stocks in Alberta are tied to Energy or Materials, which are dominated by global pricing. A regional political movement seems unlikely to overwhelm those factors for long.

Ultimately, the Alberta independence story is interesting. And it does highlight divides in Canada many outsiders gloss over. But for markets, it looks mostly like a sideshow for now.