Petrol North of the Border

TORONTO–The words of the Big Oil man in New York City came back quickly to this bustling metropolis: “If the proposals are translated into legislation as presented, they will affect every aspect of Canadian economic, political and social life and stretch beyond Canada’s national borders.”

Thus spoke Alex Massad, president of Mobil Oil Corp.’s exploration and production division, at an investment conference. He was referring to the determination of the Trudeau government in Ottawa to Canadianize the oil and gas industry to the level of 50 percent Canadian ownership by 1990. Presently, nearly 80 percent of the nation’s oil and gas industry is foreign-owned, mostly by U.S. companies. No other Western country permits such domination.

Prime Minister Pierre Trudeau and his energy minister, Marc Lalonde, are going to purchase major oil companies and properties through the Canadian government-owned Petro-Canada–already a major explorer of oil and gas. The government also is pushing for private Canadian companies to buy into foreign energy companies’ subsidiaries operating in the country.

In late October, the Ottawa government announced the Canadianization policy, which included holding crude oil prices well below the world cartel price, subsidizing the 25 percent of oil consumption that is imported and placing a tax on natural gas production. This policy infuriated the Alberta government led by Premier Peter Lougheed, who promptly announced that he was going to cut the province’s oil production 180,000 barrels a day, challenge the gas tax in court and stall the new tar sands development. In Edmonton the day of Lougheed’s televised evening speech, people were as excited as sports fans are before a boxing event.

But Ottawa clearly has the upper hand, notwithstanding the “nationalism” of Alberta’s political and business elites. Under the British North America Act, Ottawa could declare a national emergency and take over oil and gas production or countermand production restrictions.

The main struggle, however, is not between Alberta, which produces more than 80 percent of Canada’s oil and gas, and Ottawa. It is between the multinational oil companies–Exxon, Mobil, Gulf, Shell–and the Canadian government.

Massad’s warning is one of many that have been ricocheting throughout Canada. Almost daily, U.S. oil subsidiaries and their Canadian allies, the latter disliking the price controls, announce the suspension of activity, cancellation of investment projects or the exporting of exploration budgets south of the border. An Exxon subsidiary involved in a huge tar sands project called a halt to its work. This induced Ottawa to come up with $40 million in interim financing to keep the project going. A spokesman for Canada’s third party, the New Democratic Party, accused the Trudeau government of knuckling under to “blackmail” by a multinational oil company which he said has “gone on strike.”

Indeed, there is much talk in oil circles of a producers’ strike or at least a slowdown. Destabilizing or dislocating the Canadian economy to stop Trudeau and Lalonde is not viewed as farfetched by close observers of this test of wills between Big Oil and the Canadian government. In announcing that Petro-Canada wants to buy out one or more of the multinational oil companies, Finance Minister Allan MacEachen said, “We are telling them: ‘We’re there and ready to buy and if you don’t like it, we’ll buy.”

Trudeau knows that time is of the essence, given the skyrocketing price of oil, and that if the Canadian government doesn’t buy in now, it will be too expensive when oil is $100 or more per barrel in 1990.

For their part, the large oil firms are concerned that if the Canadian energy move is successful, the idea could spread to the United States, the only Western country without a publicly-owned oil company to manage the oil and gas reserves under government-owned land.

A majority of U.S. oil and gas reserves are under the federal lands, onshore and offshore. They belong to the American people, are worth trillions of dollars, and are beingleased for a pittance to the large oil companies.

What is happening in Canada may alert Americans to what rich energy resources they already legally own, but do not control, and from which they do not receive adequate wealth. And Americans may sense more strongly that manipulated energy shortages leading to gas lines may not be as likely if they controlled their own oil instead of ceding it to the sovereign international state of Exxon.

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