The Canadian government struck a wide-ranging energy agreement today with Alberta Province, ending a 14-month-old internal dispute that has stalled oil and gas development in Canada and badly damaged investors' confidence in this resource-rich country.
Prime Minister Pierre Trudeau initialed the long-sought accord at a joint press conference with Premier Peter Lougheed of Alberta, the western Canadian province that produces 85 percent of Canada's oil and natural gas.
Announcement of the deal is expected to bolster the Canadian dollar on foreign exchange markets. Speculation in recent days that the two sides were nearing an agreement already has sparked a dramatic upsurge in the value of Canada's currency, which opened this month in the range of 83 U.S. cents after falling to a 50-year low of 80 U.S. cents in August.
Trudeau labeled the deal "a victory" from an economic point of view and predicted "renewed confidence in the Canadian economy" now that the two governments had ended their prolonged feud.
The complicated accord covers the distribution between the federal government and Alberta of an estimated $200 billion in petroleum revenues over the next five years. It includes a schedule of tax increases that will move Canada's regulated price to 75 percent of the world price and a cutback in the industry's share of oil and gas revenues. Also, Ottawa has agreed to back down on a controversial natural gas export tax which has been hotly contested by the provinces of Alberta and British Columbia.
Under the agreement, the price of most domestic oil will jump by about $2 a barrel each year until next July 1 and by about $7 a year thereafter until July 1, 1986. Under the policies of recent Liberal governments, Canada's domestic oil price has been held to $15.38, less than half the world price.
As part of the pact, the Alberta government shortly will restore full production of oil within the province. The Lougheed administration in the past year had introduced three staged reductions in oil output, which by today had reduced production by 120,000 barrels daily -- or about 10 percent of Canadian production.
The agreement also opened the way for approval of construction of two $10 billion oil sands plants in Alberta. The Alberta government had refused to permit construction of the proposed synthetic-oil-producing operations as part of its campaign against the Trudeau government's energy policies. Under Canada's decentralized federal system, the provincial governments hold title to resources within their boundaries, but the central government in Ottawa controls interprovincial trade and has powers to tax resource revenues.
For years the two governments have disagreed bitterly over how far these powers extend, with the split coming to a head last fall when Ottawa introduced a broad-ranging national energy program intended to boost the federal government's share of oil and gas funds and keep domestic oil prices well below world levels.