NEP

I'll be out out of town for the next week so don't expect any posts unless there's a national emergency or, you know, Stephen Harper wears a really funny hat. Before I go, a post on a topic Liberals in Calgary get more flack over than any other - the NEP.

I have been door knocking and had people who were in pre-school when the NEP was brought in tell me that it’s the reason they won’t vote Liberal. Over time it has grown to mythic standard even though no one in Alberta really knows what it was or what it did (contrary to popular belief, it did not allow Pierre Trudeau to sacrifice the first born son of all Albertan families). So this post is going to be my abbreviated defense of the NEP.

First of all, a little history. The NEP was implemented by the Trudeau Liberals in 1981 as the world price of oil soared. The NEP had three main goals:

1. Increase Canadian content in the oil industry by giving incentives to Canadian companies.
2. Keep the price of oil bellow the world price to protect consumers.
3. Tax oil exports to increase the federal share of the profits.

After protests, boycotts, and court challenges from Alberta Premier Peter Lougheed, he and Trudeau signed several revised, far less drastic NEP deals.

So what did the NEP actually do? Was it really evil in design? Did it destroy Alberta’s industries? Well, let’s take a look at the three goals I listed above.

Canadian Content
It’s hard to argue against this one. At the time of the NEP, Canada did not control its own oil. With its incentives program, Canadian control of the oil industry rose from 25% to 50% within a few years. By having the industry Canadian controlled, it left Canada more resilient to world events, more self-reliant, and getting a larger profit from the pie OPEC baked.

Fixed Price
Let’s remember that the price of oil had increased ten fold in the previous decade and everyone assumed 90$ or 100$ a barrel oil was on the horizon. Quite simply, the government had to do something to protect the 99% of Canadians who used oil. Albertans often feel they were sold out to protect Ontario consumers but that’s the nature of confederation. In the 1930s, Ontario bailed out Alberta and kept the province from declaring bankruptcy. In the 1960s, Diefenbaker’s National Oil Program helped Alberta’s oil patch at the expense of Ontario consumers. Trudeau had to speak for Canada and with oil prices expected to soar, Canadians wanted him to keep prices low.

Cash Grab
Make no mistake, there was a cash grab element to the NEP. But so what? Lougheed had done the exact same thing in the 1970s, by canceling existing contracts and then increasing the provincial share of the oil royalties. The federal government could legitimately tax exports and Lougheed himself admitted that his court challenge was a 50/50 shot at best.


As for the effects of the NEP – let’s be clear: THE NEP DID NOT CAUSE THE RECESSION. The oil industry in the States tanked at the same time and the NEP did not cause the world price of oil to fall. Trudeau was willing to renegotiate the NEP on multiple occasions as the price of oil fell.

Some will say the federal government was too confrontational, but Lougheed’s extreme inflexibility left them no choice but to be. When Joe Clark took over for his micro-term, his government suffered worse relations with Lougheed than Trudeau’s had. If Lougheed couldn’t work with a decentralizing, Alberta-born PM who swept the West and promised a “community of communities”, it’s hard to blame Trudeau exclusively for the bad relations. Lougheed knew that he could score cheap votes at home by fighting with Ottawa (sound familiar?) – even if it meant advancing the feelings of Western alienation in the process.

The bottom line is the NEP was a legitimate policy that fell victim to poor timing. It’s been an easy scapegoat all these years, even though no one understands its intent or consequences. There are a lot of good reasons for Albertans to be pissed off with Ottawa and the Liberal Party – I just wish they’d focus on some of them instead of living in the past and an ill-fated, good-intentioned policy.