The federal government has announced it will soon be going ahead with selling off its remaining shares in Petro-Canada, which is expected to result in a windfall for Ottawa of approximately $2.5-billion. Most industry experts have applauded this move.
However, in announcing this sale, Ottawa has conveniently forgotten to tell Canadians how it acquired its shares of Petro-Canada in the first place.
But when one looks at the history, a clear case can be made that the bulk of these proceeds needs to go into Canada's roads and highways.
In 1981, the Trudeau government introduced the National Energy Program, which set out a number of energy-related objectives for the government at the time. One of these objectives was to increase Canadian ownership in the oil and gas industry as a way of buffeting the domestic market from external energy-price shocks. The obvious vehicle that was used to increase Canadian ownership was Petro-Canada, the state-owned oil company that had been set up in the 1970s. However, Petro-Canada did not have enough capital at its disposal to make large enough acquisitions to make any noticeable dent in Canadian ownership -- so how would it acquire such capital?
The answer came in the 1981 federal budget through the creation of the "Canadian Ownership Account" or COA. The COA was to be a stand-alone federal account whose sole purpose was to expand Canadian ownership in the energy sector. In order to fund the account, the budget also introduced the "Canadian Ownership Charge," which was a special tax levied on all sales of gas and fuel in Canada -- a 1982 PricewaterhouseCoopers report estimated that this new tax added 4 cents at the pump to the price of every litre of fuel. Statistics Canada confirms that the month the tax began to be levied at the pump witnessed one of the steepest month-over-month fuel-price increases in the previous 30 years.
Money from this Canadian Ownership Account was subsequently transferred to Petro-Canada in order to make large-scale acquisitions as a means of increasing Canadian ownership. The largest and best-known acquisition was the 1982 takeover of Petrofina -- between 1981 and 1983, the federal government forwarded Petro-Canada $1.7-billion out of the COA to complete the Petrofina transaction. In return, Petro-Canada issued common shares to the federal government. Although the Canadian Ownership Account ceased to exist following the demise of the National Energy Program with the election of Brian Mulroney, the shares stayed with the federal government -- and continue to be held by Ottawa today.
So in short, Ottawa's shares in Petro-Canada were paid for by a special tax levied on motorists in the early 1980s, and so it seems logical that now that those shares are being liquidated, motorists should stand to realize something for their original investment. Clearly, upgrading Canada's roads and highways is the best way to ensure that those who paid the bill for Ottawa's Petro-Canada shares -- motorists -- can stand to benefit.
Of course, given the neglect and deterioration witnessed on Canada's highways, the share sale proceeds would only make a small dent in repairing and upgrading Canada's National Highway system. However, devoting the bulk of the Petro-Canada share sale to roads and highways would send a strong signal that the federal government agrees with the concerns of all Canadians about the state of roads and highways in Canada. It's not just good public policy, but given the history, it's the logical course to take.
Jeff Morrison is executive director of the Road and Infrastructure Program of Canada, a special committee of the Canadian Construction Association.
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