Trudeau to meet with premiers, Indigenous leaders Thursday as COVID-19 spreads and oil prices tank

NOTE: This story was published before the cancellations of the First Ministers Meeting and the meeting with Indigenous leaders was cancelled and some of the information is now out of date. Read an updated story here.

Prime Minister Justin Trudeau and the country's provincial and territorial leaders will meet in Ottawa over the next two days as Canada grapples with the fallout from the COVID-19 pandemic and cratering oil prices that could blow big holes in public finances.

The premiers met in December for an emergency meeting of sorts to address the threat to national unity posed by rising political and economic frustration in Alberta and Saskatchewan over their place in the federation. The leaders agreed unanimously to push Ottawa to rework the fiscal stabilization program — a fund for provinces facing sudden financial shocks — and take a second look at Bill C-69, the federal government's overhaul of the environmental assessment regime.

But a meeting that was initially called to address the political alienation of Alberta and Saskatchewan — and some of the health-care funding concerns of other provinces — has picked up some more agenda items in recent days.

The outbreak of COVID-19 — which has infected dozens of Canadians and killed one — and the threat it poses to Canada's economic outlook will also be up for discussion among the country's leaders today and tomorrow.

New Brunswick Premier Blaine Higgs said late Wednesday he is debating whether he should come up to Ottawa at a time when COVID-19 is threatening public health. Yukon Premier Sandy Silver has already cancelled.

Higgs said the meeting is "very important" given the national health and economic threats abroad, but he questioned if it was "prudent" for the country's leaders to gather in one spot.

"We've actually connected with Ottawa and our colleagues and considering, can we do this on a video conference? Can we look at this another way? If we're asking people to stay home, should we be doing the same thing?" Higgs said in an interview with CBC's Power & Politics.

Manitoba Premier Brian Pallister has delayed his flight out of Winnipeg until later on Thursday after the NDP opposition in that province successfully managed to delay the tabling of the provincial budget, pushing back his departure. A spokeswoman for the premier said Pallister is hoping the budget will be introduced early Thursday. 

The weeks-long Indigenous-led rail blockades also will be discussed, with national Indigenous leaders scheduled to meet with the prime minister and premiers later today. Those blockades crippled the country's transport network and left CN Rail trains idling for much of February.

Supporters of the Wet'suwet'en hereditary chiefs opposed to the Coastal GasLink pipeline in northern B.C. are planning solidarity protests near the site of the meeting as they renew their calls for TC Energy, the pipeline proponent, to leave the area.

At least one premier said the first ministers' meeting shouldn't be bogged down by discussions about "fashionable" issues. Alberta Premier Jason Kenney said the group should be laser-focused on the economy.

"We need this government to get refocused on the economy — enough about dealing with every fashionable issue out there and the virtue-signalling and the UN Security Council and all the rest of it," Kenney told reporters before he boarded a flight to Ottawa Wednesday.

"We are facing an economic crisis in Canada and we need the national government to act accordingly with total focus on that issue."

Oil prices

The stock market has seen wild swings over the last two weeks and the price of West Texas Intermediate (WTI), the U.S. oil price benchmark, has cratered due to anxiety over COVID-19 and a conflict between major world oil producers on production levels.

Saudi Arabia and Russia were unable to agree last weekend on production cuts to bolster the global price. That sent WTI into a tailspin — it dropped 24 per cent on Monday and fell even lower Wednesday. The industry now faces the possibility of increased production at a time when demand for more oil is weak.

It costs Canadian producers more than either of those two countries to get a marketable barrel of oil out of the ground.

Both Alberta and Ottawa projected WTI would trade in the high US$50 range for much of the year. On Wednesday, the price was roughly US$33.

The average per barrel operating cost for a surface mining operation in Alberta's oilsands is about C$27 — which means that if oil prices stay at these levels over the medium term, many operations will be unprofitable, will fail to generate free cash flow and could be forced to shut down and issue pink slips to thousands of workers.

In 2015, the federal Department of Finance estimated that every $1 decrease in the price of oil would result in a reduction in tax revenues of roughly $150 million. That means Ottawa already is facing the loss of $3.6 billion in tax revenue this year because of the wild gyrations in the price of oil.

The situation is much worse in Alberta. For ever $1 decrease in the price of WTI, the province can expect to lose $355 million in revenue.

Fiscal stabilization program

To address these shocks, Kenney will come to Ottawa to ask the federal Liberal government to bolster the stabilization program to help cover some of those budget shortfalls by removing per capita limits on the money available to provinces.

