Open Collections

UBC Theses and Dissertations

UBC Theses Logo

UBC Theses and Dissertations

Politics and power : petroleum policy in British Columbia Jackson, Dale L. 1989

Your browser doesn't seem to have a PDF viewer, please download the PDF to view this item.

Item Metadata

Download

Media
831-UBC_1989_A8 J32.pdf [ 4.43MB ]
Metadata
JSON: 831-1.0097786.json
JSON-LD: 831-1.0097786-ld.json
RDF/XML (Pretty): 831-1.0097786-rdf.xml
RDF/JSON: 831-1.0097786-rdf.json
Turtle: 831-1.0097786-turtle.txt
N-Triples: 831-1.0097786-rdf-ntriples.txt
Original Record: 831-1.0097786-source.json
Full Text
831-1.0097786-fulltext.txt
Citation
831-1.0097786.ris

Full Text

POLITICS and POWER: PETROLEUM POLICY in BRITISH COLUMBIA By Dale L. Jackson B.A., The University of B r i t i s h Columbia, 1984 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS in THE FACULTY OF GRADUATE STUDIES (Department of P o l i t i c a l Science) We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA September 1989 (c^ Dale L. Jackson, 1989 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department The University of British Columbia Vancouver, Canada DE-6 (2/88) i i Abstract T h i s t h e s i s examines the determinants of petroleum p o l i c y i n B r i t i s h Columbia. The vast f i n a n c i a l stakes i n the petroleum s e c t o r , and the upheaval the sector has undergone i n the past twenty years, ensure the p a r t i c i p a t i o n of the most powerful a c t o r s i n attempting to i n f l u e n c e p o l i c y i n t h e i r f a v o r . The t h e s i s examines two s p e c i f i c case s t u d i e s : ( 1 ) the long running d i s p u t e over ownership and j u r i s d i c t i o n of Canada's western o f f s h o r e region, and ( 2 ) the r a d i c a l s h i f t s i n n a t u r a l gas p r i c i n g i n B r i t i s h Columbia. Four t h e o r e t i c a l explanations of p o l i c y formation are u t i l i z e d : p a r t y and ideology, Marxism, s t a t e autonomy, and i n t e r n a t i o n a l i s m . Party and ideology i n v o l v e s the b e l i e f that the p o l i t i c a l p a r t y i n power i s able to a f f e c t the p o l i c y process, and that p a r t i e s have p o l i c y preferences based on i d e o l o g i c a l d i f f e r e n c e s between the p a r t i e s ' members or e l e c t o r a l supporters. The Marxist a n a l y s i s of c a p i t a l i s t s o c i e t y sees the owners of the means of production as the dominant c l a s s , and thus government p o l i c y i s designed to favor t h i s c l a s s . State autonomy focuses on the a b i l i t y of s t a t e a c t o r s and/or i n s t i t u t i o n s to a f f e c t the p o l i c y process i n ways that entrench and expand the i n t e r e s t s of government a c t o r s . F i n a l l y , i n t e r n a t i o n a l i s m holds that f o r c e s and c o n d i t i o n s o u t s i d e of the p o l i t y being s t u d i e d i n f l u e n c e , and may even dominate, domestic p o l i c y formation. It i s concluded that a l l four variables play some role in determining policy, but that two of these are paramount. Both the s t a t i s t impulses generated by the unique variant of federalism found in Canada, and the a b i l i t y of the petroleum industry to influence the provincial and federal governments, are indispensable in understanding petroleum policy in B r i t i s h Columbia. There i s a balance of power between these three sets of actors, each able to put i t s stamp on policy, but none able to dominate completely. i v Table of Contents A b s t r a c t i i Tabl e o f Contents i v L i s t o f Tables v L i s t o f F i g u r e s v i Acknowledgements v i i Chapter 1 I n t r o d u c t i o n 1 Chapter 2 Four Explanations of P u b l i c P o l i c y 5 Pa r t y and Ideology 6 Marxism 11 Sta t e Autonomy 13 I n t e r n a t i o n a l i s m 18 Separating V a r i a b l e s 23 Chapter 3 Ownership of B r i t i s h Columbia's Offshore 27 O f f s h o r e Chronology 27 Assessment of V a r i a b l e s 39 P a r t y and Ideology 39 Marxism 40 I n t e r n a t i o n a l i s m 44 S t a t e Autonomy 47. Chapter 4 N a t u r a l Gas P r i c i n g 52 Gas P r i c i n g Chronology 52 Assessment of V a r i a b l e s 68 P a r t y and Ideology 68 I n t e r n a t i o n a l i s m 72 Sta t e Autonomy 74 Marxism 77 Chapter 5 Conclusion 83 B i b l i o g r a p h y 88 Appendix A Government Revenue From O i l and Gas 92 Appendix B P r i c e of Natural Gas 93 V L i s t o f T a b l e s T a b l e 1 G o v e r n m e n t R e v e n u e s F r o m P e t r o l e u m 9 2 T a b l e 2 N a t u r a l G a s P r i c e s 9 3 v i L i s t o f F i g u r e s F i g u r e 1 M i n e r a l R e s o u r c e A d m i n i s t r a t i o n L i n e s 34 F i g u r e 2 G a s F i e l d s and P i p e l i n e s i n B r i t i s h C o l u m b i a 55 Acknowledgements My thanks must start with my advisor, George Hoberg, who throughout the course of this thesis offered numerous suggestions that have invariably made their way into what follows. I would also l i k e to acknowledge the influence of two other members of the Department of P o l i t i c a l Science. Both Ken Carty and Paul Tennant, by their approach to the study of p o l i t i c s and to teaching, have made my time at U.B.C. more f u l f i l l i n g than i t would have been without them. F i n a l l y , this thesis i s dedicated to the three people without who's support and encouragement this project would never have reached completion - my parents Geoff and P h y l l i s Jackson, and my wife Alison Crone. 1 C h a p t e r 1 I n t r o d u c t i o n The g l o b a l petroleum market has undergone r a d i c a l changes i n the l a s t twenty years. The OPEC nations have expanded t h e i r economic and p o l i t i c a l power enormously, while consuming nation s have f e l t the severe economic e f f e c t s of massive p r i c e i n c r e a s e s . Canada has not been immune from the i n t e r n a t i o n a l energy c r i s i s . Rapidly i n c r e a s i n g energy p r i c e s , u n c e r t a i n t y of supply, and f e d e r a l - p r o v i n c i a l c o n f l i c t were a f a c t of l i f e f o r a l l Canadians during t h i s p e r i o d . B r i t i s h Columbia was profoundly a f f e c t e d by the energy c r i s i s along with the r e s t of Canada. The B r i t i s h Columbia government, as d i d a l l a f f e c t e d governments, reacted with a set of p o l i c i e s designed to a d j u s t the province to the new energy r e a l i t i e s . T h i s t h e s i s seeks to understand the f o r c e s that l i e behind the formation of petroleum p o l i c y i n B r i t i s h Columbia. In doing so i t u t i l i z e s four t h e o r e t i c a l explanations of p o l i c y formation: p a r t y and ideology, Marxism, s t a t e autonomy, and i n t e r n a t i o n a l i s m . A l l four v a r i a b l e s are d e f i n e d and examined i n more d e t a i l i n the next chapter, but are a l s o presented i n a cursory manner at t h i s p o i n t . Party and ideology i n v o l v e s the b e l i e f that the p o l i t i c a l p a r t y i n power i s able to a f f e c t the p o l i c y process, and that p a r t i e s have p o l i c y preferences based on i d e o l o g i c a l d i f f e r e n c e s between the p a r t i e s ' members or e l e c t o r a l supporters. The M a r x i s t a n a l y s i s of c a p i t a l i s t s o c i e t y sees the owners of the means of p r o d u c t i o n as the dominant c l a s s , and thus government p o l i c y 2 i s designed to favor this class. State autonomy focuses on the a b i l i t y of state actors and/or in s t i t u t i o n s to affect the policy process in ways that entrench and expand the interests of government actors. F i n a l l y , internationalism holds that forces and conditions outside of the p o l i t y being studied influence, and may even dominate, domestic policy formation. It should be mentioned that a number of d i f f i c u l t i e s arise when trying to assess which of these four variables are responsible for policy formation. These d i f f i c u l t i e s are discussed at the end of the next chapter. Within the general and extensive subject area of petroleum policy in B r i t i s h Columbia, two issue areas have been selected as case studies: the dispute over ownership and j u r i s d i c t i o n of offshore petroleum resources, and natural gas p r i c i n g . The offshore dispute has been a source of c o n f l i c t between the federal and provincial government for over t h i r t y years. Both levels of government lay claim to the offshore area to the west of the province. The area i s thought to contain commercial natural gas reserves, with some opportunity of s i g n i f i c a n t o i l reserves. Because of the enormous revenues involved with petroleum development, control of the offshore i s of great salience to both levels of government, and resolution of the dispute would allow the petroleum industry to operate i n more stable regulatory environment than what has been in place to this point. 3 Natural gas pr i c i n g , as well, i s of considerable importance to the three main actors in petroleum policy. The ownership of, and a b i l i t y to price, natural gas i s bound up in the Constitution, and, l i k e so much of constitutionally derived j u r i s d i c t i o n in Canada, i s a matter of dispute. The revenues obtained from natural gas in B r i t i s h Columbia are extremely s i g n i f i c a n t , although not on the scale o f Alberta's petroleum resources. How these revenues are distributed i s o f obvious interest to both levels of government and to the petroleum industry. There are, then, two aspects to the policy issues chosen that recommend them. F i r s t , both issues have been at the p o l i t i c a l forefront for some time. As a result, the interests involved w i l l have been able to develop and exert their resources to the degree they fe e l appropriate. Second, both issues have s i g n i f i c a n t benefits and/or costs to the interests the four explanatory variables predict w i l l be involved in setting poli c y . The rest of the thesis i s divided into four sections. The next chapter presents each of the four explanatory variables, attempts to predict in general terms what policy w i l l look l i k e i f each variable i s responsible for policy formation, and discusses d i f f i c u l t i e s in trying to assess each variable. Chapters 3 and 4 present the two case studies. A chronology of the offshore dispute i s presented in Chapter 3, and of natural gas pricing in Chapter 4. The second half of each chapter assesses each of the four variables for i t s a p p l i c a b i l i t y to the policy issue being studied. Chapter 5 4 summarizes the findings of the two previous chapters, draws out conclusions from these findings, and t r i e s to assess what the conclusions say about the study of public policy. 5 Chapter 2 Four E x p l a n a t i o n s o f P u b l i c P o l i c y T h i s t h e s i s seeks t o understand the f o r c e s behind the f o r m a t i o n o f petr o l e u m p o l i c y i n B r i t i s h Columbia. There a r e two a s p e c t s t o such an u n d e r t a k i n g . Of course the c o n t e n t o f p e t r o l e u m p o l i c y must be p r e s e n t e d , and t h a t i s done l a t e r . F i r s t , though, t h e r e must be a framework t o p l a c e the c o n t e n t i n . P r e s e n t e d below a re f o u r v a r i a b l e s p o t e n t i a l l y c a p a b l e of e x p l a i n i n g p o l i c y c o n t e n t . B e f o r e p r e s e n t i n g these four v a r i a b l e s i t s h o u l d be mentioned t h a t no mention o f the r o l e p l a y e d by energy consumers, both i n d u s t r i a l and r e s i d e n t i a l , i s made throughout what f o l l o w s . T h i s might a t f i r s t g l a n c e seem a c u r i o u s o m i s s i o n , however the reasons f o r doing so are q u i t e s i m p l e : n e i t h e r group has had a r o l e t o p l a y i n p o l i c y f o r m a t i o n . In the case of the o f f s h o r e d i s p u t e n o t h i n g would be gained by involvement by e i t h e r group, what was a t st a k e concerned o n l y the p r o v i n c i a l and f e d e r a l governments, and the petroleum i n d u s t r y . In the case o f n a t u r a l gas p r i c i n g both c l a s s e s of consumers had a c o n s i d e r a b l e s t a k e i n what form p o l i c y took, but a g a i n no e v i d e n c e o f t h e i r e f f e c t on p o l i c y can be found. T h i s i s not t o say t h a t n e i t h e r group was a c t i v e i n t r y i n g t o pursuade government p o l i c y makers; both i n d u s t r y and consumer groups made numerous p r e s e n t a t i o n s a t r a t e h e a r i n g s . The f a c t t h a t o i l and gas p r i c e s rose t o w o r l d l e v e l s s h o r t l y a f t e r the 1973 and 1979 w o r l d p r i c e shocks i n d i c a t e s these groups had no e f f e c t on p o l i c y . 6 I. Party and Ideology An on-going debate among p o l i t i c a l s c i e n t i s t s has been the importance of ideology and party for government policy. The concept that party and ideology matter i s based on two b e l i e f s . The f i r s t i s that the p o l i t i c a l party in power influences government policy, and the second i s that parties have different policy preferences based on ideological differences between the parties' members and/or constituent groups. While being the object of some debate, differences among parties are commonly placed on a one-dimensional, l e f t -right continuum. In a simplified portrayal, parties of the l e f t are said to favor, a c t i v i s t state p o l i c i e s to control the free market, while parties of the right advocate a free market devoid of government interference. In r e a l i t y , of course, a l l parties a c t i v e l y use the coercive powers of the state to shape not only the market, but a wide variety of other s o c i a l phenomena as well. Nevertheless, numerous studies have been carried out to determine i f party affects policy. The results are at best ambiguous. A number of studies have found party makes l i t t l e or no difference. For example, Weir found no difference in the trade and resource p o l i c i e s of the two main federal p a r t i e s . 1 McCready and Winn conclude the redistributive p o l i c i e s of the 1 John Weir, "Trade and Resource P o l i c i e s , " in P o l i t i c a l  Parties in Canada, Conrad Winn and John McMenemy (Toronto, McGraw-Hill Ryerson Ltd., 1976). 7 four western provinces are not explained by the partisanship of the government in power.2 Stevenson finds that, while there are differences between Liberal and Conservative foreign p o l i c i e s , i t i s the s i m i l a r i t i e s that "...are more s t r i k i n g than the differences between the p a r t i e s . " 3 On the other hand, a number of writers contend that indeed party does affect policy. Cameron finds that party i s one of the variables explaining the expansion of post-war western government revenues. 4 Hibbs finds "... a low unemployment -high i n f l a t i o n configuration in nations reg u l a r i l y governed by the Left and a high unemployment - low i n f l a t i o n pattern in p o l i t i c a l systems dominated by center and r i g h t i s t p a r t i e s . " 5 F i n a l l y , Marsha Chandler, in work summarized in more d e t a i l below, finds partisanship i s the most important variable explaining resource policy in the western provinces.^ While the l i t e r a t u r e i s inconclusive, we can nevertheless hypothesize that differences in party policy between the NDP 2 Douglas McCready and Conrad Winn, "Redistributive Policy," i n Winn and McMenemy. 3 Garth Stevenson, "Foreign Policy," in Winn and McMenemy. 4 David R. Cameron, "The Expansion of the Public Economy: A Comparative Analysis," in American P o l i t i c a l Science Review, 72 (1978), pp. 1243-61. 5 Douglas A. Hibbs J r . , " P o l i t i c a l Parties and Macroeconomic Policy," in the American P o l i t i c a l Science Review, 71:4 (1977), p. 1467. Marsha Chandler, "The P o l i t i c s of Provincial Resource Policy," in The P o l i t i c s of Canadian Public Policy, Michael M. Atkinson and Marsha A. Chandler, eds. (Toronto: University of Toronto Press, 1983). 8 government of 1972-75 and the Social Credit governments of 1952-72 and 1975-present help explain petroleum policy in B r i t i s h Columbia. Although the general l i t e r a t u r e notes several problems with operationalizing party and policy as an explanatory variable, the s p e c i f i c case of B r i t i s h Columbia i s more ea s i l y handled.^ B r i t i s h Columbia i s viewed as a highly polarized province, both in terms of i t s electorate and i t s p r o v i n c i a l p o l i t i c a l parties. Blake has documented s i g n i f i c a n t ideological differences between NDP and Social Credit supporters.