National Energy Program
The National Energy Program (NEP) was a significant policy initiative introduced by the Canadian government in October 1980, aimed at increasing Canadian ownership and control over domestic energy resources. In response to rising oil prices, the NEP sought to boost Canadian ownership of oil companies to 50% and included various tax incentives for Canadian enterprises. A key aspect of the program was the establishment of price controls and taxes on gas and petroleum, which were controversial and perceived by some as double taxation. The NEP faced strong opposition, particularly from oil-producing provinces like Alberta and British Columbia, which argued that it undermined their economic interests by reducing revenues and prompting companies to relocate to more favorable regulatory environments in the United States. The program's impact was far-reaching, contributing to job losses and economic challenges, and even stirring sentiments for western separatism. Over time, the provisions of the NEP were gradually rolled back due to widespread discontent, and its unpopularity is often cited as a factor in the electoral success of the Conservative Party in 1984. The NEP remains a complex and contentious chapter in Canada's energy policy history, reflecting the tensions between regional interests and federal authority.
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National Energy Program
Identification Canadian government policy
Date 1980-1984
In response to the energy shortages of the 1970’s, Prime Minister Pierre Trudeau instituted the National Energy Program, which aimed to promote energy self-sufficiency, increase Canadian ownership in the energy industry, encourage oil exploration and alternative energy, and increase government revenue. The western provinces and multinational energy companies bitterly opposed the program from its inception.
Energy was a major issue in Canada’s 1980 national election, and the Labor Party campaigned on greater control of Canada’s resources, revenues, and future. Rising oil prices had hit the urban, industrialized eastern provinces hardest, but the oil-producing western provinces were alarmed by federal promises to control the price of Canadian oil. When the National Energy Program (NEP) was announced in October, 1980, neither the provinces nor the energy companies had been consulted.
The NEP, administered by the Department of Energy, Mines and Resources, addressed foreign control of oil companies with a proposal to boost Canadian ownership to 50 percent and to give tax and lease incentives to Canadian-owned companies. The government also claimed a right to 25 percent of oil or gas discovered on federal property. Most controversially, the NEP established price controls and a new tax on gas and petroleum that opponents decried as double taxation. Although the price controls and taxation were intended to encourage reinvestment in Canadian exploration, the oil-producing provinces faced lower revenues, and the energy companies feared loss of profits.
Oil-rich Alberta withheld 100,000 barrels per day from the market to protest price limits. Exploration and production in several sites were suspended until their profitability could be established. Both Alberta and British Columbia prepared to challenge the federal government in court. Many companies moved to the United States, where the Ronald Reagan administration offered a more lenient regulatory environment and higher profits.
Impact
Although the provisions of the NEP seemed reasonable and necessary to many, the western provinces blamed the loss of thousands of jobs and billions of dollars on the move. There was even the threat of a western separatist movement. Gradually, NEP provisions were rolled back. The unpopular program is widely believed to have contributed to Brian Mulroney’s Conservative Party victory in 1984.
Bibliography
Doern, G. Bruce, and Robert Johnson, eds. Rules, Rules, Rules, Rules: Multi-Level Regulatory Governance. Toronto: University of Toronto Press, 2006. Studies the nature, causes, and dynamics of government regulation in and affecting Canada.
Fossum, John Erik. Oil, the State, and Federalism: The Rise and Demise of Petro-Canada as a Statist Impulse. Toronto: University of Toronto Press, 1997. Explores reasons for federal intervention in energy industry and analyzes its failure. Contrasts the Canadian policy conflict with those in other nations.
McDougall, I. A. Marketing Canada’s Energy. Toronto: Canadian Institute for Economic Policy/Lorimer, 1983. Argues that the NEP was a positive response to the 1970’s energy crisis and that government’s responsibility was to promote energy independence.