What was the National Energy Program of 1980?

The National Energy Program (NEP) was a federal economic policy introduced by Pierre Trudeau's Liberal government on October 28, 1980 in the federal budget speech delivered by Finance Minister Allan MacEachen and Energy Minister Marc Lalonde. The NEP imposed federal taxes on Canadian oil and gas production, set lower 'made in Canada' prices for Canadian crude oil than world prices, and increased Canadian (especially federal-owned Petro-Canada) ownership of the petroleum industry. The NEP was deeply opposed in Alberta and was largely dismantled by the Mulroney Conservative government after the 1984 election.

The NEP responded to several pressures. World oil prices had risen sharply after the 1979 Iranian Revolution and the second oil-price shock. Canada faced a situation in which Alberta and Saskatchewan oil sold for world prices in international markets, while eastern Canadian consumers paid those high prices and the federal government received only modest tax revenues. The Trudeau government had campaigned in the February 18, 1980 election (which returned Trudeau to power after Joe Clark's nine-month interlude) on the platform of 'a fair price for fuel for all Canadians, wherever they may live'.

Major NEP measures included the Petroleum and Gas Revenue Tax (PGRT, an 8 per cent tax on oil and gas company revenues), the Petroleum Compensation Charge (an excise tax on imported oil to subsidise eastern Canadian refineries), the Canadian Ownership Charge (a temporary petroleum products tax to fund the federal purchase of foreign-owned Canadian oil companies), the Petroleum Incentives Program (grants for Canadian-owned exploration in frontier areas), and the requirement of 50 per cent Canadian ownership of frontier oil and gas leases. Petro-Canada (federally founded in 1975) was expanded as a Canadian-owned national oil company. The NEP set domestic Canadian crude prices at about 75 per cent of the international price, with a complex schedule of price increases.

Western Canadian opposition was vehement. Alberta Premier Peter Lougheed announced production cuts on October 30, 1980 (within 48 hours of the NEP announcement). The Alberta government and federal government negotiated the September 1, 1981 Memorandum of Agreement, which restored Alberta a larger share of petroleum revenues. The NEP became symbolic of perceived Liberal anti-Western bias and contributed substantially to the rise of the Reform Party in the late 1980s. World oil prices collapsed in 1986, undermining the NEP's economic logic. The Mulroney Conservative government largely dismantled the NEP after winning the 1984 election: the Western Accord of March 28, 1985 ended the two-tier pricing system; the Atlantic Accord of February 11, 1985 removed federal interference in offshore Atlantic resources; and the Mulroney government privatised Petro-Canada starting in 1991. The NEP remains a powerful Canadian-Western political memory.