^ As well, Erickson, Carty, and Blake found s i g n i f i c a n t differences among the parties' e l i t e s . ^ Thus one would expect the NDP and Social Credit to espouse quite d i f f e r e n t policy platforms. In addition, we are concerned not with the t o t a l i t y of government or party p o l i c i e s , but with one thin s l i c e : those dealing with petroleum policy. As a result, we need not be concerned with overlapping policy preferences of the parties. How, then, are we to evaluate party as a predictor of government policy? Most studies looking at this problem take These problems include the inadequacy of placing parties on a one-dimensional continuum, overlapping party p o l i c i e s , and inadequate measures of party policy. Donald E. Blake, 2 P o l i t i c a l Worlds: Parties and Voting in  B r i t i s h Columbia, (Vancouver: University of B r i t i s h Columbia Press, 1985), pp. 49-113. Lynda Erickson, R.K. Carty, and Donald E. Blake, "Ideology and Partisanship in B r i t i s h Columbia: A c t i v i s t s in a B i -polar P o l i t i c a l System," paper presented to the XIV World Congress of the International P o l i t i c a l Science Association, 1988. l e v e l s of government expenditures as the dependent v a r i a b l e . 1 0 As Chandler notes, however, resource policy expenditure levels are an inadequate indicator because the most common policy instrument used in the resource f i e l d i s the tax system. The levels of direct government subsidies are r e l a t i v e l y low. 1 1 Chandler suggests as an alternative that governments of the l e f t w i l l be more l i k e l y to use coercive revenue instruments than w i l l governments of the right. She presents four revenue instruments and ranks them in increasing order of coercion. They are; 1. P r o f i t Tax - tax on the net p r o f i t s of a company 2. Gross Royalties - royalties that take a fixed percentage of the value of production 3. Super-royalties — a second level of very high rate taxes, designed to capture windfall p r o f i t s 4. Public Ownership Using the coercion of revenue instruments as the dependent variable. Chandler finds that in Canada, "... party ideology has proved to be an important determinant of resource p o l i c y . n ^ - 2 When discussing B r i t i s h Columbia, Chandler concludes there "... i s evidence that an NDP government acted quite d i f f e r e n t l y from a Social Credit administration." 1 3 In 1 0 See Cameron, pp. 1246-48. 1 1 Chandler i n Atkinson and Chandler, pp. 48-9. 1 2 Chandler i n Chandler and Atkinson, p.64. 1 3 Chandler i n Chandler and Atkinson, p. 56. 10 addition to Chandler's c l a s s i f i c a t i o n , other writers have found that governments of the l e f t were approximately three times as l i k e l y to form Crown Corporations as were parties of the r i g h t . 1 4 Therefore, we can hypothesize that i f party determines policy, the NDP government of 1972-75 should be characterized by the use of more coercive policy instruments, and the creation of more Crown Corporations, than w i l l be the Social Credit governments of 1952-72 and 1975-present. While the natural gas study can be evaluated using Chandler's typology, the offshore dispute does not lend i t s e l f to this type of c l a s s i f i c a t i o n . In this case we cannot be as predictive as with gas pr i c i n g . One possible way differences between the two parties might manifest themselves arises from the NDP favoring a stronger federal government than does the Social Credit party. The NDP has long supported a strong central government as a means of insuring the necessary resources to enact the party's p o l i c i e s i f e l e c t e d . 1 5 Therefore, in the case of the offshore dispute, we can hypothecize that the NDP w i l l favor more c e n t r a l i s t p o l i c i e s than w i l l the Social Credit party. 1 4 Marsha Chandler, "State Enterprises and Partisanship in Provincial P o l i t i c s , " in the Canadian Journal of P o l i t i c a l  Science, XV:4 (December, 1982) pp. 711-40, and Aidan R. Vining and Robert B o t t e r e l l , "An Overview of the Origins, Growth, Size and Functions of Provincial Crown Corporations," in Crown Corporations in Canada, Robert Prichard, ed. (Toronto: Butterworth and Co.,1983). 1 5 Desmond Morton, NDP: Social Democracy in Canada, 2nd ed., (Toronto: Samuel, Stevens, Hakkert and Company, 1977), ch. 4. 11 I I . Marxism For Marxists the control of power i s d i r e c t l y related to the control of the means of production. The owners and managers of the means of production e f f e c t i v e l y control a l l the major resources of society. Within this power structure the state i s t o t a l l y subservient to the needs of c a p i t a l . Its role i s , in the words of one writer, [to] try to f u l f i l l two basic and often mutually contradictory functions - accumulation and legitimization ... This means that the state must try to maintain or create the conditions in which pro f i t a b l e c a p i t a l accumulation i s possible. However, the state also must try to maintain or create the conditions for s o c i a l harmony. 1 6 How the state i s tied to capital i s a matter of some debate among Marxist writers. Some see the relationship cemented through cross membership between capital and the s t a t e . ^ Others see the relationship arising from the need of the state to maintain 'business confidence 1. 1^ While the role of the state has not changed in Marxist thinking, i t s relation to capital has undergone a fundamental 1 G James O'Connor, The F i s c a l C r i s i s of the State, (New York, St. Martin's Press, 1973), p. 6, as quoted in Leo Panitch, "The Role and Nature of the Canadian State," in The  Canadian State; P o l i t i c a l Economy and P o l i t i c a l Power, Leo Panitch, ed., (Toronto: University of Toronto Press, 1977), p. 8. ^ See, for example, Ralph Miliband, The State in C a p i t a l i s t  Society: The Analysis of the Western System of Power, (London: Quartet Books Ltd., 1969). 1 8 See, Fred Block, "The Ruling Class Does Not Role," in S o c i a l i s t Register, 33 (May - June, 1977). 12 restructuring, primarily in an e f f o r t to explain the emergence of the welfare state. Writers emphasize the need for the 'relative autonomy of the state' from c a p i t a l . This autonomy i s needed because ca p i t a l i t s e l f i s not able to act in i t s long term interests. It i s necessary, therefore, for the state to act in ways that, while perhaps harmful to the interests of c a p i t a l in the short term, or of s p e c i f i c sectors of c a p i t a l in the long term, serves the interests of the c a p i t a l i s t class as a whole. In the case of Canada writers have put forward two findings that for our purposes are highly suggestive. F i r s t , there i s agreement that the c a p i t a l i s t system i s strongly entrenched. Panitch writes that there exists, ... an ideological hegemony emanating from both the bourgeoisie and the state which i s awesome, which i s reflected in the sheer pervasiveness of the view that the national interest and business interests are at one, and which certainly ensures the smooth functioning of the relationship between the state and the c a p i t a l i s t class. 9 In addition, Marxists find that capital in Canada has tended to be less homogeneous than in other countries. This fragmentation has led to c o n f l i c t within the dominant class. In pursuing the c o n f l i c t , some sectors of cap i t a l have used the p r o v i n c i a l governments to advance their causes. This capture of provincial governments has been one of the main causes of federal-provincial c o n f l i c t . Garth Stevenson, writing of the past, has noted, 19 Panitch in Panitch, p. 13. 13 ... the provincial state spoke on behalf of the narrow and parochial interest of one segment of the bourgeoisie, while Ottawa spoke on behalf of the more general and long-term interests of the ruling class as a whole. Narrow and s p e c i f i c interests can more eas i l y recruit a provincial state to act on their behalf than they can capture the federal state, which i s exposed to a much wider range of influences... We are given, then, both a rationale for government action and a prediction of how i t might act. Governments act in the interests of c a p i t a l , and in the case of Canada, pr o v i n c i a l governments may act in close concert with one sector of c a p i t a l . For our purposes we can hypothesize that the B r i t i s h Columbia government's natural gas pricing policy i s the result of e f f o r t s to optimize conditions for one faction of c a p i t a l . The petroleum industry,•already said to control the Alberta government, might also exert influence on the B r i t i s h Columbia government because i t too i s a producing province. I l l . State Autonomy The f i r s t two variables see societal forces as co n t r o l l i n g the policy process. Recently, however, there has emerged a new school of investigation that focuses, not on the impact of society on government, but on the impact of government on society. E r i c Nordlinger i s one of the best known proponents Garth Stevenson, "Federalism and the P o l i t i c a l Economy of the Canadian State," in Panitch, pp.90-91. For case studies of provinces captured by sectors of c a p i t a l see, Henry Milner, "The Decline and F a l l of the Quebec Liberal Regime: Contradictions in the Modern Quebec State," and Larry Pratt, "The State and Province-building: Alberta's Development Strategy," in Panitch, pp. 101-32 and pp. 133-62. 14 o f s t a t e a u t o n o m y . F o r N o r d l i n g e r , t h e s t a t e c a n b e v i e w e d i n a m e a n i n g f u l w a y o n l y b y s e e i n g i t a s a c o l l e c t i o n o f i n d i v i d u a l s . F o r , " O n l y i n d i v i d u a l s h a v e p r e f e r e n c e s a n d e n g a g e i n a c t i o n s t h a t m a k e f o r t h e i r r e a l i z a t i o n . " 2 1 T h e r e i s n o r o o m f o r a v i e w o f t h e s t a t e a s a n i n s t i t u t i o n a l c o l l e c t i v i t y . N o r d l i n g e r h o l d s t h a t , T h e s t a t e i s a u t o n o m o u s t o t h e e x t e n t t h a t i t t r a n s l a t e s i t s p r e f e r e n c e s i n t o a u t h o r i t a t i v e a c t i o n s , t h e d e g r e e t o w h i c h p u b l i c p o l i c y c o n f o r m s t o t h e p a r a l l e l o g r a m o f t h e p u b l i c o f f i c i a l s ' r e s o u r c e w e i g h t e d p r e f e r e n c e s . 2 S t a t e a u t o n o m y , f o r N o r d l i n g e r , i s s i m p l y t h e d e g r e e t o w h i c h g o v e r n m e n t o f f i c i a l s h a v e t h e i r w a y . N o r d l i n g e r ' s d e f i n i t i o n i s i n c o m p l e t e a n d a s a r e s u l t w e a k e n s t h e c o n c e p t o f s t a t e a u t o n o m y . A s N o r d l i n g e r h i m s e l f a d m i t s , t h e s t a t e i s a l s o " . . . s o m e c o m b i n a t i o n o f i t s f u n c t i o n s , c o n t o u r s , l e g i t i m a c y , l e g a l n o r m s , r u l e s a n d m a c h i n e r y , s o v e r e i g n t y , n e a r c o e r c i v e m o n o p o l y , a n d t e r r i t o r i a l c o n t r o l . " 2 3 I n o t h e r w o r d s , t h e s t a t e i s a l s o t h e p o l i t i c a l i n s t i t u t i o n s a n d c o n v e n t i o n s o f a p o l i t y . I n s t i t u t i o n s a n d c o n v e n t i o n s a r e i m p o r t a n t b e c a u s e , " [ a ] c t o r s i n t h e p o l i t i c a l s y s t e m , w h e t h e r i n d i v i d u a l s o r g r o u p s , a r e b o u n d w i t h i n t h e s e s t r u c t u r e s , w h i c h l i m i t , e v e n d e t e r m i n e , t h e i r c o n c e p t i o n s o f t h e i r o w n i n t e r e s t a n d t h e i r p o l i t i c a l r e s o u r c e s . " 2 4 A 2 1 E r i c A . N o r d l i n g e r , O n t h e A u t o n o m y o f t h e D e m o c r a t i c  S t a t e , ( C a m b r i d g e M a s s . : H a r v a r d U n i v e r s i t y P r e s s , 1 9 8 1 ) , p . 9 . 2 2 N o r d l i n g e r , p . 1 9 . 2 3 N o r d l i n g e r , p . 9 . 15 d e f i n i t i o n of state autonomy must treat the state in i t s complete form, not just the incomplete conception a r t i c u l a t e d by Nordlinger. Theda Skocpol recognized this dual conception of the state when she wrote. On the one hand, states may be viewed as organizations through which o f f i c i a l c o l l e c t i v i t i e s may pursue d i s t i n c t i v e goals, re a l i z i n g them more or less e f f e c t i v e l y given the available state resources in r e l a t i o n to social settings. On the other hand, states may be viewed more macroscopically as configurations of organization and action that influence the meanings and methods of p o l i t i c s for a l l groups and classes in s o c i e t y . 2 5 [Accordingly], States conceived as organizations claiming controls over t e r r i t o r i e s and people may formulate and pursue goals that are not simply r e f l e c t i v e of the demands or interests of s o c i a l groups, classes, or society. This i s what i s usually meant by "state autonomy."26 Thus we are given two variants of state autonomy, one concentrating on the goals of p o l i t i c a l actors, the other on the i n s t i t u t i o n a l framework these actors must operate within. This i s not to say that the two conceptions of the state and state autonomy are incompatable. There i s no reason why state o f f i c i a l s cannot form and pursue their own goals. It needs to be recognized, however, that those goals and how they are Stephen Krasner, "Approaches to the State: Alternative Conceptions and H i s t o r i c a l Dynamics," in Comparative  P o l i t i c s , January 1984, p. 225. Theda Skocpol, "Bringing the State Back In: Strategies of Analysis in Current Research," in Bringing the State Back  In, Peter Evans, et a l , eds., (Cambridge: Cambridge University Press, 1985),p.28. Skocpol, p. 9. 16 achieved can be shaped by the i n s t i t u t i o n a l framework that o f f i c i a l s must work within. Alan Cairns, in work that predates Skocpol's, believes these s t a t i s t arguments l i e at the heart of Canadian p o l i t i c s . Cairns sees a constitution which i n i t i a l l y set up a federal state, and gave both levels of government important and wide-ranging j u r i s d i c t i o n s , as the key variable in the process that resulted i n "executive federalism." 2 7 What has evolved i s a federal state i n which both levels of government have become powerful and adversarial combatants, w i l l i n g to use the constitution to expand their interests. Cairns states, The nature of the federal system with i t s fuzzy li n e s of j u r i s d i c t i o n a l demarcation, and extensive overlapping of the potential for government response, means that in inumerable f i e l d s there i s , in fact, an intergovernmental competition to occupy the f i e l d 2 8 Within such a system the goals and aspirations of p o l i t i c a l and government actors are naturally shaped to serve the needs of t h i s i n s t i t u t i o n a l framework. Of these individuals Cairns writes, The ministries, departments, agencies, bureaus, and f i e l d o f f i c e s to which they daily report constitute p a r t i a l l y self-contained e n t i t i e s , valued for their own sake, and possessed of their own l i f e and Executive federalism i s a phrase used by Donald Smiley to describe federal government as a process carried out by insulated p o l i t i c a l e l i t e s at the provincial and federal l e v e l . It i s a view developed and discussed i n , Donald V. Smiley, Canada in Question; Federalism in the Eighties, 3rd ed., (Toronto: McGraw-Hill Ryerson, 1980). Alan C. Cairns, "The Other C r i s i s of Canadian Federalism, in Canadian Public Administration, 22, (Summer 1979), p. 189. 17 interests. Their minimum desire i s for a steady l e v e l of a c t i v i t y . Typically, however, they seek to enlarge the scope of their functions. If the environment offers new opportunities for expansion in emergent problem areas they w i l l compete with other bureaucracies for the prizes of status and growth offered by enhancement of their a c t i v i t y . 2 9 Careers are made by expanding influence and t e r r i t o r y . The natural t e r r i t o r y for encroachment i s the other l e v e l of government. What emerges from these s t a t i s t arguments i s an explanatory variable for policy formation. Policy i s formulated and enacted, not in response to societal inputs, but to further the needs and goals of government actors, and shaped by the system within which they work. It needs to be realized that the a b i l i t y of the state to enact p o l i c i e s of i t s choosing need not be absolute, rather a balance of power between state and societal actors i s possible. This i s true both of states viewed as c o l l e c t i o n s of individuals, and of states concieved as i n s t i t u t i o n a l structures. The power of the state to enact i t s own policy preferences need not be absolute in order for s t a t i s t arguments to be found v a l i d . A balance of state and s o c i e t a l influences may account for policy, and that balance may s h i f t to favor one side or the other across policy areas, across time and across p o l i t i e s . 3 0 2 9 Cairns, "Governments and Societies of Canadian Federalism," in Canadian Journal of P o l i t i c a l Science, X:4 p. 703. 3 0 The d i v e r s i t y of p o s s i b i l i t i e s within the concept of state autonomy i s central to the writing of Peter H a l l . See Peter H a l l , Governing the Economy: The P o l i t i c s of State 18 Stephen Tomblin, in an unpublished PhD. thesis, finds these s t a t i s t impulses to be the dominant explanation when examining the p o l i c i e s of the government of W.A.C. Bennett. 