Michael Ignatieff: Rebuilding the Liberal Party of Canada Through the Oil Sands

George Hoberg and Matthew Landryiggh


Over the past several months, Michael Ignatieff has been surprisingly positive toward the Alberta oil sands. In a Vancouver pub this past January, the Liberal leader had this to say: “It [the oil sands] changes everything about our economic future. It changes everything about Canada’s importance in the world.” This is new talk for the Liberal party, and it parallels Prime Minister Harper’s stance on the issue – that energy is a key geopolitical tool for Canada. But Ignatieff has gone even further, framing the oil sands as fundamental to the future of Canadian federalism. “Energy policy in our country is a national unity issue,” the leader was quoted as saying at the same Vancouver meeting. Ignatieff’s explicit openness toward the oil sands stems from his desire to rebuild the Liberal Party in Western Canada and to escape the sour political legacy of Pierre Trudeau’s 1980 National Energy Program.


The Liberal Party of Central and Eastern Canada


Often called the “Party of Canada,” the Liberals have historically had difficulties west of Ontario.  The last period of Liberal dominance in the region began in 1949, under Prime Minister Louis St. Laurent. In that election, the Liberals managed to carry Manitoba, Saskatchewan and British Columbia, while finishing second behind the Social Credit party in Alberta. By 1968 however (the first election of Pierre Elliott Trudeau), the Liberal party was beginning to lose momentum in Western Canada, ceding Saskatchewan and facing a strong Progressive Conservative base in Alberta.


In 1980, despite Trudeau’s return to office, the Liberals found themselves swept entirely out of British Columbia, Alberta and Saskatchewan, and managing only two seats in Manitoba. It was during this period that the Liberals enacted the National Energy Program, a decision that would meet vehement resistance in Western Canada. Capitalizing on the program’s unpopularity, Brian Mulroney campaigned on the notion of a “Renewed Federalism”, with energy policy at the centre of the Progressive Conservative platform. The 1985 Western Accord, signed between Ottawa and the three oil and gas producing provinces of Western Canada, reintroduced free market principles to the sector, and emphasized federal-provincial co-operation.


Meanwhile, the “Party of Canada” failed to win a single seat in either Alberta or Saskatchewan for the remainder of the decade, reasserting itself only modestly in the region following the Progressive Conservative collapse of 1993. In that year the Liberals, challenged only by regional parties (the Reform Party in the west, and the Bloc Quebecois in the east) retained control of Ottawa through the new millennium. However, with the resurgence of a national conservative party, the Liberals have continued to struggled in the Western Canada throughout the 2000s. They currently hold only seven seats west of Ontario, with five of those in British Columbia.


The National Energy Program


As designed by the Trudeau government in 1980, the NEP had three major goals:

1)      Security of supply and independence from the world market.

2)      For all Canadians to benefit from the energy industry.

3)      To insure a fairer revenue-sharing regime that recognizes the rights of all Canadians.

Achieving these goals, however, proved to be difficult for then-PM Pierre Trudeau. To shield consumer provinces from dramatically increased oil prices, domestic rates were kept artificially low (never rising above 85% of the world price). This was meant to insulate Eastern Canada – the source of Liberal support – from the global recession. In effect, however, it brought Alberta’s energy boom to a halt, forcing industry to sell its oil domestically at a discounted price. Alongside strict price regulations, the federal share of petroleum income increased from 10 – 24%, while the share for the Province and industry correspondingly decreased.


The federal justification for this policy was simple: as Alberta’s wealth increased and the rest of the country fell deeper into recession, Ottawa would be obliged to take on ever larger equalization payments to “have-not” provinces. Increasing Ottawa’s royalty take from the booming energy sector in the West would help mitigate these costs. For Albertans, however, the NEP represented an encroachment by the federal government into the management of natural resources – a provincial jurisdiction as enshrined in the Constitution. The details of the plan also called for 50% Canadian ownership by 1990. In sum, despite Ottawa’s intentions, the NEP failed to pull the rest of Canada up out of recession and, instead, pulled Alberta down into it. Unemployment rose to 10%, with lost revenue from the period estimated at between $50 and $100 billion.


The reasons for the NEP’s failure are varied. For one, it was a unilateral federal effort, enacted without sufficient provincial consultation. Secondly, the program hinged on the assumption that petroleum prices would continue to increase to $100 a barrel, thereby generating enough revenue to pay down the federal budget deficit. Oil prices, however, dropped 5% in 1981 and a further 13% in 1982, signalling to both industry and government that things were changing. This softening in world oil prices, combined with a new, less friendly investment climate, led to project closures and a reduction in further development. So drastically had the policy environment changed, that the Liberals instituted a phased shut down of the NEP in 1983, only three years after its inception.


