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UPDATE 1-Alberta to study forming its own power company in fight with PM Trudeau

(Adds quote from federal Environment Minister)

By Rod Nickel

WINNIPEG, Manitoba, Nov 27 (Reuters) - The premier of Canada's oil and gas producing province Alberta said on Monday her government will consider creating a publicly-owned electricity company, in a bid to evade federal requirements to develop a net-zero power grid by 2035.

The move is Alberta's latest attempt to undermine the climate action plans of Liberal Prime Minister Justin Trudeau, which Premier Danielle Smith and other conservative politicians say are unrealistic.

Smith's United Conservative Party (UCP) government introduced a resolution in the Alberta legislature to study forming a province-run power corporation run under its Sovereignty Act, a previously unused law enacted last year to give Alberta a legislative framework to defy federal laws it deems unconstitutional.

The resolution, once passed by the UCP majority government, would also order provincial authorities not to cooperate in implementing the Canadian federal government's planned clean electricity regulations. Such regulations would be costly and could lead to power shortages, Smith said.

"It's simply too massive a risk for Albertans," Smith told reporters. "If we do not act we will end up with instability in our grid (and) we will either not be able to grow as a province or end up with brownouts and blackouts."

Smith said her government hoped Ottawa would back down, adding the fight may end up in court.

Federal Environment Minister Steven Guilbeault said Ottawa would continue moving ahead with its clean electricity regulations and there was no legal basis for Alberta's actions.

"That's what I find unacceptable with the position that Premier Smith has taken because it's bad for Albertans, it's bad for workers in Alberta, it's bad for the economy of Alberta," Guilbeault told reporters in Ottawa.

Canadian provincial laws are not allowed to frustrate the progress of federal laws, meaning Alberta's plan is unconstitutional, said Martin Olszynski, an associate professor at the University of Calgary.

"This is just a bunch of political theatre," Olszynski said.

The resolution would instruct the Alberta government to study forming a corporation to produce electricity if private-sector generators determine it is too risky to operate such facilities because of the Canadian government's regulations.

The Alberta government company would be "generator of last resort," Smith said, meaning it would produce power only when supplies from private-sector companies are insufficient. The province currently generates most of its power from the private sector, unlike most others.

That power corporation would not recognize federal regulations as valid. It would build or buy power plants that run on natural gas that might otherwise not be able to operate past 2035 due to the regulations.

Canada already produces most of its power from renewable sources such as hydro and nuclear. Alberta, however, generates nearly half of Canada's emissions from electricity generation due to its reliance on natural gas.

Power generators such as TransAlta and Capital Power have not committed to Trudeau's 2035 goal but some say they may reach net-zero ahead of Alberta's own 2050 target.

The federal government's electricity regulations are in draft form and scheduled to come into force on Jan. 1, 2025 after further consultation. (Reporting by Rod Nickel in Winnipeg, Manitoba, additional reporting by David Ljunggren in Ottawa and Nia Williams in British Columbia; editing by Deepa Babington and Stephen Coates)