3 1 According to Tomblin, Bennett's personal vision of B r i t i s h Columbia, and his reliance on building infrastructure to realize that v i s i o n , i s the key to understanding the p o l i c i e s of his government. Tomblin states, ...the Bennett government was often more concerned with exploiting infrastructure for the purpose of building a more integrated and unified t e r r i t o r y , than i t was with serving the short-term goals of powerful economic groups....it i s certain that the p o l i t i c a l leaders themselves had their own set of objectives which were not merely the product of interest group pressure. 3 2 If the type of s t a t i s t arguments presented above are found to be true, what type of po l i c i e s might we expect to find? The most obvious feature of such p o l i c i e s i s that they w i l l entrench or expand provincial j u r i s d i c t i o n vis a vis the federal government. Furthermore, the province's position on issues introduced by the federal government w i l l also seek to improve i t s j u r i s d i c t i o n a l standing. IV. Internationalism Intervention in B r i t a i n and France^ (New York: Oxford University Press, 1986), esp. Ch. 10. Stephen G. Tomblin, In Defense of Territory: Province- Building Under W.A.C. Bennett, (unpublished PhD. thesis, 1985). Tomblin, p. 241-42. 19 The three previous variables a l l look, to internal forces to explain p o l i c y . Yet, without exception, a l l p o l i t i c a l observers would agree external forces also play a key role in the domestic p o l i t i c s of v i r t u a l l y a l l nations, and cert a i n l y a l l nations in the western world. Curiously, policy theorists have paid far less attention to these external forces than they appear to warrant. Canada in partic u l a r , would seem to be an ideal candidate for such an analysis. With an important part of i t s economy devoted to exports, and with ownership of a large part of i t s i n d u s t r i a l sector in foreign hands, Canada would appear to be more vulnerable to external forces than many other nations. This i s not to suggest that international forces have been ignored t o t a l l y . There i s a growing Canadian p o l i t i c a l economy l i t e r a t u r e , much of which addresses outside influences in one degree or another. This l i t e r a t u r e sees the Canadian economy as being t y p i f i e d by a heavy reliance on resource exports and dominated by foreign capital interests. One early explanation of the structure of the Canadian economy saw i t s key feature as the country's early reliance on raw, unprocessed natural resources as the engine for ecomonic growth. 3 3 The so-called 'staples theory' holds that the reliance on exports of natural resources weakens the a b i l i t y 3 3 The staples theory was developed to the Canadian model i n i t i a l l y by Harold Innis and W.A. Mackintosh. Summaries of this theory and what follows on the Canadian p o l i t i c a l economy can be found i n , Wallace Clement and Glen Williams, eds., The New Canadian P o l i t i c a l Economy, (Kingston: McGill-Queen's University Press, 1989). 20 of a nation to develop a mature i n d u s t r i a l economy in two ways. F i r s t , i t places the health of the national economy at the caprices of international market forces, over which the national government has no control. Second, the economic benefits of resource refinement accrues to the importing nation, at the expense of the exporting nation because products manufactured from these raw resources are then imported by the exporting nation. Nations, once locked into the staples trap are unable to develop a mature i n d u s t r i a l economy. The staples theory has been attacked in later years because i t has been observed that countries have been able to develop mature economies from those based on staple exports. Two ways out of the staple economy have been put forward. F i r s t , countries able to develop internal sources of c a p i t a l , or exercise internal regulation over external sources of c a p i t a l , and develop technological and managerial sovereignty, have moved into a more advanced economic phajse. Examples of such countries are Sweden, Italy, Japan, and the Netherlands, among o t h e r s . 3 4 The second way to acquire a more mature economy i s import c a p i t a l and technology. This has been the route taken by Canada. Reasons put forward for Canada adopting t h i s route vary. One writer sees i t as a result of the growth in si z e , The emergence of these 'late followers' and their comparison with the Canadian example i s addressed i n , Gordon Laxer, Open For Business: The Roots of Foreign  Ownership in Canada, (Toronto: Oxford University Press, 1989). 21 influence and power of multinational corporations at the time when Canada required capital and technology. 3 5 The other dominant explanation, put forward by Gordon Laxer, points to a lack of agrarian radicalism at the time large imports of American c a p i t a l and technology began. He finds that in the other late follower nations agrarian movements were largely responsible for enacting barriers to unrestricted imports of external c a p i t a l and technology. Whatever the cause of Canada taking the second route to i n d u s t r i a l i z a t i o n , the costs of doing so are clear. Canada continues to rely upon staple exports, with i t s accompanying exposure to fluctuating global markets. As well, the move to i n d u s t r i a l i z a t i o n has resulted in the highest l e v e l of foreign ownership of any developed country. 3 6 The p o s s i b i l i t y of foreign c a p i t a l influencing and dominating national a f f a i r s l i e s behind much of the Canadian p o l i t i c a l economy writing. How these features of the Canadian economy w i l l affect policy formation depends on the argument being examined. The exposure of the Canadian economy to international market forces because of a reliance on staple exports and the influence of the international market on domestic policy content i s discussed below. The effect of a high degree of 3 5 The role of the multinational corporation in the restructuring of the Canadian economy i s central to the writing of Wallace Clement. His theory i s summarized and criti q u e d in Clement and Williams. 3 6 Laxer (p. 225.) quotes a United Nations study that found Canada, with 0.5 per cent of the global population, received 17 per cent of global foreign direct investment. 22 foreign ownership in Canada's economy i s one varient of the Marxist argument, and the effect on policy i s discussed in that section of this chapter. Other than the p o l i t i c a l economy l i t e r a t u r e l i t t l e attention has been paid to developing a systematic approach to the influence of international forces on domestic policy content. One author who has attempted to draw out some ramifications i s Peter Gourevitch, and his findings are of i n t e r e s t . 3 7 His paper focuses on those works that deal with international explanations of domestic i n s t i t u t i o n a l structures and group c o a l i t i o n patterns. Gourevitch summarizes the work of one group of writers who find the growing interdependence of nations a f f e c t domestic p o l i t i c s . These writers have ... stressed the growing role of transnational, international and multinational actors, and global, non-military forces such as technology, trade, communications, and culture in shaping p o l i c y . 3 8 Thus, while Gourevitch's summary lacks the theoretical sophistication of the other variables, i t nonetheless can be hypothesized that i t w i l l be international actors that are responsible for the content of B r i t i s h Columbia's natural gas p r i c i n g p o l i c y . Work by other authors has suggested two p o s s i b i l i t i e s as to what form international factors may manifest themselves. One Peter Gourevitch, "The Second Image Reversed: The International Sources of Domestic P o l i t i c s , " in International Organization, 32:4 (Autumn 1978), pp.881-912. Gourevitch, p. 893. 23 school of thought sasss QBairJIiaaffJK,, __ri9 !by iurtrpPiication, sub-national governments,* ass "ILeaunniiaiig1 firon cotflher governments. This learning process; ius xme „t° time domaja_7_it explanations for the spread of the wpTifran-g sitatee--^ Hugdn Bfeclo portrays learning as goveirnmenttae i p a ^ l i n g asver a pracfolem and adopting p o l i c y that emulattEE ]pB-i30~ smiii-ttaons faraam other governments. The second way int-erma&ikarialL .ffaT&gscrs imay affiBect domestic policy i s through ttthae qgamwaaag M&&]r<&££>EKiSmw2e of national economies. As exsmtDina^ Ifeeasnm^  i t i s possible that iton^drJ_E _MB0Uic-y gareferaanaes; imay give way to international consiii3bBCTtrJaDa^  UJtae aibilitty _jff nations to ignore economic chasn^&E iiaaifceain^  terEases as trade increases. One writer who has asaftarei trJMaB fJossiibiULiiity i s David Cameron. He finds the desjargse t_> wihiicdJa a_titiL'D-ns feawe ana open economy i s the best predictasir a_f TptfoTlTiir' jps&vgmiuee gsx^arnsukam.4 ^  He concludes, The predomiinamit iknage inrr^iriitt itn miEEstt -_3_0.icy studies i s *hatt oaf poli±ii__al auitamky — _ f autonomous states whose aaaalLiucy gperDcesses an:® whrnaJLy insulated from external ifararines. "3fe_ una a wnarllffl m__r;ked by 'complex int^fb^pemfltenne1' j _ ^ t % ana i-nage i s increasingly If international SsxnneB asrfi TEESj>onsiible Sam* SJxittish Columbia's natural gas priciaag r_xg>131igr_y- w s e aaaaa expert. eeadi_tence of their The c l a s s i c woilk <sm IrMss arsea i s - JBar/b Iter-lB- Modern Social  P o l i c i e s in Brltr_aina anad Sweidenag p*e,w S_s™as Yale University Press, 1974). Cameron, 1978. Cameron, p. 125®-24 a c t i v i t y to be manifested in one of two ways. F i r s t , i f emulation accounts for policy, then the i n i t i a t i v e s adopted by B r i t i s h Columbia w i l l have found their genesis in external j u r i s d i c t i o n s . Second, i f the international economy i s responsible, policy w i l l r e f l e c t a response dictated by outside events. Separating Variables While the four variables just presented appear to be quite d i s t i n c t , a t t r i b u t i n g causality to one variable or another may not be so simple. Scenarios might arise that could be interpreted in different ways. This next section deals with several methodological considerations that could lead to these types of problems. While a d e f i n i t i v e framework for analysis i s not developed, more general considerations are discussed for each case. If any of these problems are encountered in the analysis that follows, a more thorough treatment w i l l be undertaken. The f i r s t area concerns the role electoral incentives play in policy formation. These incentives f a l l into the party and ideology variable, but in a different fashion than the constraints imposed by a party's membership on policy choice. Incentives may occur in one of two ways. Significant portions of the electorate could vote on the basis of a party's ideology, or a party may offer incentives not formulated by ideology to win over voters. The effects of electoral incentives are harder to demonstrate than influence of party 25 membership. If electoral incentives are a factor two conditions must be present. The issue must have some degree of public p r o f i l e . Policy choices on an issue without salience to the electorate w i l l not be motivated by appeals to the voters. Using the same logic, the policy adopted must be supported by a si g n i f i c a n t percentage of the electorate. A second potential d i f f i c u l t y revolves around policy choices taken to f o r e s t a l l public protest. It may be the case that an issue c r y s t a l l i z e s in the minds of the public to such an extent that governments are constrained in the policy decisions they can take. A current example of this dynamic i s the growing support for environmental protection. As the public's support for environmental issues grows, the options open to governments are decreased. In extreme cases governments may adopt p o l i c i e s knowing the f a i l u r e to do so w i l l bring unacceptable levels of disenchantment from the public. Another d i f f i c u l t y arises in di f f e r e n t i a t i n g between the elected p o l i t i c a l actor as a representative of a party, and the actor as government o f f i c i a l . One view strengthens the case for party and ideology as a determinant of policy, the other argues for statism. If elected p o l i t i c a l leaders are influenced by their party, one of two conditions must be true. Either the leaders must be representative of the party in terms of ideology and class, and thus representative of the general party membership, or the party e l i t e must be directed 26 i n some manner from the general membership. If party leaders d i f f e r in soci o l o g i c a l measurements from the party membership, or are able to lead their parties in a top down manner, i t can be presumed that restraints on their leadership are minimal. In such a case p o l i t i c a l leaders can be viewed as government actors, and s t a t i s t arguments w i l l apply. There may be d i f f i c u l t y , , as well, in d i f f e r e n t i a t i n g between actions taken by state o f f i c i a l s to further their own careers, and actions by the same o f f i c i a l s taken to perpetuate the c a p i t a l i s t system. The s t a t i s t arguments put forward b y Cairns, in explaining the motivations for independent state actions, asserts that the catalyst for independent state action i s the advancement of careers and expansion of j u r i s d i c t i o n . At the same time, some Marxists, more interested i n the effect of policy than the motivation for i t s genesis, see state o f f i c i a l s introducing p o l i c i e s that w i l l maintain business confidence. In this conception of state actions, o f f i c i a l s advance their careers b y formulating and adopting p o l i c i e s that aid c a p i t a l . It i s therefore not contradictory to say that p o l i c i e s might b e introduced that favor c a p i t a l , but are nevertheless motivated by s t a t i s t impulses. Chapter 3 Ownership of B r i t i s h Columbia's Offshore The f i r s t policy issue to be assessed i s B r i t i s h Columbia's position on the ownership of the offshore on the west coast. A chronology of the dispute i s presented, and then each of the four variables i s assessed in l i g h t of the events of the dispute. The dispute centered around which le v e l of government owns the offshore area off the coast of B r i t i s h Columbia. The area i s thought to contain commercial amounts of petroleum products. A survey by the Geological Survey of Canada estimated that the area contains 9.4 t r i l l i o n cubic feet of natural g a s . 4 2 By contrast, in 1984 the established reserves of gas in B r i t i s h Columbia totaled 8.33 t r i l l i o n cubic feet. There i s a p o s s i b i l i t y , although small, that the offshore region also contains commercial amounts of crude o i l . Globally, the importance of ownership of offshore areas did not emerge u n t i l World War II. It was the development of the technology necessary to explore and develop the offshore, coupled with the highly petroleum intensive war e f f o r t that served to increase attention on offshore ownership. 4 3 In B r i t i s h Columbia a r e l a t i v e l y minor dispute between the federal and provincial levels of government occurred at the turn of the century over the offshore and control of f i s h i n g 4 2 The report i s summarized in the V i c t o r i a Times, February 7, 1982, p.8. 4 3 For a discussion of the history of natural gas see, J. D. Davis, Blue Gold: The P o l i t i c a l Economy of Natural Gas, (London: George alie n and Unwin, 1984). 28 grounds. Other than this small incident, however, nothing of note occurred u n t i l 1949 when B r i t i s h Columbia, using the Petroleum and Natural Gas Act, issued a series of exploration permits covering small areas of the offshore r e g i o n . 4 4 This practice continued u n t i l 1957, with the permit holders conducting l i t t l e ox no exploration and allowing the permits to lapse the following year. 4^ In 1958, however, the R i c h f i e l d O i l Corporation obtained permits to explore large areas of the offshore from the provincial government and applied to the federal government for permits covering roughly the same t e r r i t o r y . AfteT enacting l e g i s l a t i o n which served to formally bring Canada's offshore under exclusive federal j u r i s d i c t i o n , the permits were issued in I960. 4 6 A 'Crown Reserve' was set up by the B r i t i s h Columbia government in August 1959. 4 7 The Reserve covered an area up to three miles west of a l l B r i t i s h Columbia lands. Creation of the reserve, i t was hoped, would serve two purposes. 4 4 Petroleum and Natural Gas Act, 1947. 4 5 Much of the early offshore history i s taken from, Neil Caplan, "Offshore Mineral Rights: Anatomy of a Federal-Provincial C o n f l i c t , " Journal of Canadian Studies, 1970, Neil Caplan, "Some Factors Affecting the Resolution of a Federal-Provincial C o n f l i c t , " in Canadian Journal of  P o l i t i c a l Science, 2:4 (1969), and Gary A. Nelson, "Offshore Petroleum Resources on the West Coast: A Review," (unpublished paper prepared for Westwater Research Centre, 1981). Additional material was gathered through conversations with o f f i c i a l s in the Ministry of Energy, Mines and Petroleum Resources. 