NEP

By the 1970s, the two main oil producing provinces in Canada were Saskatchewan and Alberta. Each province had control over natural resources and received royalties for oil and gas production within its boarders. The revenue from oil and gas exploitation reached new heights during the 1970s as international oil and gas prices increased significantly. A result of the high prices of oil and gas was that the western provinces had increased economic power in Canada. Added to this, during the 1970s a boycott of oil produced in Arabic countries increased the cost of oil that was being imported by Eastern Canada.

The federal government wanted to increase the control Canadians had of the oil industry and provide some relief to Eastern Canada in the price of oil and gas. To do this the National Energy Program (NEP) was introduced in October 1980. The NEP included price controls and federal taxes on oil and gas production. The revenue from the federal taxes on oil and gas were used to establish Petro-Canada, a federal government petroleum company, to act as the government’s monitor on the industry. The federal government also provided grants to Canadian owned petroleum companies to encourage Canadian ownership.

The NEP was seen by many western observers as an effort on the part of the federal government to take away the oil revenue that belonged rightfully to Saskatchewan and Alberta and give it to Ontario.

One of the consequences of the animosity created between the western provinces and the federal government was seen when the 1982 Constitution Act was being negotiated; Alberta premier Peter Lougheed had the "notwithstanding clause" added to the amending formula. This allowed any province to opt out of any constitutional change they wished to.

Negotiations over the NEP and oil and gas extraction between the western provinces and the federal government did not bring any agreements. In 1984, the Liberal government that had brought the National Energy Program into place was swept from power and replaced by the Progressive Conservative government. There were only two Liberals elected in the west, but the new Progressive Conservative government had fifty-eight members from the west. The result was that the new federal government under Prime Minister Mulroney signed the Western Energy Accord in 1985 that eliminated the National Energy Program.

The Birth and Death of the NEP Though it was eventually killed in 1985, the National Energy Policy (NEP) established by the Trudeau Liberals in 1980 still generates controversy in Alberta. In this excerpt from the JuneWarren publication, The Great Canadian Oil Patch: The Petroleum Era from Birth to Peak, author Earle Gray recounts the history of the NEP and its impacts on Alberta’s energy sector. Read more…