Oil Revolt

The West balks at new taxes

For years Canada's Western provinces could do little more than complain about the Eastern Establishment, including the federal government in Ottawa. The West was helplessly beholden to Eastern tariffs, Eastern financial institutions and a Parliament dominated by Ontario and Quebec. Then, the West struck oil. All of a sudden, it found itself awash in energy, profits and power. This inevitably led to an East-West struggle. Last week it erupted into an outright tax revolt as the West balked at new federal excise levies on all natural gas sales.

British Columbia boldly announced that it would refuse to turn over the tax and would hold it in a trust instead, pending a court of appeal decision on its legality. Neighboring Alberta and probably Saskatchewan will make their payments on schedule in January but will accompany them with formal protests. The West's purpose: to force Canadian Prime Minister Pierre Trudeau to renegotiate the National Energy Program he announced last October, which sharply increased the federal share of oil and gas revenues.

Under the new taxation rules, Ottawa's share of energy revenues would increase from 10% to 24%, ultimately enriching federal coffers by $21.5 billion over the next three years. According to the Trudeau government, the tax was needed mainly to offset the power of foreign multinationals, which control nearly three-quarters of Canada's present oil and gas revenues. The Prime Minister's goal is 50% Canadian ownership by 1990.

Even if the courts decide to overrule the tax boycott, Trudeau's program will still face other obstacles in the West. In Alberta, the country's leading oil supplier, Premier Peter Lougheed warned that unless Ottawa negotiates a higher price for crude, the province will not only cut back production by 15% but will hold up construction of two new refineries.

Mindful of the dangers of the provincial protest, Ottawa has reacted in a low key. Trudeau spent his Christmas holiday skiing in the Alps, while a junior finance minister issued a statement to British Columbia pointing out that the province had the right to challenge a levy, but only in court. More forthrightly, Ottawa's Energy Minister, Marc Lalonde, warned that a refusal to pay would be "a dangerous precedent for any government to take."

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