4 6 The l e g i s l a t i o n was contained in two Acts; the Public Land  Grants Act, 1960 and the T e r r i t o r i a l Lands Act, 1960. 4 7 B r i t i s h Columbia Order-in-Council 1842/59. 29 F i r s t , the very fact that the government was taking l e g i s l a t i v e action would serve to further validate B r i t i s h Columbia's claim. Second, in the hope of raising more revenue, exploration rights were to be auctioned off to the highest bidder, rather than rented to the f i r s t applicant as was done previously. Lands already under exploration permits were excluded from the reserve. In fact, creation of the reserve weakened the province's position. When the reserve was created in 1959 approximately 3,000,000 acres were under provincial exploration permit. As the costs involved with new and old permits increased, however, the industry stopped taking out new permits and surrendered old ones. By 1962 the area under p r o v i n c i a l permit had f a l l e n to 600,000 acres. Fearing further erosion of i t s position, the government cancelled the reserve and returned to the previous system of issuing exploration permits. By 1960, then, both governments had established their claims to the offshore. Both had l e g i s l a t i o n which attempted to bring the offshore under i t s control, and each had issued exploration permits to the Richfield O i l Corporation for roughly the same area. During this period l i t t l e overt c o n f l i c t was found. Rather, i t would seem both levels of government were laying the groundwork in the event the offshore issue gained greater prominence at a later date. 30 In the early 1960s two events served to heat up the offshore dispute. F i r s t , Shell Canada obtained exploration permits from the federal government t o t a l l i n g 10,500,000 acres without obtaining provincial permits for the same area. Second, and p a r t i a l l y i n answer to Shell Canada's actions, the B r i t i s h Columbia government began to prepare to take the offshore j u r i s d i c t i o n question before the B r i t i s h Columbia Court of Appeal. As quickly as the dispute seemed to escalate i n 1962, events in 1963 served to defuse the situation. F i r s t , Shell was prevailed upon to take out provincial exploration permits in June of that year. Second, the federal Conservative government was replaced with a Liberal minority government seemingly more sympathetic to the province's claim. The pr o v i n c i a l and federal governments exchanged correspondence and i t was agreed direct negotiations might prove f r u i t f u l . Negotiations began in July, 1963, but quickly degenerated into acrimony. By June of 1964 the only agreement between the two governments was that a reference to the Canadian Supreme Court would be the only way to reconcile both parties' differences. Other than the obvious importance of the Court's opinion, the decision to send the matter to the Supreme Court had one other important dimension. At the same time B r i t i s h Columbia was establishing i t s claim to the offshore, the four A t l a n t i c provinces and Quebec had also claimed ownership to the eastern offshore. To this point each of these six provinces had followed independent courses. With the court case, however, the provinces were brought together in a common front. From 31 t h i s point on B r i t i s h Columbia's position would be formulated with the other fiv e coastal provinces. The federal government acted as petitioner for the reference and sent t h e matter t o the Supreme Court in 1965. The Court handed down i t s opinion on November 7, 1967. 4 8 The federal government's p e t i t i o n was worded in such a way as to determine who had j u r i s d i c t i o n over the offshore west of B r i t i s h Columbia; i t did not include the eastern offshore. The Court found unanimously that the federal government had exclusive ownership and j u r i s d i c t i o n over the offshore. Despite the unanimity of the Court some ambiguities remained. The Court's ruling dealt only with B r i t i s h Columbia's offshore, so the claim of the eastern provinces had not been invalidated. Newfoundland, in particular, has a unique constitutional history, and f e l t the Court's decision would not apply to i t s claim. In addition, Prime Minister Pearson had promised to negotiate control over t h e offshore with the provinces once the Court had handed down i t s decision, and i t was unclear what the scope of the negotiations would be. Premier Bennett, taking a l i b e r a l interpretation of the federal government's promise, called on Pearson to transfer ownership of the offshore to the provinces. 4 9 Premier Bennett did not accept the Court's decision, indeed the B r i t i s h Columbia government to this day has never acknowledged i t s 4 8 Reference Re Ownership of Offshore Mineral Rights, Dominion Law Reports, 1968. 4 9 See Vancouver Province, November 7, 1967, pp. 1-2. 32 v a l i d i t y . F i n a l l y , i t was unclear from the Court's decision whether Canada had ownership of the waters between Vancouver and Queen Charlotte Islands, and the mainland, or whether they could be considered 'inland waters', and thus belong to the province. While the federal government enjoyed a stronger bargaining position after the Supreme Court ruling, the offshore dispute was far from resolved. During the period of the mid 1960s the petroleum industry, and in particular Shell Canada, had been very active in B r i t i s h Columbia's o f f s h o r e . 5 0 Shell had begun a seismic exploration program in 1963. The results of the program, as well as other seismic work undertaken by other companies, were very encouraging. Shell planned to d r i l l a series of test wells off the west coast of Vancouver Island and in the Hecate S t r a i t . Thus, at the time the offshore dispute was sent to the Canadian Supreme Court, resolution of the dispute seemed to be of great salience, with the discovery of s i g n i f i c a n t petroleum reserves only a matter of time. Fourteen test wells were d r i l l e d in 1967 and 1968. The results of these wells were extremely disappointing. While small amounts of petroleum were found, nothing approaching commercial v i a b i l i t y was encountered. As well, growing environmental concern about the offshore was forcing both levels of government to re-assess their position on offshore Shell's exploration efforts are summarized in Oilweek, July 6, 1970. 33 development. By the time the Court's opi n i o n was rendered, then, enthusiasm f o r o f f s h o r e development had cooled c o n s i d e r a b l y . In 1968 newly e l e c t e d Prime M i n i s t e r Trudeau followed up h i s predecessor's promise to negotiate the o f f s h o r e i s s u e by sending a proposal to the s i x c o a s t a l p r o v i n c e s . The f e d e r a l government's o f f e r would have given a d m i n i s t r a t i v e c o n t r o l and a l l revenue d e r i v e d from areas w i t h i n the "Mineral Resources A d m i n i s t r a t i o n L i n e s " to the contiguous province. The M i n e r a l Resources A d m i n i s t r a t i o n Lines were l i n e s of demarcation c l o s e l y f o l l o w i n g the s h o r e l i n e s . A map showing these proposed l i n e s i s included i n Figure 1. In a d d i t i o n , the f e d e r a l government o f f e r e d to share on a 50-50 b a s i s with a l l ten p r o v i n c e s , any revenue derived from the areas seaward of the M i n e r a l Resources A d m i n i s t r a t i o n L i n e s . The f e d e r a l government proposed to administer these areas. B r i t i s h Columbia had two o b j e c t i o n s to the f e d e r a l p r o p o s a l . F i r s t , most of the promising o f f s h o r e areas l a y o u t s i d e of the p r o v i n c i a l l y c o n t r o l l e d areas. Second, the 50-50 revenue s h a r i n g proposal would give the province an i n s u f f i c i e n t r e t u r n f o r the r i s k and impacts that the province would ' experience from o f f s h o r e development. Premier Bennett r e j e c t e d the o f f e r i n a l e t t e r to Trudeau s t a t i n g , " I t i s B r i t i s h Columbia's f i r m o p i n i o n that the [o f f s h o r e resources] should remain under the j u r i s d i c t i o n of the Province and any U. S. A. 35 l e g a l interest of the Federal Government should be so t r a n s f e r r e d . 1 , 5 1 By 1972 growing general environmental concern had been cr y s t a l i z e d by four s p e c i f i c events. F i r s t , in 1968 a well blowout i n the Santa Barbara Channel off the C a l i f o r n i a coast had caused massive damage to that area and the pictures had been viewed by B r i t i s h Columbians nightly on the news. Second, the United States was proposing to ship crude o i l from the Pruhdoe o i l f i e l d in Alaska down the B r i t i s h Columbia coast, and through the Str a i t of Juan de Fuca. Third, the Arrow o i l tanker had broken up off the coast of Nova Scotia causing considerable damage, and this too had been seen on the nightly news. F i n a l l y , the voyage of the modified supertanker Manhattan through the' A r c t i c in 1971 further brought home the environmental dangers of offshore exploration and development. 5 2 As a result of these s p e c i f i c incidents a number of factors were constraining government options with regard to continued exploration of the offshore. Public opposition was finding i t s outlet i n a series of protests, resolutions from a variety of groups condemning exploration, and a series of c r i t i c a l 5 1 Letter to P. E. Trudeau, Prime Minister of Canada, from W. A. C. Bennett, Premier of B r i t i s h Columbia, dated A p r i l 1, 1969. 5 2 Concern over the Manhatten voyage centered around Canadian sovereignty over the A r t i e . Nelson makes the point, however, that environmental concerns were also an issue, (p.28 and p.31) 36 e d i t o r i a l s in the daily papers. Environmental concerns by members of both levels of government influenced the decision-makers. The poor results of the Shell Canada d r i l l i n g program had cooled the petroleum industry's enthusiasm. F i n a l l y , support of continued exploration was viewed b y a l l parties as inconsistent with Canada's opposition to the tanker t r a f f i c o f f B r i t i s h Columbia's coast resulting from the newly developed Alaskan o i l f i e l d s . A l l these factors combined to force the governments to place a moratorium on further exploration and development. The moratorium remains in place to t h i s day. In 1974 a dispute over ownership of the recently b u i l t Roberts Bank coal port provided the catalyst for the provincial government to pursue i t s claim of ownership over the inland waters of the Georgia S t r a i t , Johnston S t r a i t , Queen Charlotte S t r a i t , and the S t r a i t of Juan de Fuca. An island terminal had been b u i l t by dredging in Georgia Str a i t off Delta, and the terminal was connected to the mainland b y a r a i l l i n e over a long causeway. Both levels of government claimed ownership of the f a c i l i t y from the time construction was begun in 1969, and the dispute continued to escalate u n t i l the NDP government referred the matter to the B r i t i s h Columbia Court of Appeal. The Court handed down i t s decision in 1976 giving ownership to the province in a three to two d e c i s i o n . 5 3 The federal government later appealed the decision to the Supreme Court of 5 3 Reference Re Ownership of the Bed of the Str a i t of Georgia  and Related Areas, B r i t i s h Columbia Law Reports, 1976. 37 Canada, which, in 1984, upheld the B r i t i s h Columbia Court of Appeal's d e c i s i o n . 5 4 Chevron Canada, in the 1970s, had obtained exploration r ights from S h e l l ' s west coast exploration permits in return for d r i l l i n g a minimum of two test wel ls . Addi t ional wells would resul t in a greater percentage of ownership of S h e l l ' s explorat ion r ight s . Chevron's desire to f u l f i l l the terms of th i s agreement coupled with generally reduced environmental concern, led the federal and B r i t i s h Columbia governments to appoint an assessment panel to examine the terms and condit ions under which the moratorium might be l i f t e d . Publ ic hearings were held in 1984 and 1985, and the panel's report was released in 1986 . 5 5 The report set out a number of concerns and areas i t f e l t should be studied further , but recommended that exploration again be allowed off the west coast . Chevron Canada, and both levels of government were preparing to resume exploration when the Exxon Valdez s p i l l occurred. The fa l l ou t from that s p i l l has again c r y s t a l l i z e d opinion, and has insured that exploration of B r i t i s h Columbia's coast w i l l not proceed in the near future. By the ear ly 1980s, however, the focus on the offshore dispute sh i f ted to the east coast. The A t l a n t i c provinces, as 5 4 Reference Re Ownership of the Bed of the Georgia S t r a i t and  Related Areas, Dominion Law Reports, 1984. 5 5 West Coast Offshore Exploration Environmental Assessment Panel , Offshore Hydrocarbon Explorat ion: Report, (Ottawa: Queen's P r i n t e r , 1986). 38 mentioned, had been following a course similar to B r i t i s h Columbia's in demanding recognition of ownership of the offshore. Like the 1967 Supreme Court of Canada opinion giving j u r i s d i c t i o n of B r i t i s h Columbia's offshore to the federal government, a similar decision in 1983 gave the federal government j u r i s d i c t i o n over Newfoundland's o f f s h o r e . 5 6 After protracted and antagonistic negotiations, in 1985 the federal and Newfoundland governments signed the A t l a n t i c Accord, which outlined administration over the Newfoundland offshore. It allowed for dual management of exploration and development, while giving a l l monies, up to certain specified l i m i t s , to the province. In 1986 the federal government and Nova Scotia signed a similar agreement. The effect on B r i t i s h Columbia's case i s obvious. It i s unlikely i n the extreme that an arrangement dissimilar to the A t l a n t i c Accord would be agreed to by the federal government. As a result, the possible options open to the B r i t i s h Columbia government are limited. It would seem the B r i t i s h Columbia government w i l l have to negotiate an agreement with the federal government involving dual control of the offshore. Recent statements by provincial p o l i t i c i a n s suggest that negotiations with the federal government indicate the pro v i n c i a l government accepts this r e a l i t y . 5 7 5 6 Reference Re Mineral and Other Natural Resources of the  Continental Shelf, Dominion Law Reports, 1983. 5 7 "Offshore Rights Deal Imminent," Vancouver Sun, May 5, 1987, p. HI. 39 At the time of writing the offshore issue i s once again in a state of limbo. While the gap in the positions of the federal and p r o v i n c i a l governments appears to have narrowed as a result of the A t l a n t i c Accord, no agreement has been announced. With the Exxon Valdez s p i l l much of the pressure for reaching an agreement on the offshore i s gone. Before the s p i l l Chevron Canada appeared determined to f u l f i l l the terms of i t s agreement with Shell Canada and d r i l l i t s two test wells. With the s p i l l that p o s s i b i l i t y has been erased for the foreseeable future. Without the impetus of Chevron's d r i l l i n g plan i t may be some time before the two governments s e t t l e t h i s long dispute. I. Party and Ideology If party and ideology are to explain the province's position on the offshore dispute, we would expect the province's position to change when the NDP was elected in 1972. More s p e c i f i c a l l y , policy statements by the NDP have supported a more c e n t r a l i s t state than parties of the right. We would expect, therefore, the NDP government to pursue a more c e n t r a l i s t position on the offshore issue. This was not the case. The province's position on the offshore while the NDP was i n power showed no discernable differences from that of the Social Credit party which preceded i t , or the one that replaced i t . That th i s i s so i s most easily demonstrated by reviewing the history of the province's peti t i o n to the B r i t i s h Columbia 40 Court of Appeal on ownership of the i n l a n d waters between the mainland, and Vancouver and Queen C h a r l o t t e I s l a n d s . The previous s e c t i o n discussed the genesis and outcome of that p e t i t i o n and w i l l not be repeated here. R e c a l l , however, that the i s s u e spanned the three B r i t i s h Columbia governments i n the 1970s. C o n s t r u c t i o n of the Roberts Bank superport began when W.A.C. Bennett was s t i l l Premier, and i t was during h i s government's term that the p r o v i n c i a l government f i r s t claimed ownership of the Roberts Bank f a c i l i t i e s . The p o l i c y was continued with the i n i t i a t i o n of the p r o v i n c i a l p e t i t i o n to the p r o v i n c i a l Court of Appeal by the NDP government i n 1974. Development of the province's case, and the a c t u a l hearing of the case by the Court, took place a f t e r the B i l l Bennett government had taken over from the NDP i n 1975. Throughout, there i s no evidence that the p r o v i n c i a l government's p o s i t i o n changed with regard to the i s s u e . We must conclude that i n the o f f s h o r e dispute party and ideology played no r o l e i n the formation of the p r o v i n c i a l government's p o s i t i o n . The apparent s h i f t i n p r o v i n c i a l p o l i c y i n the l a s t two or three years to an acceptance of some f e d e r a l l e g i t i m a c y i n t h i s area can be a t t r i b u t e d to the developments on the east coast, r a t h e r than to any w i l l i n g change w i t h i n the B r i t i s h Columbia government. I I . Marxism I f c a p i t a l i s able to exert the degree of i n f l u e n c e claimed by Marxi s t w r i t e r s , we would expect that the province's p o s i t i o n 41 on the dispute would r e f l e c t what would be most favorable to the petroleum industry. Indeed, as i s shown below, i t would have been to the industry's d i s t i n c t advantage to have had the dispute s e t t l e d long ago. In general, this l i t e r a t u r e does not predict which le v e l of government ownership and j u r i s d i c t i o n of the offshore business would prefer, although the work by Stevenson might indicate the petroleum industry would prefer to work through the provincial government. 