Calgary & Southern Alberta

Prime Minister Pierre Elliot Trudeau and Premier Peter Lougheed ca. 1973: Courtesy of the Glenbow Collection

While the 1950s and 1960s were decades of oil and gas discovery in Alberta, the 1970s ushered in a period of escalating oil prices and concerns about supply. The Social Credit Party, in power from 1935 to 1971, pursued a "hands-off" approach to oil and natural gas development. Oil and gas companies would pay for exploration and development and Alberta would prosper through royalties and spin-offs. In the 1970s, international developments would promote a phenomenal growth in Alberta’s profits from its resources. Control of the international industry shifted from oil companies to the leading producing countries, namely, the Organisation of Petroleum Exporting Companies (OPEC). Middle-eastern countries had founded the organisation in the 1960s and began to control oil and gas prices in 1969. In 1973, members of OPEC unilaterally raised prices by 70 percent and banned exports to Western nations that had supported Israel in the Yom Kippur War. Within a year, oil prices quadrupled.

In response to the OPEC crisis the Alberta provincial government, lead by Premier Peter Lougheed, moved aggressively to capture the profits associated with rising oil prices. The government raised royalties on oil and gas and established technical public ownership of resources. In eastern Canada the situation differed: higher oil prices threatened Central and Atlantic Canada’s economic stability because they predominantly imported the resource. The federal government also reacted quickly to the crisis by imposing a freeze on oil prices in the fall of 1973. In addition, Prime Minister Pierre Elliot Trudeau’s Liberal Party established a federal oil export tax to capture increased revenues, and it denied resource companies the right to deduct provincial royalty charges before computing federal taxes. By 1975, the two governments reached an impasse: both levels of government shared the wealth.

Despite this impasse, the nature of Alberta’s relationship with the federal government had changed. Unlike the Social Credit Party, the Progressive Conservative Party was no longer content to leave exploration and development to resource companies while the government reaped the profits. Rather, the government was now trying to control the industry – production, marking, and pricing. The Lougheed government – like most western Canadian provincial governments in this period – believed that the resource boom could provide the region with a basis for economic diversification and revenue. Consequently, Lougheed established the Alberta Heritage Trust Fund to aid diversification and to ensure the province’s financial survival when resources depleted.

By 1975, however, Canada was in a serious trade deficit position in the oil industry. The national economy faced serious problems. Trudeau's government argued that it was in the country’s interest to establish an energy or resource policy – despite the fact that resources fell within provincial jurisdiction. Central and Atlantic Canada had to be sheltered from the escalating world price of oil. In return, Lougheed argued that the West should be made to pay the full cost of Canadian nationhood. Following Confederation, the West had virtually paid for the building of the Canadian Pacific Railway. Now, the same situation had reoccurred. The two governments agreed to a gradual increase in prices and joint involvement – with resource companies – in the development of tar sands and heavy oil upgraders.

Prime Minister Joe Clark
Courtesy of the Provincial Archives of Alberta

In this context, Alberta’s Joe Clark won the 1979 federal election. Clark’s first budget promised a $4 increase per barrel in oil prices in 1980. His Progressive Conservative Party was defeated in the House of Commons only seven months later. Eastern and western Canadian hostility characterised the upcoming election. Trudeau's Liberal Party won the 1980 election with a majority. The government’s first budget introduced the National Energy Programme (NEP). The programme imposed federal authority over energy resources and established new price and revenue sharing schemes without western consent. The NEP also established policies to encourage the Canadianisation of the oil and gas industry and to develop non-conventional methods of extraction and more frontier exploration. Petro-Canada, a crown corporation, would further increase the federal government’s involvement in the industry.

Federal and provincial relations deteriorated further when Trudeau declared his intention to repatriate and amend Canada’s constitution with only Ontario and New Brunswick’s support. The Lougheed government viewed Trudeau’s initiative as an attempt to increase federal powers at the provinces' expense. Western Canadians widely believed that the NEP and the repatriation of the constitution was yet another effort to make the Ontario perspective of Canada the national one. As a consequence, western Canadian separatist parties began to dot the region. In March 1981 Alberta cut the flow of oil to eastern Canada by five percent. Lougheed increased the percentage to ten percent in June. A poll conducted in 1981 showed that forty-nine percent of Albertans supported separation from Canada.

In September of 1981 the two governments finally reached an agreement that would take effect in 1986. Alberta agreed to accept a slightly modified NEP. Lougheed also agreed that the Canadian price of oil would never rise above seventy-five percent of the world price. In exchange, Alberta earned substantial price hikes for oil and the federal government promised not to tax oil and gas exports to the United States. While the provinces would receive 30.2 percent of oil and gas revenue, the federal government would receive 25.5 percent. Despite the concessions that Lougheed received from the federal government, complex factors caused Alberta’s oil boom to collapse in 1982.