The architect of the NEP, Marc Lalonde, would have done it differently

"Lac-Mégantic has made people realize that the alternative is to transport oil by train and this is not risk-free. It’s certainly a lot more hazardous than pipelines."

February 11, 2014

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06_reflections_story1a
Marc Lalonde
illustration Adolfo Ruiz

Prime Minister Trudeau appointed me minister of energy [in 1980] and I developed the National Energy Program. Since a very large component of this was of a fiscal nature, the program was integrated into the federal budget. Historically, the federal government, the provincial government and industry each took a one-third share of energy revenue. When oil prices started to rise after 1974, Alberta increased its stake by increasing royalties.

And then in 1979, when OPEC’s actions led to the price of oil more than doubling, revenues for Alberta increased considerably while the federal government saw its share go down significantly. Royalties, it must be remembered, come in before taxes. So there was a very large fiscal element in the NEP and the intention was to try to rebalance the distribution of income between these three elements.

The NEP was predicated on the continued increase in international oil prices. Had I only known that prices would have gone down to $15 from $32 rather than up to $65! One lesson from this is that you have to be very aware of the volatility of commodity prices and be very suspicious of projections going constantly one way. We took a very comprehensive approach to a single issue – it was quite a mouthful. It probably would have been better to go at the matter piece-by-piece since that would have given us more flexibility to adjust as events unfolded.

I would definitely agree it is a good thing that there has been a move away from government intervention in the energy economy. I wring my hands regularly about Quebec’s [energy policy]. The whole damn thing about fracking – and the same thing for oil and gas exploration – suddenly we are concerned that drilling in the Gulf of St. Lawrence is going to damage fishing. I find the whole thing [in Quebec] very depressing. Lac-Mégantic has made people realize that the alternative is to transport oil by train and this is not risk-free. It’s certainly a lot more hazardous than pipelines.

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