5 8 Contrary to what i s predicted, the entire history of the offshore issue demonstrates that the interests of the petroleum industry have been ignored by both levels of government in the dispute. Two s p e c i f i c examples can be used to draw out the general trends in the costs and problems the petroleum industry has experienced as a result of the offshore dispute. Shell Canada has been the most active company in exploring B r i t i s h Columbia's o f f s h o r e . 5 9 Throughout the 1960s Shell consistently worked within the regulations set up by both le v e l s of government. The company paid two sets of fees and rentals, one to each level of government, with the payments 5 8 Stevenson contends that the accumulation function i s performed by the provinces more than by the federal government, and that sectors of capital have shown a preference to using the provinces to advance their interests, rather than the federal government. Garth Stevenson, "Federalism and the P o l i t i c a l Economy of the Canadian State," i n Leo Panitch, ed. The Canadian State:  P o l i t i c a l Economy and P o l i t i c a l Power, (Toronto: University of Toronto Press, 1977). For d e t a i l on the following two cases see, Nelson, pp. 33-40. 42 t o t a l i n g s e v e r a l m i l l i o n d o l l a r s . A f t e r the Supreme Court of Canada d e c i s i o n i n 1967, which held that j u r i s d i c t i o n over the o f f s h o r e r e s t e d with the f e d e r a l government, S h e l l surrendered i t s p r o v i n c i a l e x p l o r a t i o n permits. The company claimed that because of the Court's d e c i s i o n i t was e n t i t l e d to the refund of a l l p r o v i n c i a l fees and r e n t a l s p a i d , an amount of approximately $2,400,000. The p r o v i n c i a l government, not r e c o g n i z i n g the Supreme Court d e c i s i o n , held that S h e l l had v o l u n t a r i l y surrendered i t s permits, and thus was not e n t i t l e d t o a refund. Beginning i n 1970 S h e l l began a s e r i e s of l e g a l manoeuvres designed to recover i t s payments. The b a t t l e continued u n t i l 1974, when the matter was dropped without r e s o l u t i o n . A s i m i l a r c l a i m was put forward by another petroleum e x p l o r a t i o n company, Haida Resources Ltd, i n 1978. In the 1960s the company had taken out two blocks of e x p l o r a t i o n permits, one i n the Georgia S t r a i t , the other i n the S t r a i t of Juan de Fuca. A f t e r the 1967 Supreme Court d e c i s i o n g i v i n g ownership of the o f f s h o r e to the f e d e r a l government, Haida Resources requested that the p r o v i n c i a l government e i t h e r g i v e assurance of t i t l e or suspend the e x p l o r a t i o n requirements of i t s permits. The p r o v i n c i a l government refused both p a r t s of Haida's request. Haida then r e l i n q u i s h e d i t s Juan de Fuca permit. A f t e r the B r i t i s h Columbia Court of Appeal r u l e d that the i n l a n d waters belonged to the province, Haida s t a t e d i t had 43 given up i t s permits in a forced surrender because the pr o v i n c i a l government would not suspend permit requirements, nor provide assurances of ownership. The company then requested that i t s permits over the Juan de Fuca area be reinstated, or alternatively that the provincial government refund a l l rentals and fees paid in connection with that claim. The provincial government f e l t the permits had been surrendered voluntarily, and thus special consideration of Haida's position was not warranted. A series of l e t t e r s were sent back and forth, but the matter was not carried further. Both these examples point out some of the d i f f i c u l t i e s the petroleum industry has had operating with the offshore dispute in place. F i r s t , companies may be caught up in complying with two possibly contradictory set of regulations governing exploration. Second, companies have had to make double payments of the fees and rentals that are required by the terms of the government permits. These payments have been made with the knowledge that one set of payments may be unnecessary i n the long run i f j u r i s d i c t i o n i s awarded to one le v e l of government or the other, and that the extra set of payments w i l l probably not be refunded. Third, the continued dispute between the two levels of government has slowed the pace of exploration and development. This has resulted in a valuable resource remaining in the ground, and unavailable for development by the petroleum industry. F i n a l l y , companies, i f they relinquish one set of permits because of an apparent resolution of j u r i s d i c t i o n , may find they have been closed out 44 i f the dispute resolves i t s e l f in the other dire c t i o n . A l l of these d i f f i c u l t i e s are a direct result of the ongoing dispute between the provincial and federal governments. Resolution of the dispute would end the type of problems just outlined. The fact that the dispute continues after t h i r t y years, with continued costs to the petroleum industry, demonstrates the i n a b i l i t y of the industry to bring about a solution to the offshore c o n f l i c t . I l l . Internationalism If international forces have exerted any influence on the offshore dispute, the most probable method w i l l have been by emulating the policy solutions in other countries. We might expect that resolution of offshore disputes in federal countries, i f they are consistently resolved in one d i r e c t i o n or another, would lead to adoption by the provincial government of similar policy positions. In fact, there has been a general trend internationally for j u r i s d i c t i o n over a nation's offshore to be given to the contiguous province or state. In parti c u l a r , both the United States and Australia have resolved their offshore disputes in this d i r e c t i o n . In the United States j u r i s d i c t i o n over a three mile wide s t r i p has been given to the contiguous state. The federal government retains control of the area outside this three mile s e c t i o n . 6 0 In Australia the states were given control over 6 0 For d e t a i l s see, David Glasner, P o l i t i c s , Prices, and  Petroleum: The P o l i t i c a l Economy of Energy, (Cambridge Mass.: Ballinger Publishing Company, 1985.). 45 t h e o f f s h o r e i n a s e t t l e m e n t n e g o t i a t e d w i t h the Commonwealth government i n 1967. The Commonwealth d i d r e t a i n a degree o f i n f l u e n c e over o f f s h o r e development, l a r g e l y i n an a d v i s o r y c a p a c i t y . 6 1 B r i t i s h Columbia has used these examples i n i t s b a r g a i n i n g w i t h the f e d e r a l government. One example o f t h i s o c c u r r i n g i s found i n a statement c o n t a i n e d w i t h i n a b r i e f i n g paper on i t s o f f s h o r e p o s i t i o n . I t s t a t e s , "In oth e r f e d e r a t i o n s such as A u s t r a l i a and the U n i t e d S t a t e s t h e r e was a p o l i t i c a l s e t t l e m e n t made under which the t e r r i t o r i a l sea o f f the c o a s t a l s t a t e s was brought w i t h i n the boundaries o f those s t a t e s . " 6 2 The use o f the U n i t e d S t a t e s and A u s t r a l i a n examples by the B r i t i s h Columbia government i s not c o n s i s t e n t w i t h Hugh H e c l o ' s c o n c e p t i o n of l e a r n i n g . R e c a l l t h a t he c o n c e i v e d of l e a r n i n g as a d o p t i o n o f a p o l i c y by a government as a r e s u l t o f p o l i c y s o l u t i o n s implemented by oth e r governments. B r i t i s h C o lumbia, however, f i r s t adopted i t s p o l i c y on the o f f s h o r e i s s u e w i t h o u t r e f e r e n c e t o o u t s i d e examples, and s u b s e q u e n t l y brought i n o u t s i d e examples when advancing i t s b a r g a i n i n g p o s i t i o n . I n f a c t , A u s t r a l i a had not s e t t l e d i t s o f f s h o r e d i s p u t e when the B r i t i s h Columbia and f e d e r a l governments 6 1 For d e t a i l s see, R i c h a r d N. Spann, Government  A d m i n i s t r a t i o n i n A u s t r a l i a , (Sydney: George A l l e n and Unwin, 1979). 6 2 Quoted from an i n t e r n a l b r i e f i n g paper prepared by the M i n i s t r y o f Energy, Mines and Petroleum Resources. 46 f i r s t a r t iculated their positions. Therefore, the conception of governments emulating policy adopted by other governments must be rejected as a source of policy in the offshore dispute. One unforeseen way in which international forces have played a role i n shaping the scope of the dispute i s through establishment of the legitimacy of a nation to claim ownership of i t s offshore. The 1958 Geneva Convention on the Continental Shelf defines the rights of a coastal nation to explore and exploit i t s contiguous seabed. 6 3 The effect of international law and convention in shaping the offshore dispute i s s i g n i f i c a n t , but should not be overstated. Doubtless i f the Geneva Convention dictated different terms, a one mile t e r r i t o r i a l sea for example, the shape and salience of the offshore dispute would be changed. A one mile sea would lessen the possible stakes by reducing r a d i c a l l y the area available for explorartion and development. The incentives for both parties in the dispute would be reduced. However, the dispute i t s e l f would s t i l l exist, and i t i s hard to see how the p o l i c i e s of either side in the dispute would be r a d i c a l l y d i f f e r e n t . In summary, the forces claimed by the For a discussion of the international legal environment in which the offshore dispute takes place see, Ian Townsend Gault, Petroleum Operations on the Canadian Continental  Margin; The Legal Issues in a Modern Perspective, (Calgary: The Canadian Institute of Resources Law, 1983), pp. 7 - 4 2 , and "Offshore Mineral Resources: Legal Aspects," an unpublished paper prepared by the Library of Parliament. 47 international arguments are of l i t t l e u t i l i t y in explaining the offshore dispute. IV. State Autonomy In Chapter 2 the general notion of state autonomy was refinaffl by examining the writings of Alan Cairns. Cairns saw the Constitution as the driving force i n Canadian p o l i t i c s , giviimg s i g n i f i c a n t powers to both levels of government, while at tBrae same time being vague about the di v i s i o n of those powers. Therefore, i f s t a t i s t arguments are to explain the B r i t i s h Columbia's policy towards the offshore, we would expect thait the dispute would be characterized by two phenomena. First,, a lack of constitutional demarcation would l i e at the core of the issue. Second, the dispute would involve a fi g h t for entrenchment or expansion of power for the parties involved-. Both phenomena can be seen in the of f s h o r e dispute. In i t s simplest terms the dispute hinges on whether B r i t i s h Columbia brought the offshore with i t when i t join e d Canada i n 1871,, ©a: whether rights over the offshore were acquired by the f e d e r a l government at a later time. The concept of offshore ownerstiniip was not recognized in 1867 and, as a result, the Constitutikati Act, 1867, in no way deals with the i s s u e . 6 4 In addition, ttK»e The Supreme Court of Canada ruled that the concept of offshore ownership was not present when B r i t i s h Columbia joined Confederation, and furthermore, under the terms of international law, Canada was not able to expand i t s t e r r i t o r i a l j u r i s d i c t i o n u n t i l the Statute of Westminster was passed by the B r i t i s h Parliament in 1931. Accordingly B r i t i s h Columbia was ruled not to own the offshore. 48 offshore dispute i s cl e a r l y about both levels of government attempting to expand their sphere of power. The real benefits of control over the offshore come not in administering exploration, but rather i f commercial petroleum discoveries are made. The enormous revenues accruing to the government owning the resource would enable si g n i f i c a n t discretionary expansion by that government. It was the consideration of enhanced revenue that was the motivating consideration in the early days of the dispute for the p r o v i n c i a l government. If this meant that power had to be usurped from the federal government then this would be done. Stephen Tomblin has summarized this era of the offshore dispute as follows: [W.A.C. Bennett's] response was geared towards protecting his government's control over offshore development. The strategy of 'economic provincialism' was based on a series of p o l i t i c a l calculations, which aimed to counter the powers of the federal government over offshore development. In short, provincial government s e l f - i n t e r e s t dictated that the federal i n i t i a t i v e s be stopped. Bennett's reaction to the perceived c r i s i s underscores the significance of the effort to increase provincial autonomy, even when industry suffered as a consequence. 5 In time the economic considerations in the dispute lessened. As the dispute progressed the federal government offered B r i t i s h Columbia the revenue accruing from commercial development. 6 6 But by this point the dispute had taken on a 5 Tomblin, p.137. The federal government's offers regarding revenue d i s t r i b u t i o n began with Trudeau's proposal in 1968. If 49 dynamic a l l i t s own. Constitutionally the matter had been largely settled by the 1967 Supreme Court of Canada decision stating that the offshore f e l l under the purview of the federal government. Then, with the federal government's offer to forgo most of the revenue from the offshore, that factor was removed. Yet the province continued to i n s i s t i t owned the offshore. This dynamic further manifests i t s e l f when one realizes the province continues to argue i t s case despite the fact that, c l e a r l y , the federal government i s far better equipped technically to administer the offshore. Part of the rhetoric the province uses to j u s t i f y i t s position i s that the p r o v i n c i a l government, by being physically closer to the area than the federal government, i s better able to e f f i c i e n t l y oversee exploration and development. It i s d i f f i c u l t to understand how physical proximity affects competence in this case. Indeed, one can argue that the federal government i s better equipped to administer offshore exploration and development because i t has performed a similar function on the east coast. The problems are similar in both areas, inclement weather, environmental danger, and native claims of j u r i s d i c t i o n , to name but three. Clearly, by the mid 1980s accepted, the agreement would have given the province a l l revenue from the areas inside the Mineral Resources Administration Lines, and a share of the revenue from outside the Lines. The provisions in the A t l a n t i c Accord gives revenue from the offshore to the contiguous province on a s l i d i n g scale, based on f i s c a l capacity of the province as calculated for equalization payments. For d e t a i l s of these calculations see the Canada - Newfoundland A t l a n t i c Accord Implementation Act, 1987 50 t h e f e d e r a l g o v e r n m e n t h a d b u i l t u p a c o n s i d e r a b l e e x p e r t i s e i n o f f s h o r e a d m i n i s t r a t i o n , f i r s t i n t h e A r c t i c , a n d l a t e r i n t h e e a s t e r n o f f s h o r e . T h e f e d e r a l a d m i n i s t r a t i v e b o d y c h a r g e d w i t h t h e t a s k , t h e C a n a d a O i l a n d G a s L a n d s A d m i n i s t r a t i o n , h a d a s t a f f n u m b e r i n g i n t h e h u n d r e d s . B y c o n t r a s t , i n 1 9 8 6 t h e p r o v i n c i a l g o v e r n m e n t h a d o n e s t a f f m e m b e r a s s i g n e d t o t h e o f f s h o r e , a n d t h a t p e r s o n w a s r e t a i n e d o n l y o n a r e n e w a b l e s i x m o n t h c o n t r a c t . S o i t m u s t b e c o n c l u d e d t h a t t h e s t a t i s t a r g u m e n t s p u t f o r t h b y C a i r n s l i e a t t h e h e a r t o f B r i t i s h C o l u m b i a ' s o f f s h o r e p o l i c y . T h a t s u c h a c o n c l u s i o n i s r e a c h e d i s n o t v e r y s u r p r i s i n g , a f t e r a l l t h e o f f s h o r e i s s u e i s a d i s p u t e p o s s i b l e o n l y i n a f e d e r a l n a t i o n . I t i s n o s u r p r i s e t h a t c o m p e t i t i o n b e t w e e n t w o l e v e l s o f g o v e r n m e n t s h o u l d e n g e n d e r p o l i c y b y e a c h g o v e r n m e n t d e s i g n e d s o l e l y t o w i n p o w e r a t t h e e x p e n s e o f t h e o t h e r . B u t b e f o r e c o n c l u d i n g t h a t s u c h a n a n a l y s i s t r i v i a l i z e s o u r i n v e s t i g a t i o n , i t s h o u l d b e r e a l i z e d t h a t a l t h o u g h t h e d i s p u t e i s a c r e a t i o n o f a f e d e r a l s y s t e m , i t d o e s n o t n e c e s s a r i l y f o l l o w t h a t a l l f e d e r a l d i s p u t e s n e e d b e e x a m p l e s o f s t a t e a u t o n o m y . I n f a c t , a n y o n e o f t h e o t h e r t h r e e v a r i a b l e s c o u l d s u c c e s s f u l l y o p e r a t e w i t h i n t h e b o u n d a r i e s o f a f e d e r a l d i s p u t e . T h a t t h e y d o n o t , w h e n t h o s e v a r i a b l e s d e a l w i t h s o m e o f t h e m o s t p o w e r f u l s o c i e t a l g r o u p s , s a y s m u c h f o r t h e e x p l a n a t o r y p o w e r o f t h e s t a t i s t s c h o o l o f t h o u g h t . 