National Energy Program
The National Energy Program (French: Programme énergétique national, NEP) was an energy policy of the Canadian federal government from 1980 to 1985. The economically nationalist policy sought to secure Canadian energy independence, though was strongly opposed by the private sector and the oil-producing Western Canadian provinces, most notably Alberta.
Created under the Liberal government of Prime Minister Pierre Trudeau on October 28, 1980, following the two oil crises of the 1970s, the NEP had three main objectives: increase ownership of the oil industry by Canadians; price energy fairly for Canadian consumers; and provide Canadian energy self-sufficiency. The NEP was also designed to promote lower prices through price controls; promote exploration for oil in Canada; promote alternative energy sources; and increase federal government revenues from oil sales through a variety of taxes and revenue-sharing with the oil-producing Western Canadian provinces.
The NEP proved to be a highly controversial policy initiative and sparked intense opposition and anger in Western Canada, particularly in Alberta. The province's premier, Peter Lougheed, was a vocal opponent of the NEP on the grounds that it interfered with provincial jurisdiction and unfairly deprived Alberta of oil revenue. In 1981, Lougheed and Trudeau reached a revenue-sharing agreement. Opponents claim that due to the NEP, the unemployment rate in Alberta rose from 3.7 percent to 12.4 percent, the bankruptcy rate in Alberta rose by 150 percent, and Alberta's losses were estimated to be between $50 billion and $100 billion (though Alberta's unemployment rate, bankruptcy rate, and revenue losses were also affected by the early 1980s recession and a crash in oil prices).
The term "Western alienation" was coined as a result of the NEP. The policy was repealed by the newly-elected Progressive Conservative (PC) government of Prime Minister Brian Mulroney on June 1, 1985. The NEP contributed to the creation and rise of the Western Canadian-based and right-wing populist Reform Party which made a major breakthrough in the 1993 federal election; the Reform Party merged with the PCs in 2003, becoming the Conservative Party which governed Canada from 2006 to 2015.
Impact on Alberta[edit]
Revenues[edit]
While the program increased domestic price controls, the emphasis on revenue sharing and incentives for oil exploration on federally owned lands was viewed critically by Alberta Premier Peter Lougheed.[22] Lougheed fought the program vigorously in the courts and in public, where he actively stoked Alberta nationalism in a television address claiming the program would bring more "Ottawa" to the province. Prior to the announcement of the National Energy Program, Lougheed had threatened to reduce Alberta's production of oil and gas to counter any federal program to increase taxes. If Alberta reduced production, Central Canada refineries and other businesses would need to purchase foreign oil which would be heavily subsidized by the federal government, a cost that it could not afford to with a $13.7 billion deficit in 1980.[23] Lougheed finally decided to exercise this authority to force Trudeau to concede some measures of the Program, and Lougheed announced on television a 60,000 barrel reduction to Alberta's production of crude oil to take place over nine months beginning in April 1981, and the suspension of two oil sands projects.[22][24][25] Lougheed however pledged that he would not allow a national oil shortage to occur, and would suspend the cuts if a shortage occurred.[24] The threat was successful as Trudeau and Lougheed signed "an oil and gas prices and revenue sharing" agreement in 1981:
Abolition[edit]
The rationale for the program weakened when world oil prices began a slow decline in the early 1980s and collapsed in late 1985 (see figure above, "Long-Term Oil Prices, 1861–2007"). A phased shutdown was commenced by Jean Chrétien, then Minister of Energy, Mines and Resources.
In the 1984 election, the Progressive Conservative Party of Brian Mulroney was elected to a majority in the House of Commons with the support of Western Canada after he had campaigned against the NEP. However, Mulroney did not eliminate the last vestiges of the program until two-and-a half years later, when world oil prices had dropped below pre-1980s levels (as adjusted for inflation: see Long-Term Oil Prices, 1861–2007).
On June 1, 1985, after extensive discussions between the federal Government and the governments of the oil-producing provinces, the "Western Accord on Energy" was agreed.[46] It provided for the full deregulation of oil prices and for allowing the market forces of international and local supply and demand determine prices.[46] Included in the full deregulation of domestic oil prices, the Western Accord also "abolished import subsidies, the export tax on crude and oil products, and the petroleum compensation charge. It also phased out PIP grants and the PGRT. In addition, controls were lifted on oil exports."[47]: 12–15 [12]