By most measures, Alberta is the wealthiest province in Canada, leading the country in GDP per capita, highest median after-tax incomes, and greatest fiscal capacity, to name but a few indicators. The province is also pumping more oil than ever before and is enjoying higher royalties and tax revenues thanks to the market access provided by the Trans Mountain and LNG Canada pipelines.
But to listen to the leaders of Alberta’s separatism movement, you’d think the province is the sad, mistreated offspring of Confederation. In their telling, it’s subjected to unfair financial burdens, inhibited in its natural-resource management and generally trod upon by the rest of the country. Alberta’s referendum on Oct. 19 will indicate how deeply those sentiments have penetrated Albertans’ minds; the fact that it’s happening in the first place shows they’ve already settled in.
And yet, many of the numbers don’t add up. Here’s how ideas, plans, and dreams of money are driving Alberta’s referendum, and the real consequences they may have.
Separatism’s money-drivers
There are two broad buckets of financial and economic matters to consider when it comes to the separatist movement: the alleged pressures driving it, and the consequences of it existing at all. Beyond the referendum’s outcome, the fact that’s happening is already changing things.
In the first bucket, people favouring separatism say Alberta pays more to Canada in taxes than Albertans they get back in benefits. On top of that, they argue that federal policies – including legislation around carbon pricing and the oil-tanker ban along much of Canada’s west coast – have inhibited investment in oil and gas and constrained the province’s ability to get top dollar for its products. They also argue that an independent Alberta would have a surplus in the billions within the first year of independence.
It’s true that the average Albertan pays more taxes to the federal government than the average Canadian, but the reason is simple: Albertans are relatively prosperous, with a young, well-paid workforce. Even with the same tax rates as other Canadians, they pay more because of higher incomes and more extravagant spending patterns. On average last year, Alberta led the country in the price of new cars purchased.
On the natural resources front, there are legitimate concerns that major projects are hard to build in Canada – see, for example, the tortured histories of the Northern Gateway, Keystone XL and Energy East pipelines. Prime Minister Mark Carney’s Major Projects Office, which aims to streamline the regulatory reviews of ‘nation-building’ projects, may help in this regard, and Carney’s government has already scaled carbon pricing back considerably.
Either way, Alberta’s oil and gas companies are hardly struggling. They've posted stellar results this year and spent $30.9 billion on capital expenditures in 2024, up 2.2% from a year earlier. Those are hardly the numbers of a hamstrung industry, and with Trans Mountain XL now carrying crude oil to the Port of Vancouver and LNG Canada exporting natural gas from Kitimat, BC, they’re expected to remain strong.
As for the province’s broader fiscal situation, Alberta is currently projecting a $2 billion surplus this year, thanks primarily to US President Donald Trump’s ill-advised war in Iran, which has driven up the price of oil, and therefore the royalties flowing into the province’s coffers.
It’s hard to see how Alberta would have an easier time addressing pipeline constraints as an independent country: It would remain landlocked, and would be negotiating with foreign nations to get resources to tidewater rather than with provincial cousins.
It’s true that the average Albertan pays more taxes to the federal government than the average Canadian, but the reason is simple: Albertans are relatively prosperous, with a young, well-paid workforce.
To combat this challenge, lawyer and separatism advocate Keith Wilson has said Alberta will lean on its deep ties with the US to ease the fallout, and indeed the current US administration has shown interest in this referendum, with US Treasury Secretary Scott Bessent going so far as to say Alberta was a potential “natural partner” of the US.
But Alberta knows from experience that reliance on a single trading partner is a bad idea, having long bemoaned the discounted price the province gets for its oil. Historically, Albertan oil sent to the US traded well below the world-reference West Texas Intermediate, often by more than US$20 per barrel. The Trans Mountain Expansion, operational since May 2024, has narrowed that by about US$3 per barrel, resulting in an estimated $4 billion in additional industry revenue as of last April. LNG Canada is expected to have a similar impact on natural gas prices. The single-customer risk has never been greater given the current US administration, which treats trade relationships as leverage to strong-arm its partners.
Another concern separatists cite is the federal government’s equalization program, whereby Ottawa redistributes money to ensure provinces can provide reasonably comparable public services at reasonably comparable tax rates. By virtue of living in a wealthy province, Albertans contribute more to equalization than other citizens and have not drawn from it since the 1960s.
To be fair, there are a couple of structural flaws with equalization. It gets wonkish, but the formula treats resource revenue differently from personal- and corporate-tax revenue. Foregone revenue from resource development – the money a province fails to make by, say, not exploiting its own oil reserves, or pricing its goods artificially lower – isn’t accounted for. This is a particular sticking point for Alberta, which watches as its equalization payments go towards Quebec, a province that has banned oil and gas development within its territory, and keeps electricity prices artificially low. In one view, Quebec is being rewarded for not developing its own resources, and Albertans are picking up the bill.
It’s possible that Alberta’s separatist motivations go beyond individual economic drivers and are actually the symptom of a much larger overarching, anti-Ottawa grievance.
There's also concern over equalization’s 'fixed-growth rule,' which ensures the total equalization payment grows roughly in line with the economy. As the Fraser Institute’s director of Alberta policy Tegan Hill has pointed out, the rule was intended to act as a ceiling on equalization payments, but it’s had the opposite effect: the total amount of payments has grown even as the gap between “have” and “have not” provinces has shrunk. The actual impact of this perceived unfairness, however, is actually quite low: as University of Calgary economist Trevor Tombe has pointed out, eliminating resource revenues and the fixed-growth rule would only shrink the cost of equalization by roughly 1%.