51 I t s h o u l d be n o t e d t h a t i n t h e c a s e o f t h e M a r x i s t v a r i a b l e i t i s p o s s i b l e t h a t , a l t h o u g h t h e c o s t s f r o m t h e o f f s h o r e d i s p u t e w e r e c o n s i d e r a b l e , t h e y were n o t s u f f i c i e n t t o m o t i v a t e t h e p e t r o l e u m i n d u s t r y t o a c t t o t h e e x t e n t i t i s c a p a b l e o f . The n e x t c a s e s t u d y , n a t u r a l gas p r i c i n g , p r e s e n t s a s c e n e r i o i n w h i c h t h e f i n a n c i a l s t a k e s a r e c o n s i d e r a b l y h i g h e r . I t may o f f e r a t r u e r t e s t o f t h e power o f t h e p e t r o l e u m s e c t o r . 5 2 Chapter 4 Natural Gas Pricing This chapter examines the history of natural gas pr i c i n g in B r i t i s h Columbia and attempts to determine the forces responsible for i t . Before beginning i t should be noted that B r i t i s h Columbia's position i n the Canadian and North American market i s unique in that i t has s u f f i c i e n t internal supplies of natural gas for i t s domestic naeeds, exports gas to the United States, but not to other provinces, and i s a net importer of o i l ; i t i s both a consuming and a producing province.' Accordingly, while Saittish Columbia approaches crude o i l pricing from the painnt cof view of a consumer, i t sees gas pr i c i n g as a producer* Because i t exports t o the United States but not to the ©timer provinces, i t i s more concerned with export gas priciim-g than with national gas p r i c i n g . Because of the roles played in gas pricing b y the federal government and Alberta* some of their p o l i c i e s are mentioned as well. Although the i n i t i a l development of B r i t i s h Columbia's petroleum resources focused am crude o i l , b y far the most important petroleum resource in the province i s natural gas. I n i t i a l gas finds were centered i n the Fort Saint John area, with production beginning i n 1957. The area continues to be an important source for the province's gas needs, supplying approximately one-third of the province's annual gas production. A second area of gas was brought on stream in 1965 and i s centred i n the Fort Melson area. These f i e l d s 53 presently supply the other two-thirds of the annual gas production. In addition to these two areas geological information indicates petroleum products (again l i k e l y in the form of natural gas) may be found in the Fraser Valley and off of B r i t i s h Columbia's coast. As of the end of 1984, the province had 264 b i l l i o n cubic metres in established reserves, and an estimated 475 b i l l i o n cubic metres of gas remaining to be discovered. 6 7 While these reserves are s u f f i c i e n t for the province's future domestic needs and export commitments, they are quite small in comparison to Canada's to t a l reserves and of the earth's t o t a l reserves. B r i t i s h Columbia has approximately 15% of Canada's t o t a l gas reserves. The vast majority of the remaining reserves are found in Alberta. As w i l l be seen l a t e r , this s i t u a t i o n has had a severely constraining effect on B r i t i s h Columbia's a b i l i t y to set gas prices independently. In terms of the global gas supply B r i t i s h Columbia's reserves are far less than one percent of tot a l established global reserves. Natural gas i s transported from the f i e l d s in the Northeast of the province to market via pipeline. The pipeline was completed in 1957 by Westcoast Transmission Ltd., and runs from Fort Saint John to Vancouver, servicing most of the major c i t i e s and towns along the way. 6 8 The pipeline i s ti e d in to B r i t i s h Columbia, Ministry of Energy, Mines and Petroleum Resources, 1984 Annual Report, V i c t o r i a : Queen's Printer, 1985). 54 the United States' d i s t r i b u t i o n system near Sumas in the Fraser Valley. As well, a l i n e owned by P a c i f i c Northern Gas Ltd. t i e s in to Westcoast's lin e near Prince George, and services Terrace, Kitimat and Prince Rupert. F i n a l l y , a l i n e owned by BC Gas Inc. extends into the Kootenays, servicing those communities and tying into the Alberta pipeline system. A map showing the gas f i e l d s and the pipelines i s included in Figure 2. The constitutional d i v i s i o n of powers, by giving certain rights and powers to the provincial governments, and others to the federal government, has had a dramatic influence on gas p r i c i n g . The B r i t i s h North America Act, 1867 gave ownership of " A l l Lands, Mines, [and] Minerals..." to the pro v i n c e s . 6 9 In addition, i t reinforces this ownership through the c i v i l property clause, and by allowing the provinces the exclusive right to levy direct t a x e s . 7 0 To the federal government i t gave j u r i s d i c t i o n over interprovincial and international t r a d e . 7 1 This has meant that, because Westcoast exports natural gas to the United States, i t i s a federally regulated u t i l i t y ; the province has no authority. Because the federal government has j u r i s d i c t i o n over 6 8 For a history of natural gas in B r i t i s h Columbia and the building of the pipeline see, Earle Gray, Wildcatters, (Toronto: McClelland and Stewart, 1982). 6 9 BNA Act, 1867, Section 109. 7 0 BNA Act, 1867, Sections 92(13) and 92(2). 7 1 BNA Act, 1867, Section 91(2). Figure 2 Natural Gas Fields and Pipelines in B r i t i s h Columbia 56 international trade, the province has no direct method of cont r o l l i n g export prices. * * * Although there was a domestic petroleum industry as early as the 1920s, i t was under W.A.C. Bennett that petroleum development r e a l l y began in B r i t i s h Columbia. Although Bennett was more than w i l l i n g to impose his views on some aspects of the petroleum sector, for the most part he allowed the petroleum industry to develop the province's resources as i t wished. 7 2 The period from 1957, when gas extraction began, to Bennett's defeat in 1972 was marked by relative global s t a b i l i t y in petroleum. Pricing remained r e l a t i v e l y stable and fears of supply shortages had yet to manifest themselves. As mentioned previously, the federal government sets the export price of natural gas and, in contrast with later years, they did so with l i t t l e active input from the producing provinces. The price of natural gas in the W.A.C. Bennett era remained f a i r l y steady. The Premier had imposed a 15% royalty on natural gas in 1954 and this remained in place u n t i l his defeat in 1972. 7 3 When the Westcoast pipeline f i r s t opened in 1957 natural gas was purchased from the producers by Westcoast 7 2 The exception to this statement i s the construction of the Westcoast pipeline. For details see Stephen Tomblin, Province-building Under W.A.C. Bennett, (unpublished PhD. dissertation, 1985), pp.99-143. 7 3 For de t a i l s see, V i c t o r i a Daily Times, March 16, 1954. 57 for $.08/Mcf (1,000 cubic feet). Domestic prices were determined by negotiation between buyer and s e l l e r , with l i t t l e interference from the provincial government. Export prices, although subject to approval by the federal government, were also negotiated between the buyer and s e l l e r . The i n i t i a l domestic price was $.21/Mcf, and export price was $.22/Mcf. By the end of the Bennett government in 1972 gas was bought from the producers for $.13/Mcf and sold to the u t i l i t i e s for $.31/Mcf, and exported for $.32/Mcf. It should be noted that in 1969 the National Energy Board, the federal department charged with overseeing energy matters, handed down a ruling which imposed a minimum price on exported gas of 105% of the domestic s e l l i n g price. With the global o i l c r i s i s , precipitated by the 1973 Arab-I s r a e l i War, the dynamic of the petroleum sector was revolutionized. In a three month period in late 1973 and early 1974 the price of crude o i l quadrupled. Thus the increased stakes of not just crude o i l , but of alternative energy supplies as well, dramatically altered the terms under which the global energy sector operated. 7 6 While this alone 7 4 The s e l l i n g price i s referred to as the wholesale price, and i t i s this price that i s the main determinant of the r e t a i l price charged consumers. 7 5 For a summary of natural gas pricing from 1957 onward see the Appendix. 7 6 It i s worth observing that, unlike crude o i l , there i s no global market for natural gas. The inherent problems in transportation mean that each lo c a l market operates under unique circumstances. As a result, except for the fact that natural gas i s the most l o g i c a l alternative fuel 58 would have been enough to change the way natural gas pri c i n g was handled in B r i t i s h Columbia and Canada, additional circumstances contributed to the energy c r i s i s . In the United States, because of a complex tangle of natural gas regulations, natural gas exploration had f a l l e n off dramatically in the preceding years. As a result, the proven domestic reserves in the United States were forecasted to be s u f f i c i e n t for only 11 years. In Alberta, a report by the Energy Resources Conservation Board had brought si g n i f i c a n t changes to the levels and structure of natural gas pricing in that province. The Report recommended immediate natural gas price increases designed to better r e f l e c t i t s true market value, as well as the implementation of a two-tiered pricing system, with export prices subsidizing domestic rates. The Alberta government adopted these two recommendations immediately. As a result, a l l new export contracts specified prices that were twice what B r i t i s h Columbia producers were receiving for their gas, with the netbacks to Alberta's producers three times what B r i t i s h Columbia's producers were receiving. source to o i l in many circumstances, and thus i t s attractiveness as an energy supply i s to some extent determined by i t s price relationship with o i l , there i s no structural link between the price of crude o i l and of natural gas. 7 7 Alberta, Energy Resources Conservation Board, Report on  F i e l d Pricing of Gas in Alberta, (Edmonton: Queen's Printer, 1972). Netback i s defined as the amount paid to the natural gas producer less operating expenses and taxes paid. 59 The p r o v i n c i a l government's response to a l l of this was to instruct the newly formed B r i t i s h Columbia Energy Commission (BCEC) to hold a public inquiry into the natural gas industry in B r i t i s h Columbia. The Commission held hearings throughout the province and released i t s Report in September of 1973. 7 9 The report found that the price of gas, exported at the time for $.32/Mcf, was undervalued by approximately $.26/Mcf and should be raised to market lev e l s . In addition i t recommended establishment of a crown corporation " ... empowered to engage in production, processing, transmission and marketing of natural gas", and implementation of a royalty system based on an assessed market value of the gas rather than the actual s e l l i n g p r i c e . From these recommendations the government created the B r i t i s h Columbia Petroleum Corporation (BCPC). 8 1 BCPC bought natural gas from producers, and then marketed the gas to domestic u t i l i t i e s and export customers. It paid Westcoast a fee for using i t s pipeline s u f f i c i e n t to give Westcoast a reasonable return on i t s investment, and the difference between the s e l l i n g price of the gas minus the fee paid to Westcoast, and the price paid to the producers, was BCPC's p r o f i t . This 7 9 B r i t i s h Columbia, B r i t i s h Columbia Energy Commission, Report on Matters Concerning the Natural Gas Industry i n  B r i t i s h Columbia, (Victoria: Queen's Printer, 1973). 8 0 BCEC, 1973, p. 2-2. 8 1 To avoid any confusion, the BCEC was an advisory body reporting to the provincial government on energy matters. The BCPC was a Crown corporation set up as a marketer for B r i t i s h Columbia's natural gas. 60 replaced the percentage royalty system used previously. With BCPC in place the provincial government now had an indirect method of raising export prices. BCPC and the natural gas d i s t r i b u t i o n arm of Crown-owned BC Hydro signed contracts in November of 1973 raising the wholesale price of gas 87% to $.58/Mcf. This in turn invoked the 105% rule of the National Energy Board. As a result, the export price gas rose 90% to $.61/Mcf. While this substantially raised the money accruing to the provincial government, none of the increase in prices went to the producers. When OPEC quadrupled i t s prices the opportunity for price increases again presented i t s e l f . After negotiations between Ottawa and V i c t o r i a , the export price was raised from $.61/Mcf to $1.00/Mcf. Domestic prices were not raised, breaking the 105% price relationship between domestic and export prices. Again a l l of the additional revenue accrued to the provincial government; the producers received none of i t . The federal government's response to the conditions set up by the 1973 c r i s i s began an escalation in federal-provincial c o n f l i c t that continued well into the 1980s. In September of 1973 i t imposed an export tax on a l l o i l and gas flowing to the United States. The announced purpose of the tax was to subsidize energy prices in the east where foreign o i l was being used. Further, because under the BNA Act the federal government cannot tax the provinces, the federal government had been unable to capture any of the revenue accruing from the price increases. In order to remedy what the federal 61 government considered an inequitable situation, i t announced producers' income tax would be based on a "deemed" wellhead price, rather than the actual price. The deemed price was i n i t i a l l y set at a level two and a half times what the producers were receiving. The federal government expected that the producing provinces would increase the amount paid to the producers in order that they could pay their increased tax b i l l s . While Alberta did exactly that, B r i t i s h Columbia refused. The dispute was resolved in 1975 when the provincial government announced that i t would pay the federal government the amount of tax payable on the difference between the actual price paid to the producers and the federally set deemed pri c e . In return the federal government agreed to allow the export price to r i s e to $1.40/Mcf in August of that year and to $1.60/Mcf in November. From November of 1973 to November of 1975 the export price of natural gas quintupled from $.32/Mcf to $1.60/Mcf. Note that while the federal-provincial dispute was resolved, the producers s t i l l did not receive any of the proceeds of these increases. In 1975, after a second public inquiry and report by BCEC, the p r o v i n c i a l government f i n a l l y increased the rates paid to natural gas producers. 8 2 The inquiry had been ordered as a result of severe cutbacks in the exploration budgets of the 8 2 B r i t i s h Columbia, B r i t i s h Columbia Energy Commission, Final  report on the 1975 Natural Gas F i e l d Price and Incentives  Inquiry, ( V i c t o r i a : Queen's Printer, 1975). 62 producers. Acting on the recommendation of BCEC, the government raised the rates paid producers from $.20/Mcf for old gas and $.35/Mcf for new gas to $.35/Mcf and $.55/Mcf r e s p e c t i v e l y . 8 3 Of the $.20 increase for old gas, $.15 was a "Exploration and Development Fund Credit." This was ... a credit per Mcf of gas sold to the B r i t i s h Columbia Petroleum Corporation which can be converted to cash to the extent of 75% of exploration and development expenditures accrued in the province upon the s e l l e r f i l i n g evidence of such expenditures. 