Alberta Energy Good Guy*

August 14, 2001

From Alberta, Energy's Good Guy (and Bad Guy)

By ANTHONY DePALMA

ALGARY, Alberta — The oil industry here was still in its infancy when Ralph Klein was growing up. So instead of working on oil rigs, as many young Calgary men do nowadays, he spent time laying concrete sidewalks with his father, Phil, a part-time masonry contractor who also wrestled on the professional circuit under the name "Killer Klein."

"Sometimes he was the good guy," Mr. Klein said of his father's wrestling persona, "but usually he was the heel."

Now that the younger Mr. Klein is the premier of Alberta, Canada's leading energy-producing province — a chunk of mountains, prairies and forests larger than France that holds vast amounts of oil and natural gas — he spends a fair amount of time visiting the oil rigs that have become the symbol of Alberta's economic success. And like his father, he has developed dual identities, at least when it comes to exploitation of the province's natural resources.

Usually, he seems to be one of the good guys, the friendly fellow with cowboy boots and a big grin who dropped out of high school but went on to become premier. That was the face he wore when he recently visited Washington and told Vice President Dick Cheney that Alberta was ready to sell as much energy as the United States wants to buy. He then invited Mr. Cheney to fish the Bow River.

Although Mr. Cheney has not yet decided whether to cast a line in the Bow, Washington welcomed Mr. Klein because his willingness to deal fits well with President Bush's plan for a continental energy policy aimed at reducing dependence on oil from outside North America.

But when he needs to, Mr. Klein, 59, is ready to play the heel. He has made clear that he will try to block future energy deals with the United States if Alberta's interests are not taken sufficiently into account. And he has the power to do so.

Canada's Constitution makes Mr. Klein a kingpin of Canadian energy. Provinces, not the federal government in Ottawa, control most natural resources. And Alberta has most of Canada's energy resources.

"We would intervene," Mr. Klein said in an interview. For instance, he said, he wants any natural gas pipeline from Alaska that passes through his province to give local refineries the chance to strip away some byproducts used to make petrochemicals. That may be, he acknowledged, "a self-serving interest," but it is one on which he would not give an inch.

In recent years, Canada's energy wealth has been spread around a bit. Atlantic provinces have started producing offshore oil; a natural gas pipeline has been built from Sable Island off Nova Scotia to Massachusetts, and demand is rising for electricity from Quebec's dams.

But Alberta remains the mother lode of Canadian power. The province produced 65 percent of Canada's crude oil, 80 percent of its natural gas and 100 percent of its bitumen, a usable oil made from Alberta's inland sea of oil sands — the largest such deposits in the world.

In some respects, Alberta is already the equivalent of a North American energy sheikdom. The province supplies more than 900,000 barrels of oil to the United States every day, and sends 2.4 trillion cubic feet of natural gas a year across the border, some of it going as far as Brooklyn.

Mr. Klein, as Alberta's leader, has been eager to keep open the valves that allow energy to flow across the border to the United States.

But if he disagrees with decisions made elsewhere, he could become one of the biggest roadblocks to Canada's participation in a continental energy policy. He recognizes the right of the Canadian government to sign international agreements, he says, but insists that Alberta and the other provinces be closely involved in negotiations from the beginning.

"Not including the provinces would be like Joe and Peter talking about selling Ralph's house without Ralph's involvement," Mr. Klein remarked.

Canadian officials — used to wrestling with the provinces over jurisdictional matters — have so far been careful but firm in responding to Mr. Klein's demands for a seat at the energy-policy negotiating table.

"When it comes to representing Canada in any international forum, obviously that is the responsibility of the government of Canada," said Ralph Goodale, the federal minister of natural resources, "and we will discharge that responsibility on behalf of all Canadians." Mr. Klein's anxiety about being excluded from the negotiating table is misplaced, he said, because at this time there is no table.

"There is no continental energy policy as such," Mr. Goodale said. "What we're pursuing is an expansion and the proper functioning of the North American energy markets."

Whatever the effort is called, the United States is intent on securing further stable sources of energy to help ease potential shortages like the one that disrupted California early this year. A task force led by Vice President Cheney concluded that one of the best ways to enhance the United States' energy security is to increase the flow of oil, natural gas and electricity from Mexico and Canada, partners in the North American Free Trade Agreement that already provide a significant portion of American energy needs.

Canada was the United States' largest source of foreign oil last year, providing 15 percent of imports. Mexico, which provided roughly 12 percent, was not far behind the second- and third-leading suppliers, Saudi Arabia and Venezuela.

