In 1980, your father’s government designed the National Energy Program (NEP). The goals of the policy as stated in the budget of 1980 were to be the “security of supply and ultimate independence from the world oil market; opportunity for all Canadians to participate in the energy industry; particularly oil and gas, and to share in the benefits of its expansion; and fairness, with a pricing and revenue-sharing regime which recognizes the needs and rights of all Canadians.”
The policy’s primary objective was price control and certainty of supply for eastern Canada. Western Canada was deeply offended and the scars of those days still run deep. More importantly, today we need a new policy, which is designed to protect not just the supply of our collective energy wealth but also the viability of a substantial source of revenue and wealth to Canadian taxpayers, corporations, and employees.
I am an investor and an owner of a wealth management company. Components of our client’s portfolios are in Canadian energy companies that we believe to be well-run and financed. I sit on the board of a public energy company. This letter thus is inherent with bias but I assure you I speak for myself and as a Canadian. I am an environmentalist and a pragmatist. I do not propose we dwell much longer on issues of the past, argue over who is right or wrong over the building of pipelines, but rather look toward creative and simple solutions that could accomplish multiple economic and political objectives.
Your government recently made a courageous decision (I believe) and purchased the Trans Mountain Pipeline (TMX). I believe your intentions were sound and the economics will ultimately prove to be rewarding (just like your father’s formation of Petro Canada is now world respected Suncor). Taken in isolation, the opening of additional markets for Canada’s energy as a good idea is not disputed. It is easy to judge actions when you are not in the seat of judgment. Leadership, as you know, means unpopular decisions at times.
I believe now is the time for a new National Energy Policy with two ideas offered below: the transfer of ownership of all or part of the TMX to the First Nations (FN) as part of your efforts to solve the various grievances of the FN’s on economic terms that are fair to all Canadians and the formation of a Strategic Petroleum Reserve (SPR) which would become an asset of all Canadians.
The ownership of the TMX by the FN’s, should they want it, could be an elegant solution to various political and economic issues and could form the basis of bringing the FN’s to being agreeable to its construction.
The formation of mechanisms to support orderly markets of Canada’s resources is not a new concept. We had the Canada Wheat Board, dairy policies, egg policies etc. We have had direct government intervention and investment in our automotive industry when it was in crisis during the great recession. The government has always made tough decisions when Canadian industry and employment was at risk. We are in a domestic energy crisis today and Canada’s well-being, and indeed the fabric of our country, is being torn apart by domestic and foreign interests on both sides of the argument.
Presently, approximately 35 million barrels of oil are sitting in storage in Western Canada. There are various reasons for such an excessively large amount of unsold oil: temporary shutting of U.S. refineries, excessive production of oil because projects developed with new pipeline construction in mind have proven to be optimistic projections, growing U.S. energy production crowding out Canadian barrels from existing pipelines, lack of new pipelines and insufficient railway capacity to supplant pipeline shortages.
The situation has led to completely uneconomic pricing of Canadian oil and as such the destruction of the economic wealth and activity in Western Canada, plunging tax receipts, the collapse of corporate profits and coming loss of jobs. The tragedy of the price problem is made all the more insulting because our oil is trading at a premium to U.S. oil once it is located on the Gulf Coast of America. Speculators and American refineries are arbitraging our national dysfunction and making a killing at Canada’s expense.
The formation of a Strategic Petroleum Reserve (SPR) would immediately solve a serious crisis of pricing of Canadian oil. If Canada were to establish an SPR like the U.S. or China has, we could immediately remove (if even only temporarily) immense inventory from the market. The oil would simply no longer be available to the “market”. The price response to such an action would be immediate. The SPR could be used as a tool to smooth out temporary price inefficiencies and thus permit businesses to plan with more precision, income would rise, investment would be secured, and tax receipts would increase.
If the SPR were to purchase all of the available oil (and by no means is it assured that it would be required to purchase it all), the investment would be about $2.1 billion if done at $60, which would arguably be a fair price, considering what the appropriate discounts in normal times should be. This investment would be the equivalent of $57 per Canadian. The investment would be by no means lost. We would collectively own the oil and such inventory could be “managed” for the benefit of the Crown, with an eye to securing not just an economic return to the crown through sales at appropriate times, but also ensuring sound pricing to industry for the long-term benefit of industry and by direct extension, the Canadian people.
We have come to the aid of industry and individual Canadians before. We have unemployment insurance to protect those who have lost jobs, marketing boards whose objective is to protect farmers, government-run pensions to protect retirees. Why would we not protect and nurture our most precious energy independence?
You are at a historical moment where you could begin the process of healing deep rifts within our country. I think your father (whom my father helped design the old NEP) would be proud if you reached out to the FN’s and also came to the arm of the energy industry in its time of need.
3 thoughts on “An Open Letter to Prime Minister Trudeau”
Wow, that’s out-of-the-box thinking John. Well done. (Of course I have no expertise to evaluate its merits, but I presume you do!) I’ll be watching to see if our PM follows up on this.
Thanks so much Diane, hope you’re well!
Good thoughts John. I sincerely hope they reach the ears of JT and he is open to listening. Julie