8 4 In other words, producers were paid by the government to explore for and develop natural gas in the province. The credit applied only to old gas, i t did not apply to new gas. The remainder of the 1970s saw a number of annual reports issued by BCEC recommending an escalating series of increases in both the wholesale and f i e l d price of natural gas. Unlike what has just been discussed, however, this a l l took place in the administrative regime already in place. The global and national petroleum environments had s t a b i l i z e d , with the wild price increases giving way to a more predictable environment, and as result the disruptive outside influences were diminished. The concepts of 'old gas' and 'new gas' were introduced in January of 1974 to r e f l e c t the increased costs of exploration and development of new sources of gas in B r i t i s h Columbia. As of September 1974 producers received $.20/Mcf for old gas and $.35/Mcf for new gas. BCEC, 1975, p.108. 63 In 1979, i n a move precipitated by the Iranian revolution, OPEC doubled the price of crude o i l , and the world was once again thrust into another energy c r i s i s . B r i t i s h Columbia's response to this c r i s i s was the announcement of a new pro v i n c i a l energy p o l i c y . 8 5 The plan, which was notably short on d e t a i l s , contained two i n i t i a t i v e s related to p r i c i n g . The f i r s t was to lessen the province's dependence on imported o i l by encouraging the use of natural gas. The second, and somewhat contradictory goal, was to set gas prices at levels which would promote conservation and encourage resource development. The f i r s t goal was never developed in d e t a i l , but i t appears the intent was to be met by keeping the domestic price of gas well below the energy equivalent price of o i l . The second goal was to be realized by raising the domestic price of gas. The announced new c r i t e r i a for domestic pricing was to be the replacement cost of new s u p p l i e s . 8 6 This meant large increases for a l l classes of consumers, both residential and i n d u s t r i a l . These principals were used by the newly formed B r i t i s h Columbia U t i l i t i e s Commission (BCUC) in recommending a series of increases in the f i e l d and wholesale prices of gas. BCUC's report recommended the wholesale price of natural gas The policy i s outlined in f u l l i n , An Energy Secure B r i t i s h  Columbia: The Challenge and the Opportunity, ( V i c t o r i a : Queen's Printer, 1980). B r i t i s h Columbia, B r i t i s h Columbia U t i l i t i e s Commission, 1980 Natural Gas Price Inquiry Report, ( V i c t o r i a : Queen's Printer, 1981). 64 almost double, increasing in increments from $1.17/Mcf in 1980 to $2.05 in 1983. In addition, the Commission recommended the f i e l d price of old gas rise 75% going from $0.94/Mcf in 1980 to $1.75/Mcf in 1983 and that new gas rise 90% from $1.17/Mcf to $2.23/Mcf. The BCUC estimated'in i t s report that at the price levels recommended, government revenue would ri s e from $194 m i l l i o n in 1980 to $276 mi l l i o n in 1983, a 42% increase. While export pricing was not under provincial j u r i s d i c t i o n , the B r i t i s h Columbia government supported the federal policy of allowing gas exports only at prices which reflected the alternative energy source cost. Unlike the 1973 o i l c r i s i s , the 1979 c r i s i s did not lead to the huge increase in export derived revenue for the government. The United States government had brought in regulatory changes that allowed gas shipped between states to be sold at levels less than world rates. The effect was to encourage domestic gas exploration and increase reserves, and to provide net gas consumer states access to supplies at a lower price than had previously available. As a result, B r i t i s h Columbia gas was less attractive than domestic supplies and export levels f e l l dramatically. Total gas exports from B r i t i s h Columbia dropped from 235 b i l l i o n cubic feet i n 1979 to 140 BCF in 1980, and to 129 BCF in 1981. By 1982 exports had dropped to 74 BCF, less than one-third the amount three years e a r l i e r . 8 7 8 7 B r i t i s h Columbia, Ministry of Energy, Mines and Petroleum Resources, Annual Reports. 65 The federal government's response to the 1979 o i l c r i s i s was the introduction of the National Energy Program (NEP) in October of 1980. The NEP had as i t s goals security of supply and independence from the world petroleum market, increased Canadian ownership of domestic petroleum supplies and downstream d i s t r i b u t i o n , and fairness in petroleum p r i c i n g . These goals were to be accomplished through a series of programs, grants and new taxes designed to encourage active Canadian part i c i p a t i o n in the petroleum sector. The money for the programs and grants was to be generated by allowing domestic petroleum prices to rise to world l e v e l s . The NEP also had as i t s purpose a restructuring of the power relationships between Alberta and the federal government, and the producers and the federal government. 8 8 B r i t i s h Columbia's reaction to the NEP was structured by i t s unique situation v i s a vis petroleum as presented e a r l i e r in th i s chapter. In general, the province was in agreement that domestic o i l prices should rise to world le v e l s . The province was very vocal with i t s opposition to the numerous taxes implemented by the federal government. Each of these taxes had an announced purpose, but cumulatively they can be seen as an attempt by the federal government to restructure the revenue sharing breakdown between the provincial government, 8 8 For a thorough discussion of the NEP see, G . Bruce Doern, and Glen Toner, The P o l i t i c s of Energy: The Development and  Implementation of the NEP, (Toronto: Methuen Publications, 1985). 66 the federal government and the petroleum industry. y The most important point to note about these new taxes i s that they seriously eroded producer netbacks, and reduced producer incentives for new exploration programs. As a result, because the federal government and the industry were extracting a large share of petroleum revenue, the provincial government was constrained in i t s pricing options by the need to keep prices below the world l e v e l . The l a s t important chapter in natural gas pricing was written i n 1985. After protracted negotiations between the federal government and the western petroleum producing provinces signed the Western Accord, which called for the deregulation of crude o i l in Canada. Shortly thereafter the same signatories signed the Agreement on Natural Gas Markets and Prices, thereby deregulating natural gas. The s e l l i n g prices of both commodities are now freely negotiated between the buyer and s e l l e r . 9 0 Similarly, the export price of natural gas i s negotiated between buyer and s e l l e r , with the proviso that the price not be lower than the domestic price at the There were eight new levies announced as part of the NEP. The d e t a i l s of each are not as important as the major economic restructuring the package as a whole resulted i n . The two taxes most objectionable to the B r i t i s h Columbia government were the Natural Gas and Gas Liquids Tax, a tax imposed on interprovincial and international gas sales, and the Petroleum and Natural Gas Revenue Tax, a royalty based on production, rather than p r o f i t . The a b i l i t y of buyer and s e l l e r to negotiate freely means the demise of BCPC. As buyer's old contracts with BCPC run out and are replaced by contracts with the gas producers, BCPC's a c t i v i t i e s w i l l be reduced. Once a l l old contracts have expired, BCPC w i l l be terminated. 67 time of the contract. The federal government has abolished the taxes introduced under the NEP, and the agreements c a l l for the producing provinces to refrain from capturing the tax revenue the federal government has given up. The money remains with the petroleum industry. The deregulation of the o i l and gas industry came about for a number of reasons. F i r s t , the unpopularity of the NEP among the industry and producing provinces insured that any proposals for change would be received favorably. Within t h i s climate a number of other factors were at work. The petroleum industry had formulated an alternative to the NEP in the early 1980s that call e d for a far less interventionist regulatory regime than that in place under the NEP. The industry was then largely successful in having the Progressive Conservative Party adopt their alternative as the party's position in the 1984 federal election. The producing provinces were also in favor of a less interventionist approach. 9 1 In B r i t i s h Columbia's case the motivating factor appears to have been the deregulation of natural gas exports. As the export price set by the federal government remained well above the continental gas price, the province had seen i t s gas exports continue to drop. The province hoped deregulation would result in increased exports and accompanying increased revenues. Whether th i s w i l l happen i s unknown. The implementation of a deregulated natural gas market has been a time consuming 9 1 These themes are developed in more d e t a i l in Doern and Toner, ch. 12. 68 process. While the structure i s now in place, the 'shakedown' process i s s t i l l in progress. Meaningful and r e l i a b l e s t a t i s t i c s are not yet available. We turn now to an evaluation of natural gas pricing using the variables presented i n Chapter 2. I. Party and Ideology To summarize b r i e f l y , the belief that party and ideology may af f e c t government policy rests on two assumptions. The f i r s t i s that the p o l i t i c a l party in power can influence government pol i c y , and the second i s that parties have different policy preferences based on the ideological preferences of i t s members and/or constituent groups. Two predictions of a party affected policy process were discussed. F i r s t , i t was hypothesized that parties of the l e f t would use more coercive revenue instruments than would parties of the right, and, second, that parties of the l e f t would form more crown corporations than would parties of the right. Recall Chandler ranked revenue instruments in increasing order of coercion as follows, - p r o f i t s tax - gross royalties - super-royalties - public ownership In 1954 W.A.C. Bennett imposed a gross royalty of 15% on natural gas. This form of revenue co l l e c t i o n was used by the Bennett government for the rest of i t s term in power. It was 69 only when the NDP government took power in 1972 that the revenue instrument changed. The formation of the B r i t i s h Columbia Petroleum Corporation in 1973 moved revenue c o l l e c t i o n to the most coercive form on Chandler's l i s t . A return to less coercive instruments i s noticable with the return to power of the Social Credit party in 1975. Although the time frame was longer, with the demise of BCPC and a return to a gross royalty system as a result of the deregulation of natural gas in 1985, the revenue instrument i s now the same as that used by W.A.C. Bennett. While the evidence i s less convincing regarding greater use of crown corporations by parties of the l e f t , i t i s not inconsistent with Chandler's findings. Chandler looked at the numbers of crown corporations created in a l l ten provinces, and over a l l sectors of government a c t i v i t y . The present study incorporates only one province in a single sector. As well, Chandler finds that the length of time a party of the l e f t i s i n power affects the numbers of crown corporations i t creates. The NDP in B r i t i s h Columbia was in power for only s l i g h t l y more than three years. These caveats aside i t i s interesting to note that the only crown corporation created in the petroleum sector - BCPC - was established by the NDP. While the data on crown corporations i s limited, that data does nothing to damage Chandler's findings. The evidence, therefore, supports Chandler's findings regarding the use of revenue instruments, and while less convincing, some support 70 for the assertion that parties of the l e f t w i l l make greater use of crown corporations was also found. In Chapter 2 i t was noted that i t i s d i f f i c u l t to di f f e r e n t i a t e between the p o l i t i c i a n as a representative of his party and as government o f f i c i a l . The question must be asked therefore, was the use of more coercive revenue instruments and crown corporations indicative of party policy or could i t be attributed to the policy preferences of government actors? As nebulous a question as this might at f i r s t appear, i t s answer i s r e l a t i v e l y straightforward. It breaks down into two separate parts. F i r s t , who in the NDP government was responsible for the formation of energy policy in general, and the formation of BCPC in particular? Second, how did t h i s person view his actions? In answer to the f i r s t question, i t appears that Alex MacDonald, Attorney-General in the NDP government, was the architect of that party's energy policy. This assertion i s made on the basis of conversations with the author and writings by MacDonald h i m s e l f . 9 2 Contrary to what many observers might suspect Bob Williams, Minister for Lands, Forests and Water Resources, appears to have had l i t t l e or no input into energy p o l i c y . 9 3 The NDP had long had a resolution 9 2 Alex MacDonald, My Dear Legs, (Vancouver: New Star Books, 1985), pp. 119-38. 9 3 This assertion about William's role i s made by G. Lewis Seens, Petroleum and P o l i t i c s : NDP and Socred P o l i c i e s in  the Seventies, (unpublished paper prepared for the B.C. Project at the University of V i c t o r i a ) , p. i i . 7 1 adopted by the general membership f a v o r i n g s o c i a l i z a t i o n of the petroleum s e c t o r i n B r i t i s h C olumbia. 9 4 Alex MacDonald l e f t l i t t l e doubt he agreed with the r e s o l u t i o n when he wrote r e c e n t l y , "We had jumped at the chance to s o c i a l i z e n a t u r a l gas. B r i t i s h Columbia had been giftwrapping i t s resource r i g h t s f o r the i n t e r n a t i o n a l companies ever s i n c e i t became a p r o v i n c e . " . 9 5 The combination of NDP p o l i c y s u p p o r t i n g p u b l i c ownership and MacDonald's support of that p o l i c y leads to the c o n c l u s i o n that i t was p a r t y and ideology r e s p o n s i b l e f o r the change i n revenue instrument. While i t must be concluded that party and ideology has had an e f f e c t on n a t u r a l gas p r i c i n g , the question remains i s i t the most important v a r i a b l e ? Although there i s l i t t l e doubt t h a t the methods used for revenue c o l l e c t i o n are of i n t e r e s t , the most n o t i c e a b l e features of n a t u r a l gas p r i c i n g over the l a s t twenty years have been the increase i n revenues a c c r u i n g to both l e v e l s of government and the i n d u s t r y , and the d i s t r i b u t i o n of these revenues among the trrree a c t o r s . Chandler's approach to party and ideology does not allow e v a l u a t i o n of t h i s area. From other evidence i t i s c l e a r that the p a r t y i n power has had l i t t l e e f f e c t on revenue g e n e r a t i o n and d i s t r i b u t i o n . R e c a l l that when the NDP formed the BCPC the revenue generated by increased gas p r i c e s i n i t i a l l y accrued e x c l u s i v e l y to the government. Des p i t e the c o n t e n t i o n 9 4 New Democratic Party, Resolutions Adopted by P a r t y  Conventions: 1969-75. 9 5 MacDonald, p. 120. 72 of the NDP government that the producers were not e n t i t l e d to any of this additional revenue, the producers were able to extract more money by cancelling v i r t u a l l y a l l exploration a c t i v i t i e s in the province. 9 6 While the party in power was not w i l l i n g to to pass on any portion of the additional revenue to the producers, the industry eventually mobilized the resources necessary to force the government to change i t s position. The remainder of the chapter w i l l concentrate on explaining levels of revenue generation and d i s t r i b u t i o n . It i s to the other three variables, each of which has a role to play in explaining these two areas that we now turn. I I . Internationalism As mentioned previously, writers have long alluded to the fact that outside trends and forces affect domestic policy formation. In Chapter 2 two ways in which this might occur, emulation and international market conditions, were discussed. The emulation argument appears to have had l i t t l e impact on gas p r i c i n g . If i t was to prove v a l i d we would expect the p r i c i n g and d i s t r i b u t i o n of natural gas to follow the patterns found in other j u r i s d i c t i o n s , and in particular those patterns found i n the United States. Clearly, that has not happened. The response of the provincial and federal governments in Canada to escalating petroleum prices was to allow domestic supplies to r i s e to world levels and to then capture the 9 6 See the section in this chapter dealing with Marxist arguments for a more detailed presentation this part of the province's gas pricing history. 