In natural gas, Canada — and Alberta — dominate. The United States imports about 15 percent of the natural gas it uses, and most of that comes from Alberta.

Mr. Klein, of course, is not the only public official involved in pursuing a continentwide energy policy. After meeting in April, President Bush, President Vicente Fox of Mexico and Prime Minister Jean Chrétien of Canada agreed to form a North American Energy Working Group, made up of senior officials from each country.

The group convened for the first time in Washington at the end of June and set an agenda for a number of issues including pipeline construction, cross-border power regulation and research into new technologies.

Of all those involved, few will occupy a more prominent position than Mr. Klein. Yet, unlike Mr. Cheney and Mr. Bush, who have worked extensively in the energy industries, most of what Mr. Klein learned about energy comes from his time in office and before that as a local television and radio reporter.

"It's impossible to be in the news business here without knowing something about the oil industry," he said.

After 11 years as a popular local television personality, known to haunt Calgary night spots and show up late for work, Mr. Klein ran successfully for mayor of his hometown. He was re-elected twice, in 1983 and 1986, and played host to the 1988 Winter Olympic Games here.

In 1989 he moved to the provincial legislature, and became Alberta's environment minister. His style of governing is often described as laid- back, and voters seem to find it easy to identify with him. In 1992 he was elected leader of the provincial wing of the Progressive Conservative Party, and later in the year was sworn in as premier of Alberta.

He has been re-elected twice; in fact he has never lost an election. Mr. Klein is now Canada's senior province leader, and one of the country's most popular politicians.

In his approach toward government and public spending, Mr. Klein is considered a close cousin to fiscal conservatives in the United States. He was the first of Canada's province leaders to successfully attack government spending, whittling down the deficit and reducing taxes. Alberta is the only province without a local sales tax, and its personal income taxes are the lowest in Canada.

"He understands this province very well, and he knows what works and what doesn't work in politics," said David Bercuson, a professor of political science at the University of Calgary. "Ralph has the knack of listening to people."

For instance, when an energy-deregulation bill took effect early this year and prices spiked, Mr. Klein pushed a $4 billion rebate through the legislature to cover the added costs and then some. The rebates helped a number of Albertans avoid paying anything for energy this past winter.

Not everyone was pleased. "Investing $4 billion in energy efficiency initiatives would have been a better use of the money than dishing out checks," said Robert G. Hornung, policy director of the Pembina Institute, an environmental research center in Alberta. "But there was a provincial election this spring, and the two events were unquestionably related."

Mr. Klein's budget-roping skills owe plenty to the energy boom in Alberta. Rising prices for oil and natural gas have produced a flood of revenue.

And recently, American oil companies have scooped up Albertan producers, taking advantage of the weakened Canadian dollar to secure a position in the further development of Canada's energy resources, as was the case with the $4 billion purchase by Conoco of Gulf Canada.

"There's no question that the industry is pleased with the direction the Alberta government has traveled," said Brian C. Dutton, an oil and gas analyst with UBS Warburg in Toronto.

Of Canada's 10 provinces, Alberta is in many ways the most like parts of the United States. In attitude and approach to business and to taxes, Alberta has more in common with Texas than with neighboring Saskatchewan.

"The oil industry quite frankly wouldn't have evolved and wouldn't be where it is today, had it not been for American companies," Mr. Klein said. "When you go to the Calgary Petroleum Club, you think you're in Texas."

The continued influx of Americans into Calgary has even forced the Petroleum Club's general manager, R. J. Thomas, to relax the dress code, allowing open-neck shirts all week instead of just on Fridays. The club recently added a stage and Las Vegas lighting to the upper-floor dining room.

"It's the big look, American- style," Mr. Thomas said.

Mr. Klein's attitudes are a far cry from the National Energy Program of the 1970's (when Mr. Chrétien was Canada's energy minister and tried to keep American hands off Canadian energy.)

Nobody in Ottawa is now thinking of reviving the National Energy Program, but federal officials are wary of wildcat provincial leaders. They are also sensitive to efforts to overhaul the regulatory process on Canada's side of the border in any way that appears to undermine Canadian sovereignty. And all plans to expand Canada's energy exports will be reviewed by environmentalists.

Mr. Klein's name is regularly heard as a potential leader of the national Progressive Conservative Party, but he says he is happy to remain in Alberta.

And while his predecessors have sometimes been called "blue-eyed sheiks," Mr. Klein said he preferred to avoid any of the obvious nicknames.

The Sultan of Oil Sands? The Prairie Potentate?

"Call me Ralph," said "Killer" Klein's plain-speaking son. "Just Ralph."

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