OIL
RIP-OFF

By MORDEN LAZARUS

The federal budget introduced late in
October dealt only marginally with Cana-
da’s serious economic problems but exten-
sively with energy policy. Keying on the
area shifted the spotlight, temporarily at
least, off the bitter constitutional issues to
the equally contentious issues involving oil
and gas.

Simply put, the budget objective is to

reach 50 per cent Canadian ownership of oil
and gas resources by 1990. This would be
accomplished by achieving control of a
significant number of oil and gas compan-
ies by Canadians and obtaining an early
increase in a share of oil and gas companies
owned by the Canadian government. This
policy runs counter not only to the position
of the multinationals which dominate the
petroleum industry in Canada but to that of
the Alberta government. Since most of the
gas and oil is found in Alberta, this provin-
ce’s opposition is the major obstacle to the
federal government’s goals.

Federal policy is the responsibility of
Energy Minister Marc Lalonde. He wants to
move quickly. Alberta’s Premier Lougheed
is determined that he won’t.

The federal position on the oil companies
is a strong one. Of the top 25 companies in
terms of assets, 17 are foreign-controlled
and account for 72 per cent of total revenues
in the industry. These include Imperial Oil
(Exxon), Gulf Canada, Shell Canada, Tex-
aco Canada, BP Canada, Mobil Canada,
Petrofina, Amoco, Hudson Bay Oiland Gas,
Chevron Standard and Canada Cities.

Petroleum industry profits have been
increasing rapidly and some of the compan-
ies are expanding into huge natural
resource conglomerates — coal, uranium,
metal mining, forest products, real estate
and more.

This profit escalation is a direct result of
the fourfold boost in OPEC oil prices in the
early 1970s. The windfall profits, according
to Lalonde and the labour-backed NDP,
should not be transferred out of Canada to
foreign ownership which uses the bonanza
to further extend their control and power
over the Canadian economy or ships out
their gains to their parent companies.

The windfall profits are enormous. In
1979, oil and gas produced in Canada was
only slightly higher than in 1970, but
production revenues rose about 1,000 per
cent from $1.2 billion to $11.1 billion last
year.

According to the federal energy depart-
ment, this pattern will continue. For exam-
ple, pre-tax profit on 1,000 cu. ft. of gas was
37 cents in 1975, 94 cents in 1979, but will
rise to $1.35 in 1981, and $2.49 by 1985. As
for oil, the profit will rise from $4.38 a barrel
in 1975 to $11.73 in 1985, perhaps more.

In addition, the big oil companies have
benefited greatly from benevolent tax
policies of both federal and provincial
governments. The industry has been pay-
ing an effective tax on its profits of only 10
per cent since 1974, much less than most
other industries.

The industry has also been getting tax
benefits on exploration. With federal tax
incentives, it costs the companies only 37
cents for every dollar they spend on explora-
tion. The Canadian taxpayer pays the other
63 cents.

Oil and gas prices will continue to
increase. This will mean further large
transfers of wealth from Canadians to

——

foreign shareholders. By ignoring the
problem of foreign ownership in the past
(although the NDP has focussed on it)
Canadians have lost a significant share of
the benefits of having a strong resource
base. If the government fails to act now,
Canadians will be the losers again. This is
the issue which the present government is
belatedly addressing.

Another factor which must concern Cana-
dians is that growth in the future will be
related to energy investment — tar sands,
pipelines, offshore drilling, liquefaction ...

An important point raised by the NDP in
the House of Commons is that the multina-
tionals do little research and development
in Canada, but pay the parent company for
research. What research is done in this
country is owned by the parent company.

All these factors dictate that decisive
action must be taken, making PetroCan the
largest oil and gas company in the country;
setting up a crown corporation to buy into
foreign-controlled companies; increasing
the role of existing Canadian companies
and attracting more Canadian capital into
the industry. PetroCan already has a gas
station network in Western Canada. The
aim is to match this with stations from
Ontario east.

