The National Energy Program (, NEP) was an energy policy of the Canadian federal government from 1980 to 1985. The economically nationalist policy sought to secure Canadian energy independence, though was strongly opposed by the private sector and the oil-producing Western Canadian provinces, most notably Alberta.

Created under the Liberal government of Prime Minister Pierre Trudeau on October 28, 1980, following the two oil crises of the 1970s, the NEP had three main objectives: increase ownership of the oil industry by Canadians; price energy fairly for Canadian consumers; and provide Canadian energy self-sufficiency. The NEP was also designed to promote lower prices through price controls; promote exploration for oil in Canada; promote alternative energy sources; and increase federal government revenues from oil sales through a variety of taxes and revenue-sharing with the oil-producing Western Canadian provinces.

The NEP proved to be a highly controversial policy initiative and sparked intense opposition and anger in Western Canada, particularly in Alberta. The province's premier, Peter Lougheed, was a vocal opponent of the NEP on the grounds that it interfered with provincial jurisdiction and unfairly deprived Alberta of oil revenue. In 1981, Lougheed and Trudeau reached a revenue-sharing agreement. Opponents say that due to the NEP, the unemployment rate in Alberta rose from 3.7 percent to 12.4 percent, the bankruptcy rate in Alberta rose by 150 percent, and Alberta's losses were estimated to be between $50 billion and $100 billion (though Alberta's unemployment rate, bankruptcy rate, and revenue losses were also affected by the early 1980s recession and a crash in oil prices).

The term "Western alienation" was coined as a result of the NEP. The policy was repealed by the newly-elected Progressive Conservative (PC) government of Prime Minister Brian Mulroney on June 1, 1985. The NEP contributed to the creation and rise of the Western Canadian-based and right-wing populist Reform Party which made a major breakthrough in the 1993 federal election; the Reform Party merged with the PCs in 2003, becoming the Conservative Party which governed Canada under Prime Minister Stephen Harper from 2006 to 2015.

Background

In his preamble to the announcement of the National Energy Program, introduced as part of the October 1980 federal budget, Finance Minister Allan MacEachen echoed concerns by leaders of developed countries regarding the recession that followed both oil crises of the 1970s and the "deeply troubling air of uncertainty and anxiety" that was shared by Canadians. The Bank of Canada reported that economic problems had been accelerated and magnified. Inflation was most commonly between 9% and 10% annually, and prime interest rates were over 10%.

Lougheed's success in the agreement was marked by a widely published photograph of a celebratory champagne toast with Trudeau and himself. Lougheed later admitted to regretting the toast.

Lougheed's battle with the National Energy Program corresponded with the 1980s oil glut where energy prices dropped dramatically due to falling demand. Lougheed was forced to lower royalty rates through the Oil and Gas Activity Program and focused the government's efforts on natural gas diversification to stem falling revenues and a declining economy.

Helliwell et al. (1983) reported that the early 1980s energy price declines prompted the federal and provincial governments to update their revenue-sharing agreements. The amended agreements allowed for $4.2 billion in higher revenues ($1.7 billion for the federal government and $1.2 billion each for the provincial governments and industry), of $29.7 billion, an increase from 3.5% of GNP in 1980 to 6.2% of GNP in 1983.

Estimates have placed Alberta's losses between $50 billion and $100 billion because of the NEP. Alberta still initially enjoyed an economic surplus due to high oil prices, but the surplus was heavily reduced by the NEP, which, in turn, stymied many of Lougheed's policies for economic diversification to reduce Alberta's dependence on the cyclical energy industry, such as the Alberta Heritage Savings Trust Fund, and also left the province with an infrastructure deficit. In particular, the Alberta Heritage Fund was meant to save as much of the earnings during high oil prices to act as a "rainy day" cushion if oil prices collapsed because of the cyclical nature of the oil and gas industry. The NEP was one reason that the fund failed to grow to its full potential. In 2022, the Heritage Savings Trust Fund has $19B, a moderate increase on the $13B it had in 1986. This slow growth occurred despite some years when Alberta government had multi-billion-dollar surpluses.

GDP

Alberta's GDP was between $60 billion and $80 billion annually during the years of the NEP (1980-1986). It is unclear whether the estimates took into account the decline in world crude oil prices that began only a few months after the NEP had come into force, the graph of long-term oil prices shows that prices adjusted for inflation did not drop below pre-1980s levels until 1985. Since the program was cancelled in 1986, the NEP was active for five years with among the most expensive for oil prices on record, and the NEP prevented Alberta's economy from fully realising those prices. In the five years prior to the NEP (1975–1979), the per capita contributions by Alberta had approximated the fluctuations in the price of oil (see graph Fluctuations: Oil Prices & Alberta Per Capita Federal Contributions 1975–1981). In 1980, however, the inflation-adjusted average price of oil was only 5% higher than the previous year, but the per capita contributions from Alberta rose 77% From 1980 to 1985, bankruptcies per 1,000 businesses in Canada peaked at 50% above the 1980 rate. Meanwhile, the bankruptcy rate in Alberta rose by 150% after the NEP took effect.

Since bankruptcies did not fare as negatively in Central Canada as in the rest of Canada and in the United States, the NEP might have had a positive effect in Central Canada.

The unemployment rate in Alberta rose from 3.7 percent in September 1980 to 12.4 percent in 1984 following passage of the NEP.

Price of oil

thumb|400px|Long-term oil prices, 1861-2007 (top line adjusted for inflation).

Throughout the 1950s, the 1960s, and the 1970s, the retail price of petroleum in Canada consistently remained close to the price of gasoline in the United States and was often lower than prices seen in the US, especially during the 1970s price spikes. The NEP, which raised the price of fuel in the West and coincided with a hike in provincial gas taxes in Ontario and Quebec, made the retail price of gasoline in Canada become noticeably higher than that of the US, a trend that has continued ever since.

Abolition

The rationale for the program weakened when world oil prices began a slow decline in the early 1980s and collapsed in late 1985. A phased shutdown was commenced by Jean Chrétien, then Minister of Energy, Mines and Resources.

In the 1984 election, the Progressive Conservative Party of Brian Mulroney was elected to a majority in the House of Commons with the support of Western Canada after he had campaigned against the NEP. However, Mulroney did not eliminate the last vestiges of the program until two-and-a half years later, when world oil prices had dropped below pre-1980s levels (as adjusted for inflation: see Long-Term Oil Prices, 1861–2007).

On June 1, 1985, after extensive discussions between the federal Government and the governments of the oil-producing provinces, the "Western Accord on Energy" was agreed. It provided for the full deregulation of oil prices and for allowing the market forces of international and local supply and demand determine prices. Edmonton economist Scarfe argued that for people in Western Canada, especially Alberta, the NEP was perceived to be at their expense in benefiting the eastern provinces.

Petro-Canada, established in 1975, was responsible for implementing much of the Program. Petro-Canada was given the backronym "Pierre Elliott Trudeau Rips Off Canada" by opponents of the National Energy Program.

According to Mary Elizabeth Vicente, an Edmonton librarian who wrote an article on the National Energy Program in 2005, the popular western slogan during the NEP, appearing on many bumper stickers, was "Let the Eastern bastards freeze in the dark." Other bumpers stated "I'd rather push this thing a mile than buy gas from PetroCan."

McKenzie argued in 1981 that politically, the NEP heightened distrust of the federal government in Western Canada, especially in Alberta, where many believed the NEP to be an intrusion of the federal government into an area of provincial jurisdiction.