Deja vu – the National Energy Program

October 2020 is the 40th anniversary of Pierre Trudeau’s signature contribution to western alienation.  The budget of 1980 contained the National Energy Program which aimed to redistribute oil wealth from Alberta to the rest of Canada.  

The oil boom of the ‘70s was a result of Middle East wars and the emergence of the OPEC cartel that set global prices.  Trudeau’s government was focussed on Quebec separatism,  rampant inflation and big spending deficit budgeting. He thought Alberta’s oil and gas wealth was a soft target.  

The main components of the NEP were:

  • A tax on all petroleum and natural gas
  • An export tax on natural gas
  • Price controls on oil and gas sold in Canada ($17 per barrel not the $40 global price)
  • A crown corporation named Petro-Canada

The federal Deputy Minister for Finance at the time said; “The energy proposals as they now stand, would be seen by many as the biggest revenue grab in the history of the country”.  And he was right – an economist pegged the grab to be $100 billion.

Trudeau and Lalonde

The Alberta government responded by cutting production and launching a lawsuit to protect its jurisdiction.  Private sector investment fled.  Drilling rigs numbers fell from 550 to 120. Unemployment sky-rocketed, small businesses crashed and Alberta’s population shrank for the first time since World War II. 

Over the intervening years, the Liberal brand remains tarnished in Alberta. A conservative movement focused on “the West wants in” failed to change the fundamental political dynamics in Canada. All attempts to reform the Senate to better represent regions fell on stony ground.  Today it is less democratic and more unaccountable than ever before.

And wealth transfers from Alberta via the tax system are ongoing. In the past decade, Alberta’s net contribution to the rest of Canada is about $200 billion. And going back the 1960s the total net payments to the rest of Canada is about $660 billion.  A Byzantine set of rules for a transfer program is locked into the Canadian Constitution and Alberta is unlikely to ever benefit from the program.  Only for the moment, has the pandemic reversed this trend; as the government of Canada takes on mountains of debt to stabilize individuals’ financial situation and the economy.

Once again regional tensions are high, as another Trudeau takes aim at Alberta’s energy industry in the name of climate change.  

For its part the Alberta government is pushing for a “fair deal”:

  • Suing the federal government over jurisdiction to levy a carbon tax
  • Lobbying against an ‘equalization’ program that is hugely disadvantageous to Alberta
  • Negotiating a few small wins related to emission regulations
  • Contemplating a provincial police force to replace the RCMP
  • Investigating a provincial pension plan.

But these measures won’t effectively address the chronic issues of political power deficits and wealth transfers. Some believe the resolution is an independent Alberta. But the ‘business case’ for separation is filled with enormous risk and uncertainty.  

Thus a solution ought to be found within Canada. Perhaps a conservative government with a small government philosophy combined with a concerted push from like-minded provinces might make a grand bargain that will address western grievances. In part the answer could include:

  • An elected Senate that can be more representative of regional interests
  • Shift federal tax room to the provinces and reduce reliance on federal transfers.