After the Alberta Progressive Conservatives were first elected in 1971, Premier Peter Lougheed embarked on a decade-long campaign to have more provincial influence in federal decision-making, while resisting what he saw as infringement by Ottawa on Alberta’s rights.
That culminated in October 1980, when Prime Minister Pierre Trudeau introduced the National Energy Program, following a deadlock in negotiations with Alberta over an energy-pricing agreement and without consulting the oil industry.
The NEP sought more federal control over the energy industry. The program had three main goals: increase the federal share of energy revenues, boost Canadian ownership in the oil industry, and make Canada self-sufficient as an oil producer.
The Trudeau government also introduced a tax to fund Ottawa’s energy company Petro-Canada, and gave grants to Canadian-owned companies to encourage exploration.
The NEP triggered an outcry, not only in Alberta but in the U.S., where American-based energy companies accused the Trudeau government of nationalization and killing investment in the industry.
Lougheed vowed to take the NEP to court. Trudeau, surprisingly to some observers, told the House of Commons that Lougheed was taking a “reasonable and rational approach.” Some pundits suggested that seemingly calm reaction stemmed from Trudeau’s confidence that the courts would inevitably side with Ottawa in finding the federal government had the authority to intervene in the industry.
Trudeau wasn’t so conciliatory when Lougheed also retaliated by cutting provincial oil production, vowing to shrink the industry to about 85 per cent of its capacity.
In reaction to the NEP, foreign companies began selling off energy assets in Canada, which eliminated many jobs, particularly in Alberta. Thousands of Albertans were unable to pay mortgages and the real estate market crashed.
Defenders of the NEP say critics failed to take into account the influence of world markets on these domestic events, however, including a glut in supply and lower energy prices in the 1980s that would have reduced energy activity regardless.
Still, many Albertans were outraged, including one resident on a call-in radio program who illustrated the deeply felt emotion around the issue: “If my voice is trembling, it’s because I am terribly angry, to the point where I would be happy to fight for our freedom and I literally mean with a rifle.” While bickering between the two levels of government continued unabated, Trudeau and Lougheed finally signed a revised energy agreement in September 1981. The deal, among other things, slightly rejigged the energy-sharing proportions and reduced a much-reviled NEP export tax on Alberta oil to zero until the courts issued a ruling on Lougheed’s jurisdictional challenge.
Unfortunately for Lougheed, reaction in the energy industry wasn’t enthusiastic to the revised agreement. A picture of him and Trudeau toasting Champagne glasses at the agreement signing sent a chill through the oil patch. Lougheed admitted later that allowing the picture was one of the biggest mistakes of his political career.
In 1982, Alberta scored a victory when the Supreme Court of Canada ruled Ottawa couldn’t legally tax provincially owned oil and gas wells. In May, federal energy minister Marc Lalonde amended the NEP, reducing oil industry taxes by $2 billion.
By 1984, declining world oil prices coincided with the start of the gradual elimination of the NEP’s price controls and tax measures. The end was in sight when Brian Mulroney and the federal Conservatives were elected that year. The official burial of the controversial program took place on March 28th the next year, when federal energy minister Pat Carney and the western energy ministers signed the Western Accord, which included a plan for phasing out the key components.
Regardless of its legacy, resentment over the harmful effects of the NEP – and the Liberal Party for its role in imposing it – lingers to this day in Alberta.