With these critiques adding up to little, it’s possible that Alberta’s separatist motivations go beyond individual economic drivers and are actually the symptom of a much larger overarching, anti-Ottawa grievance. If that’s the case, then there are non-economic concerns the federation would do well to resolve. Alberta does not have the appropriate number of Senators and Members of Parliament for its growing population, particularly when compared with Atlantic Canada. The four Atlantic provinces, for instance, have 30 senators for a population of 2.7 million people. Alberta, with 5.1 million people, has six. The disparity is less egregious in Parliament, but even there, Alberta would have three more MPs if representation-by-population were strictly adhered to. Remedying those legitimate democratic deficits would help soothe other wounds, whether they be real or imaginary.
The costs of separation
Alberta Premier Danielle Smith has cited the potential cost of separation in the hundreds of millions.
Getty Images
In the second financial/economic bucket are the costs of separatism, and the uncertainty engendered by the very talk of it.
Let’s first consider the hard costs of setting up a new country. The separatist movement has generally painted a rosy picture here. The Alberta Prosperity Project, the group behind Stay Free Alberta, projects that the transition to an independent Alberta would be a modest $6 billion – and that’s with the new country eliminating personal income taxes.
Others, however, have put the figure much higher. A recent report from the Canada West Foundation put transition costs at a minimum of $200 billion, with ongoing costs of $50 billion annually. Those include the costs of taking over federal transfers for health care, education, and other services; setting up new trade agreements and diplomatic services; and taking over federal responsibilities such as border and customs agencies, defence, taxing authorities, treaty obligations, and more.
Separation would also see Alberta assume its share of the federal debt. The Canada West Foundation estimates that Alberta’s debt per person would rise from about $27,000 to $80,000–$95,000 after separation. That’s an increase of almost 3.5 times, and would be coupled with higher interest rates, since Canada’s debt rating is stronger than Alberta’s current rate.
Even Premier Danielle Smith, the one most responsible for unleashing this unnecessary tribulation on the country, has cited potential costs in the hundreds of billions.
The price of uncertainty
It’s important to note that Albertans are not being asked if they want to separate, just if they want the government to start the process of holding a binding referendum on the matter. But even a referendum on having a referendum comes with costs.
Carlos Freire-Gibb, a business professor at MacEwan University in Edmonton, has studied the costs of separation movements in Quebec, the UK, and Spain. He says the real economic damage comes from the mere talk of separation – businesses tend to defer investment or take it elsewhere when faced with legal and regulatory uncertainty. “It creates havoc in the business environment, leading to enormous economic losses for everybody,” says Freire-Gibb. “Trust evaporates, and the resulting costs become nearly impossible to quantify.”
He gives the example of the Trump administration’s tariffs: When Trump threatens – or imposes, or threatens to impose – tariffs, then governments, businesses, and individuals change their decisions. The jarring nature of his tariff-policy shifts, where subjected products and imposed percentages change on the fly, only compounds the problem. “It sends a message to US buyers and Canadian producers that trade is unreliable, forcing many to alter their spending and planning,” says Freire-Gibb.
The real economic damage comes from the mere talk of separation – businesses tend to take investment elsewhere when faced with legal and regulatory uncertainty.
This uncertainty is already affecting businesses in Alberta. One survey from the Calgary Chamber of Commerce found that 80% of members think the separation discussion is negatively affecting the economy. Almost 50% “are very or somewhat likely” to leave the province if it separates, and one in three Alberta workers are "significantly exposed to disruptions to trade with Canada and the rest of the world."
A second Chamber-commissioned study, authored by Tombe, used Brexit as a comparison. Based on the UK’s experience, Tombe estimates that an 8% increase in trade costs – brought on by regulatory differences, potential tariffs, and the province’s exclusion from international trade agreements – could cost Alberta 175,000 jobs and shrink the economy by $62 billion a year.
Quebec’s two separation referendums, in 1980 and 1995, highlight the economic consequences of separation debates. Even before the 1980 referendum, businesses began fleeing the province. Montreal had historically been Canada’s leading financial centre, but during the 1970s, Royal Bank of Canada, Bank of Montreal, and Sun Life Assurance all moved key head-office functions to Toronto. Canadian Pacific Railways relocated its headquarters from Montreal to Calgary following the 1995 referendum, and the overall situation also affected the stock returns of Quebec-based firms, particularly those with greater exposure to political risk.
Even if citizens respond in the affirmative, that would be followed by years of negotiations as the province tried to extricate itself from all the machinery of the nation.
The uncertainty will last for a decade: Keep in mind that the October 19 referendum does not ask Albertans if they want to separate. It asks if they want the province to hold a referendum on separation. Even if citizens respond in the affirmative and a referendum were to be held, that would be followed by years of negotiations as the province tried to extricate itself from all the machinery of the nation.
There’s no question that Alberta is financially stronger within Canada. Separation would be an own-goal of epic proportions. The province is also filled with proud Canadians who don’t want to separate, and recent polling predicts a resounding win for the 'remain' side. That may end talk of separation for a while, but the repercussions of asking the question in the first place could last for much longer.