How Stephane Dion’s Green Shift Aggravated The Problem.


By embracing the oil sands, Michael Ignatieff hopes to reenergize the Liberal party in western Canada. To do this, he has begun to distance himself and the party today from certain policies of the past, namely the NEP and Stephane Dion’s Green Shift. Dion staked his party’s hopes on an ambitious, nation-wide carbon tax. It met strong resistance in western Canada, however, and Conservative rhetoric frequently linked the Green Shift directly to the NEP. “It’s (the Green Shift) like the national energy program in the sense that the national energy program was designed to screw the West and really damage the energy sector,” Stephen Harper told the CBC. “This is different in that it will actually screw everybody across the country.” Echoing that sentiment, the Premier’s Office in Alberta was quick to condemn the plan: “Mr. Dion cannot come to Alberta and tell us how to run our province,” a spokesman said, dubbing the Liberal policy “an NEP-style green shaft.”


While Dion dismissed comparisons between the NEP and his own program, Michael Ignatieff has made it a priority to directly address Western concerns. “The dumbest thing you can do is run against the energy sectors in Western Canada,” Ignatieff told a room of supporters in Regina. “God knows this party has made mistakes out in western Canada.” Included in his list of mistakes: the NEP and Dion’s Green Shift. Nevertheless, try as he might, the National Energy Program and Stephane Dion’s more recent Green Shift have created a political legacy that may be impossible for Michael Ignatieff to escape. A quarter century after the NEP’s end, it remains a poignant issue in Western Canada. The Green Shift only refreshed bitter memories.


The New Dilemma


There is no question that overcoming longstanding political ill will rooted in memories of the NEP will be essential for rebuilding the Liberal Party in Western Canada. However, doing so may create tensions elsewhere for Michael Ignatieff. How exactly will Michael Ignatieff reconcile the oil sands with an aggressive climate action plan, important to so many Liberal supporters? Details have been deliberately vague thus far (the official Liberal platform is expected in June) but it will likely involve some form of cap-and-trade system with absolute limits, a policy Ignatieff has expressed interest in before (although he has maintained that such a system must not hurt Alberta). Ignatieff has also said he would have Ottawa match at least part of the two billion dollars Alberta has committed to carbon capture & storage research. And, while details of the Liberals’ climate action plan have been vague, Ignatieff has been clear on what will not be on the table: “We will not be going into the next election with a carbon tax,” he stated during the May convention. Although his party adopted a resolution leaving open the option for a carbon tax, the party leader retains a veto over party platform items (Liberal Party Constitution, Section 33 (2e) ).


Politically, Ignatieff’s pro-development position on Alberta’s oil sands is a trade off; alienate some of the party’s younger, more progressive members to pick up formally sympathetic ridings in Edmonton and Manitoba. But if it is not successful – if the NEP proves too difficult a legacy to cast off – then Ignatieff will have given ground for nothing, electorally-speaking. Political commentator Don Newman, for one, is weary of the strategy. Newman believes Ignatieff has more growth potential in the eastern provinces and to focus resources on such an uphill battle (in Western Canada) appears “delusional.” However, Ignatieff’s support for the oil sands, beyond simple political expediency, represents a greater, symbolic gesture to the West. While Dion was quick to criticize Alberta for its “tarnished” environmental record, Ignatieff is reaching out. “The dumbest thing you can do – and no Liberal shoulder ever do it – is run against Alberta, make Alberta the enemy, isolate Alberta.” He wants to extend an olive branch to the people of the Wild Rose Country, to reassert that the Liberals, in their traditional pragmatism, are the “Party of Canada”.


The larger question that remains, however, is whether Michael Ignatieff’s conciliatory gesture to the West will complicate, even hinder, any significant policy aimed at reducing greenhouse gas emissions in the future.


Print Resources on the National Energy Program


G. Bruce Doern and Glen Toner, The Politics of Energy, (Toronto: Methuen, 1985)


Patrick James and Robert Michelin, “The Canadian National Energy Program and Its Aftermath: Perspectives on an Era of Confrontation,” American Review of Canadian Studies, 19:1 (1989): 59-81.


Glen Toner, “Stardust:  The Tory Energy Program,” in Michael Prince, ed., How Ottawa Spends, 1986-87 (Toronto:  Methuen, 1986), pp. 119-148.


Carolyn J. Tuohy, Politics and Policy in Canada: Institutionalized Ambivalence, Philadelphia: Temple University Press, 1992.



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