This is Worse Than the NEP

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If history doesn’t so much repeat itself as it rhymes, then Canadian energy in 2015 is a rhyming couplet for energy in 1980. 

Pierre Trudeau’s 1980 National Energy Policy forced the West to sell its natural resources to the rest of Canada at below market prices.  The result was a massive transfer from one part of the country to another; however at least the benefits stayed in Canada and the tax revenue stayed with the Canadian government.

Today, both federal and provincial governments are implementing policies that force the West to sell its oil and gas to the United States at substantially less than the international Brent price. The result is that we are transferring approximately $30 billion per year with associated taxes and royalties from Canada to the United States.  This is a Made in Canada economic problem of historic proportions. 

Since 2008/09 America has revolutionized the world by changing the global energy paradigm.  They did it with disruptive innovations in fracking technology.  They have fueled their recovery from the financial crisis while at the same time being the only G20 country to meet Kyoto targets. Many in the US are calling hydraulic fracturing a green technology as a result.

The dramatic increase in American domestic oil and gas production is why their need for our nation’s largest export has decreased so much. That’s why the infrastructure based on Canadian energy policy of the 1950’s is now all wrong.  We put all our eggs in the American basket by building our main pipelines to the US Midwest instead of tide water ports. As a result we are paying the price, or more to the point, not receiving the price.

Far worse than the falling global price of oil is that Canada does not receive it.  If our oil and gas could reach tide water ports, Canada would receive the same world price as Norway and Nigeria. Then Canadian companies would be able to compete on a level playing field. That is the story Canadians aren’t being told. 

In 1980, former Alberta Premier Mr. Lougheed asked in a speech ,  “Why Alberta oil? Why not the lumber in British Columbia? Why not an export tax on the potash from Saskatchewan? On the nickel from Manitoba, on the pulp and paper and minerals from Ontario and Quebec? Why Alberta oil?”

Its 2015 and we could ask the same question about our energy policies and tanker moratoriums today.  Except this time, we also have to ask why the massive transfer is to a foreign country while we run deficits at home. We could also ask why people aren’t angry about it.