Government Use of Strategic Litigation: The Alberta Exported Gas Tax Reference

This study examines how the Alberta government used litigation--the Alberta Exported Gas Tax Reference--as part of its efforts to combat the federal government's National Energy Program (NEP) in the early 1980s; in doing so, the study posits some general theories of government use of strategic litigation and highlights the need for further research in this area. While the increased use of strategic litigation by interest groups as a political tactic since the entrenchment of the Charter of Rights has attracted considerable attention from Canadian scholars, little attention has been given to studying strategic litigation by government actors. This is conspicuous given Alan Cairns' seminal reminder that both the federal and provincial governments use a variety of methods to protect and expand their jurisdiction of constitutional responsibilities (Cairns 1977, 700-706). Strategic litigation is one method used by governments in their quest for political and constitutional advantage. Using the reference mechanism, which allows governments in Canada to ask the courts for advisory opinions, the Alberta government launched a constitutional challenge to the NEP's natural gas export tax. This use of strategic litigation paid off in March 1981 with a unanimous ruling by the Alberta Court of Appeal that declared the federal tax on provincially-owned exported natural gas unconstitutional (Reference Re Proposed Federal Tax on Exported Natural Gas). The decision gave the Alberta government new legal resources that were subsequently parlayed into political resources when the Alberta government used the decision to help negotiate a better energy deal with Ottawa. Background The introduction of the National Energy Program (NEP) in the October 1980 federal budget followed a series of unsuccessful meetings between Alberta and the federal Liberal government to arrive at a mutually agreeable energy These discussions focussed on the price at which oil and natural gas products should be sold and the appropriate distribution of economic rents (between Ottawa, the producing provinces and industry) generated by oil and gas sales. Pricing, revenue sharing and, ultimately, control of natural resources were not new issues--they had plagued relations between Alberta and the federal government after the oil price shocks in 1973 and 1979 (Doern and Toner 1985). Never before, however, had they been so bitterly contested. These contentious negotiations are better appreciated and understood by placing them in the larger Canadian constitutional and political context. As Cairns notes, One way in which Canada is unusual as a federation is the degree of power of the provincial governments over natural resource policy. (1992, 55). Whereas the clause in the U.S. has been interpreted to give the federal government a wide range of power over natural resources, Canadian provinces have asserted their right to control natural resource management by relying especially on Section 109 of the constitution, which stipulates that All Lands, Mines, Minerals and Royalties belonging to the several Provinces of Canada shall belong to the several Provinces ... (1) However, the federal government in Canada has justified its influence in natural resource policy by its constitutional power to regulate trade and commerce and to raise money by any mode or system of taxation. Given these federal and provincial constitutional powers and the constitutional prohibition against one level of government taxing the other level (section 125), along with the reality that resource management, trade, and taxation are interdependent, there is potential for conflict (Cairns 1992, 56-57). Not surprisingly, prior to the 1970s, there were periodic disputes between the federal government and the provinces over natural resources. For a variety of reasons, though, these disputes were not as persistent or vitriolic as they were in the 1970s and early 1980s, when rising oil and gas prices would lead to the clash between energy producing provinces, particularly Alberta, and the federal government (Cairns 1992, 60-64). …

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