The current program, which is administered by Finance Minister Bill Morneau, provides financial assistance to any province faced with a year-over-year decline in its non-resource revenues greater than five per cent.

However, the money available to eligible provinces is capped at just $60 per resident — something Kenney says is inadequate given the size of the budget deficit the province is facing after the last time oil prices plunged.

In 2018, for example, Alberta tapped just $250 million from the program while Newfoundland and Labrador received about $8 million. Lifting the cap would flow more money to provinces in need.

Morneau said Ottawa is aware "that system should be updated."

"It's hasn't been updated for more than a couple of decades. We want to make sure it responds to significant financial shocks for provinces," he said ahead of the meeting.

COVID-19

Trudeau promised Wednesday that his government is taking the COVID-19 pandemic "extremely seriously."

While he said Canada has been "fortunate so far" in that less than 100 people have been officially diagnosed with the virus, Trudeau said Ottawa is ready to invest more to help workers facing long periods at home in quarantine and businesses experiencing disruptions.

Manitoba Métis Federation president David Chartrand, who is representing the Métis National Council at the talks in Ottawa, said COVID-19 should be front and centre in the discussions and jurisdictional disputes over Indigenous land and treaty rights should be left for another day.

"I think this is sort of a potential attack on our country and we need to come together on that, and that differences with jurisdictions and politics need to be put aside and I hope that's what comes out of this meeting," Chartrand said in an interview.

"If it ever hits our communities, if it ever comes to any of our Métis villages, we are in big trouble. We don't have health care centres. We don't have supports. We have no program with the province. There's nothing. We're on our own. If it ever hits us, what do we do?"

Beyond COVID-19, the Indigenous leaders want to discuss the importance of implementing the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) legislation to avoid future unrest.

Trudeau promised money for Indigenous communities facing COVID-19. He also promised to help the provinces and territories shoulder the costs of the virus.

The provinces are on the front line of this pandemic as provincially run hospitals and public health agencies are dealing with suspected cases of the virus. To that end, Trudeau promised to earmark half of the billion-dollar COVID-19 response fund for the provinces to help them deal with "preparation and mitigation" of the virus.

Provinces have promised to ramp up testing of the virus to identify potential cases early to stop the spread.

"We have not seen a drastic spike in the number of cases reported but I know that people across the country are worried, worried about their health, worried about their aging parents, worried about the kind of impact this virus could have on their job, on their business," Trudeau said.

Federal budget

Ottawa has loosened the purse strings to help address COVID-19. Morneau and Treasury Board President Jean-Yves Duclos have suggested more money could flow in the upcoming federal budget to stimulate an economy that faces a slump as a result of virus-related shocks.

In a press release ahead of the meeting, the premiers are asking Ottawa to target infrastructure spending in particular by sending them "additional, long-term funding to enable projects to move forward expeditiously."

But the Business Council of Canada warned Ottawa against massive increases in deficit spending when Ottawa is already on track to post a $26.6 billion deficit for this fiscal year.

"We commend the federal government's responsible and targeted package of measures to protect Canadians from COVID-19 and to address the economic consequences of the current health emergency. More may be required going forward, but at this point it makes sense to hold off on major economic stimulus measures until the extent of the impact is better understood," said Goldy Hyder, the president and CEO of the council.

Hyder, like Kenney, said the meeting of leaders should be focused on supporting the economy and the oil and gas sector.

"We look forward to this week's First Ministers' Meeting to assess how the federal government responds to the hardship currently being inflicted on the energy sector. The TMX pipeline project, Coastal GasLink and other trade-enabling infrastructure are needed now more than ever," Hyder said.

Health care spending

While spending might increase in the coming federal budget, it's not yet clear if Ottawa will meet the demand from provincial leaders to lift a cap on health care spending.

The Council of the Federation agreed at their December meeting to press Ottawa to increase the annual escalator on the Canada Health Transfer to 5.2 per cent a year from the current three per cent.

Some premiers, notably Manitoba Premier Brian Pallister, said Ottawa should park plans for a national pharmacare program and direct funds toward supporting the existing health care system.

Asked in question period Wednesday if Trudeau would agree to the escalator hike, the prime minister pivoted to the government's new funding for COVID-19.

"We're always going to be ready to work with the provinces to improve the health system for Canadians, while of course respecting provincial jurisdiction," Trudeau said.