An important move is the new Canada
Lands regulations which will assign a 25
per cent interest in all far north and Atlan-
tic offshore oil and gas fuels to public
agencies. Steps in this direction have
already been taken.

Present tax incentives will be revised.
Instead of favouring the big companies, the
new system will replace automatic write-
offs with direct grants, graduated to the
degree of Canadian ownership. All produc-
tion projects in the Far North and Atlantic
offshore must have 50 per cent Canadian
ownership.

The tough choice the government faces
will come if foreign companies refuse to sell
or to reduce their stake. What could follow is
nationalization on a massive scale. This is
what the NDP is urging. Speaking in
Winnipeg November 20, NDP Leader Ed
Broadbent said that the proposal to have 50
per cent of Canada’s oil companies
Canadian-owned by 1990 is inadequate.

Other nations already have major control
of their oil and gas industry — Mexico 100
per cent, Great Britain’s state company has
a 50 per cent stake in production from its
rich North Sea oil fields, Norway takes 50 to
70 per cent of the proceeds from oil and gas,
to name a few. Yet PetroCan is to take only
25 per cent from frontier discoveries while,
according to Lalonde, Canadian taxpayers
pay 90 per cent and more of the costs of
frontier exploration and development.

Premier Lougheed’s position is more
difficult to counter. Alberta now gets almost
45 per cent of production revenues, the
companies about this same amount, but the
federal government only 10 per cent.
Ottawa wants at least 20 to 25 per cent by
reducing the companies’ share, leaving
Alberta with about 43 per cent and billions
of dollars.

Lougheed is taking advantage of long-
time Western antipathy to eastern (mean-
ing Ontario and Quebec) economic domi-
nance to block federal moves at every turn.
Now Alberta must call the shots. Alberta

must corral the booty and dish it out as it
sees fit. The West’s time has come.

The question is, will it be atthe expense of
Canada as a nation? Peter Foster in his best
seller, The Blue-Eyed Sheiks — The Cana-
dian Oil Establishment, says:

“Indeed, it is worth pointing out, since
Alberta today is fond of painting its eco-
nomic history as one of being an underdog ~«
to eastern interests, that from 1960 onwards@
consumers in Ontario were forced by the

federal govenment to pay higher prices

for their oil than their Quebec neighbours
who enjoyed cheap imports. They paid these
higher prices so that Alberta might have a
market.”

Having escaped the threat of separatism
in Quebec, the nation now faces the threat
from Alberta. Now is no time for faint
hearts. —ML

PENSION
STORY

The trade union movement in Canada
and the political party it supports has done
more to get pensions for senior citizens in
Canada as a right than has any other group
in the country.

As long ago as 1905, the old Trades and
Labour Congress of Canada urged that
legislation be adopted to take care of the
deserving poor and disabled. Now, 75 years
later, the Canadian Labour Congress and
the New Democratic Party are still urging
better pensions for all who need them.

The lamentable fact is that so few peopl
know or appreciate who led the pension
fight through the years.

This 32-page booklet is an educational
effort intended to inform and to influence all
who would like to know more about our
pension system, how it came into being,
how adequate or inadequate it is, what is
being recommended to improve it and the
forces whose aim it is to diminish it.

Pensions are higher today and govern-
ment pensions are indexed to the cost-of-
living. But private pensions are not. In fact
private pensions have more faults than
benefits.

Yet it is often the public pension plans
which come under attack. This booklet
gives the reader enough information abo
what needs to be done and what othe™.
countries are doing to stimulate desire to
know more.

The Pension Story, by Morden Lazarus,
32 pages. Published by Co-operative Press
Associates for the Canadian Centre for
Labour Studies. Introduction by CLC Presi-
dent Dennis McDermott.

For more information, write Larry Wagg,
Director, Department of Education, Cana-
dian Labour Congress, 2841 Riverside
Drive, Ottawa, Ontario K1V 8X7, or get in
touch with your provincial CLC office.

10/Lumber Worker/Nov.-Dec., 1980