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The Birth and Death of the NEP

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The thrust of the Liberals' more aggressive energy policies had been developed by a committee of Liberal members of Parliament headed by Marc Lalonde, assisted by researcher Barbara Zulzenko, a New York con­sumer advocate who had no qualifications as an economist or knowledge about the petroleum industry. When the Liberals were back in office, Marc Lalonde was energy minister, directing the development and drafting of the National Energy Program by EMR's Energy Policy sector. Because it involved so many taxes, it was unveiled as part of Finance Minister Allan MacEachen's October 28 budget. The two-price system and the oil export tax were re-confirmed. New taxes were designed to boost the federal share of oil and gas production revenue from nine percent to a projected 26 per­cent during the four-year period 1980 to 1983. Some $4.6 billion was bud­geted for the PIPs, the Petroleum Incentive Payments under which Ottawa paid up to 80 percent of the cost of exploratory wells on its Canada Lands in the northern and offshore frontier areas and up to 35 percent of wildcats drilled in the West, the amount depending on the degree of Canadian own­ership of the exploring company. The gas delivery pipeline from Alberta was to be extended from Montreal to Quebec City and the Maritime provinces. Natural gas prices were to be kept relatively low to encourage switching from fuel oil. Canadian ownership of the petroleum industry was to be increased from 27 percent to at least 50 percent by 1990. Petro-Canada was directed to acquire the Canadian assets of at least one foreign-controlled multinational oil company (in fact, it already had). Petro-Canada was given the right to acquire, prior to the start of production, a quarter interest in any oil or gas discoveries on the Canada Lands, without having to pay for any of the prior exploration costs.

The NEP was festooned with an array of acronyms that denoted both taxes and spending. On the taxing side, in addition to the PIPs, there was NORP, the New Oil Reference Price, to encourage development of the oil sands; IORT, the Incremental Oil Revenue Tax, an additional tax on oil com­pany revenue which would apply if prices rose more rapidly than expected, which never happened; COS, the Canadian Ownership Charge, a tax later applied to gasoline sales to pay the $1.7 -billion cost of Petro-Canada's pur­chase of Canadian Petrofina; and PCC, the Petroleum Compensation Charge that subsidized the cost of oil imports. On the spending side was COSP, the Canadian Oil Substitution Program; UOOP, the Utility Off-Oil Program; CHIP, the Canadian Home Insulation Program; and FIRE, the Forest Industry Renewable Energy program. Including Petro-Canada, the PIP grants, and all the other items, in the five-year period 1980-85, Ottawa spent $13 billion on its energy programs. Also related to the NEP was the Western Development Fund, established to return to the West, under federal control, a portion of the funds taken from the West by the NEP, and to help bolster Western sup­port for the Liberals. Much of the fund was spent to help resolve railway transportation issues that had been a Western complaint for more than a century, frequently mentioned by Lougheed in his discontents about Confederation's alleged Alberta discrimination.2

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