73 revenue generated through a variety of taxation measures. In the United States the approach was to keep the price of domestic petroleum supplies below world levels through regulation. In the case of intrastate petroleum, where federal regulation did not apply, the producers kept a l l the windfall p r o f i t s . The a b i l i t y of the state to capture gains in petroleum revenue i s the most notable feature of natural gas pr i c i n g policy in B r i t i s h Columbia. The enormous differences in approach between Canada and the United States rules out any chance of the emulation argument explaining p o l i c y . 9 7 The argument that global market conditions shape domestic policy i s more convincing. The point to be made i s so obvious as to be self-evident, yet i t s importance also cannot be overstated. It must be realized that i t was the two global energy cris e s i n 1973 and 1979 that set up the conditions that allowed the enormous increases in domestic petroleum revenues. Without the quadrupling of crude o i l prices in 1973 and the doubling of prices in 1979, the concomitant domestic increases would have been unthinkable. Note that this does not mean the There are d i f f i c u l t i e s in comparing the pricing regimes in Canada and the United States, that arise from the differences in j u r i s d i c t i o n a l power di s t r i b u t i o n between the federal and provincial/state levels. For example, while the provinces are responsible for setting internal price levels in Canada, the federal government has this r e s p o n s i b i l i t y in the United States. This i s reason enough to reject the emulation argument. For an analysis of natural gas pricing in the United States see, David Glasner, P o l i t i c s , Prices, and Petroleum: The P o l i t i c a l  Economy of Energy, (Cambridge, Mass.: Ballinger Publishing Company, 1985). 7 4 increases were mandated by the international market, there was no reason domestic prices could not remain constant, but rather that the international market enabled domestic increases. Therefore, while the international market forces argument has played a role in B r i t i s h Columbia policy, that role has been to define the boundaries of the province's response to the energy c r i s i s , i t does not explain the levels of revenue generation and i t s d i s t r i b u t i o n . I I I . State Autonomy The state autonomy argument rests on the assumption that government actors have their own policy preferences independent of societal preferences, and that they have the capacity to act on these preferences. We have seen that one source of state preferences is the Canadian variant of federalism that gives both the provincial and federal levels of government wide ranging areas of competence, while doing so in a vague and often unspecified manner. If the s t a t i s t variable proves to be v a l i d in the case of natural gas pricing then we would expect the issue to be demarcated by federal-p r o v i n c i a l c o n f l i c t , with each level attempting to expand i t s sphere of influence. Obviously much of B r i t i s h Columbia's gas p r i c i n g policy can be seen in this context. Some pro v i n c i a l i n i t i a t i v e s have cl e a r l y been taken in response to moves from the federal government, and s i m i l a r l y , federal actions have been shaped to counteract i n i t i a t i v e s from B r i t i s h Columbia and the other producing provinces. 75 In fact, the federal-provincial dispute has evolved in two phases. The f i r s t phase, lasting from 1973 to 1979, occurred when the producing provinces moved to increase o i l and gas pr i c i n g to the new world levels. As the stakes increased, the federal government responded to what i t considered an undesirable s h i f t in power and revenue from the central government to the western governments. In B r i t i s h Columbia the government increased the wholesale price of gas in four increments between the end of 1973 to the beginning of 1978, raising the base price from $.31/Mcf to $1.17/Mcf. The export price rose even more dramatically from $.32/Mcf to $2.16/Mcf in approximately the same period. While not a l l of the money accruing because of these increases went into the government's coffers - the producers and carrier received some - t o t a l petroleum revenue to the government increased from $46.5 m i l l i o n i n 1973 to $400 mil l i o n in 1979. As the federal government realized the enormity of the money involved, i t too acted to capture a portion of the increased revenue. Two i n i t i a t i v e s in particular can be seen in this l i g h t . F i r s t , as we have seen, the federal government imposed an export tax on the gas flowing to the United States. This was a move that infuriated the producing provinces, who f e l t such a levy was a form of resource tax, a source of revenue reserved for the provinces under the BNA Act. The second move by the federal government was the provision contained in the 1974 budget that allowed producers to be taxed on a deemed price for o i l and gas rather than the actual s e l l i n g price. 76 The provision was a direct response to the formation of BCPC, and i t s a b i l i t y to* c o l l e c t a l l the revenue generated from gas price increases. The federal government assumed the province would raise the rate paid to the producers to match the deemed price . It was a maneuver designed to siphon part of the extra revenue from the pro v i n c i a l government. As we have seen the maneuver succeeded when the p r o v i n c i a l government agreed to pay the federal government trJoe tax due on the difference between the actual p r i c e and the deemed price, in return for the federal government allowing export prices to r i s e . The second phase began i n i n response to the second round of global price escalations., This time i t was the federal government which acted f i r s t to capture the extra revenue. Doern and Toner concluded fcBaatt the NEP [could] be viewed as part of an interelated effoirt by the recentralizing Liberals to reaffirm the .cenattiral government's economic management powers and p o l i t i c a l v i s i b i l i t y . " 9 8 The major taxes imposed were an attempt to capture, from the producing provinces and the petroleum industry, the revenue generated from r i s i n g petroleum prices- The B r i t i s h Columbia government's reaction centered on the natural gas tax imposed on i n t e r p r o v i n c i a l and international gas sales. The government f e l t the federal government was entering into p r o v i n c i a l j u r i s d i c t i o n emsi ibegan withholding the money due Doern and Toner, p. 45fl-77 from the export tax. It continued to do so u n t i l a settlement was reached with the federal government in September of 1981. Clearly, the actions of each level of government can be seen as an attempt to expand i t s area of j u r i s d i c t i o n . The a b i l i t y to intrude into a new or expanding arena of economic power would result in two benefits. F i r s t , the actual employment of newly gained j u r i s d i c t i o n offered numerous opportunities for career advancement for both elected and bureaucratic o f f i c i a l s . Second, the additional revenues gained from natural gas pricing opened up avenues of discretionary spending, again bolstering the role of elected o f f i c i a l s . While there appears to be no question that s t a t i s t impulses l i e at the heart of much of the gas pricing policy of the pro v i n c i a l government over the last two decades, they f a i l to explain the repeated success of the petroleum industry in securing a large segment of the increased revenue for i t s own purposes. IV. Marxism The Marxist school of thought holds that cap i t a l controls a l l resources in society, and although the state may have a re l a t i v e degree of autonomy, i t s t i l l acts on behalf of c a p i t a l . If this analysis i s to hold for the present study we can expect that the pricing regime put in place by the prov i n c i a l government w i l l benefit the petroleum industry, with much of the revenue generation enabled by the 1973 and 78 1979 energy crises going to the province's producers. We find that in fact this i s largely the case. The power of the petroleum industry i s c l e a r l y seen in i t s a b i l i t y to capture large parts of the new revenue generated after price increases, even in the face of provincial government opposition. Recall that as the government moved to increase gas prices, raising the domestic price from $.31/Mcf in 1972 to $1.17/Mcf by March of 1978, and seeing the export price escalate from $.32/Mcf to $2.16/Mcf in the same period, i t did not pass any of the extra revenue on to the producers. 9 9 The B r i t i s h Columbia government's position was that the producer's costs had not increased, that the rates paid to producers had almost doubled in 1973, that they had been receiving an adequate return on investment before the price increases, and thus there was no reason to increase the amount producers received. The producers' reaction was to cancel v i r t u a l l y a l l exploration programs in the province, and put the funds earmarked for this purpose in to exploration in Alberta and the U.S.A. 1 0 0 This occurred at a time when the 9 9 Producers received $.13/Mcf u n t i l November of 1973 when the rate was raised to $.20/Mcf. When pricing was divided into old gas and new gas in 1974 the rates were $.20/Mcf for old and $.22/Mcf for new, with the price for new gas raising to $.35/Mcf later that year. 100 T n e extent of the boycott on exploration in B r i t i s h Columbia i s seen by the number of wells d r i l l e d in the province over the years discussed. New wells d r i l l e d dropped from 211 in 1972 to 80 by 1975. The wells d r i l l e d 79 province's proven reserves were being depleted more rapidly than new supplies were discovered. The prospects of lost revenues from cancelled exploration a c t i v i t y and long term domestic gas shortages were unacceptable to the government, and, as a result, i t had no choice but to raise the rate paid to producers. The position of the government was put in no uncertain terms by the BCEC in i t s 1975 report. The industry has in effect gone on strike against the [BCPC] price schedule and the government, in a poor bargaining position and facing dire consequences of a "'prolonged s t r i k e ' " , must meet the terms of the industry. This i s the economic r e a l i t y of the p r e s e n t . 1 0 1 Accordingly, the rates paid to producers were raised dramatically from $.20/Mcf and $.35/Mcf for old and new gas in September of 1974 to $.78/Mcf and $1.03/Mcf by March of 1978. Clearly the petroleum industry had been able to mold the p r i c i n g regime in B r i t i s h Columbia to better maximize i t s p r o f i t s . The industry's response to the government's actions were a c l a s s i c example of what Marxists point to as one of the main t a c t i c s employed by cap i t a l to influence policy. The continued confidence of business i s required by government o f f i c i a l s . The absence of this confidence leads inevitably, i t i s claimed, to electoral defeat or forceful overthrow. As such, " . . . c a p i t a l i s t s , in their c o l l e c t i v e role as investors, have a veto over state p o l i c i e s in that their f a i l u r e to in 1975 were v i r t u a l l y a l l for new production, very few were exploratory wells. 1 0 1 BCEC, 1975, p. 73. 80 invest at adequate levels can create major p o l i t i c a l problems for the state managers." 1 0 2 In the present case th i s t a c t i c was c l e a r l y successful, and was repeated at the national l e v e l i n the aftermath of the 1979 global c r i s i s . The events after the 1979 c r i s i s d i f f e r somewhat from the 1973 c r i s i s . As was discussed in the previous section, the federal government took the i n i t i a t i v e in capturing the increased revenue being generated. As a result, the focus of the struggle between the industry and government shifted from the producing provinces to Ottawa. The NEP became the target for the industry, and i t s actions were at a national l e v e l . This takes events out of the province, and to some extent, out of the scope of this thesis. It i s interesting to note, however, that the t a c t i c of taking exploration capital elsewhere, this time to the United States, was again used and was again successful. Doern and Toner summarized the response of both leve l s of government to the industry's moves stating, Both levels of government responded to industry pressure and the overall recessionary atmosphere by announcing si g n i f i c a n t f i n a n c i a l concessions to the industry.... In May 1982 the federal NEP-Update, which included $2 b i l l i o n worth of tax concessions, was r e l e a s e d . 1 0 3 Clearly the petroleum industry was successful in advancing i t s interests at both the provincial and the national l e v e l . 1 0 2 Fred Block, "The Ruling Class Does Not Rule," in S o c i a l i s t  Register, 33:3 (May - June), 1977, p.15. For a similar argument from a non-Marxist perspective see Charles Lindblom, P o l i t i c s and Markets, (New York: Basic Books Inc., 1977), ch. 13. 1 0 3 Doern and Toner, p. 463. 8 1 Despite attempts by the B r i t i s h Columbia government in the mid 1970s, and by the federal government in the early 1 9 8 0 s , to capture the extra revenue generated from escalating petroleum prices, the industry was successful in both cases in apportioning a si g n i f i c a n t percentage of the revenue for i t s e l f . However, i t remains the case that the industry was not successful in stopping both levels of government completely. Both the producing provinces and federal government expanded their influence over the industry during the period studied. Just as the s t a t i s t argument was unable to account for a l l of B r i t i s h Columbia's gas pricing policy, so too i s the Marxist variable found wanting. It i s to th i s dilemma that we now turn. * * * In trying to explain the natural gas pricing policy of the B r i t i s h Columbia government we have examined four possible explanations. Each has had something to offer. The party and ideology variable proved of u t i l i t y in explaining the s t y l e of revenue c o l l e c t i o n , with the NDP government of 1 9 7 2 to 1 9 7 5 favoring a more coercive revenue instrument than either of the Social Credit governments before or after i t . The international variable was able to account for the range of the p o l i c i e s the federal and provincial governments could adopt, both by expanding the pricing p o s s i b i l i t i e s when global prices increased and constraining those p o s s i b i l i t i e s to current market lev e l s . The real issue in natural gas p r i c i n g , 82 however, i s how petroleum revenue i s distributed, and neither of these two variables i s of u t i l i t y on this subject. The two remaining variables, state autonomy and Marxism, have been able to account for certain features of petroleum revenue d i s t r i b u t i o n in B r i t i s h Columbia, but neither has been successful i n explaining a l l aspects. Both the B r i t i s h Columbia and federal governments moved quickly, when global petroleum prices rose, to increase domestic and export prices and to keep the revenue generated for themselves. The p r o v i n c i a l government used the findings from hearings held by the BCEC and later the BCUC to j u s t i f y price hikes. The federal government increased i t s share of petroleum revenues by allowing export prices to r i s e , and then implementing an export tax on petroleum. After the 1979 c r i s i s , the federal government implemented a number of domestic taxes, and negotiated with the producing provinces to allow further domestic price increases. The petroleum industry, seeing the scope of the additional revenues, was able, through the use of 'investment s t r i k e s ' , to siphon off s i g n i f i c a n t amounts of the additional revenue for i t s e l f . What this suggests i s that a balance of power exists between the three parties involved i n gas p r i c i n g . The implications of such a balance are examined in the concluding chapter. 83 Chapter 5 Conclusion This thesis began by asking who i s able to influence or dominate natural gas pricing policy formation in B r i t i s h Columbia. We are now in a position to assess what has been discovered to this point. Chapter 3 concluded that s t a t i s t forces were at the heart of provincial policy towards the offshore dispute. More s p e c i f i c a l l y , the dispute hinges on the unique type of federalism found in Canada that gives each l e v e l of government the incentive and power to expand i t s sphere of influence. Both the federal and B r i t i s h Columbia governments, i n an attempt to gain a new level of j u r i s d i c t i o n , one with prospects for s i g n i f i c a n t revenue generation, have battled for more than t h i r t y years to gain offshore ownership and j u r i s d i c t i o n . In Chapter 4 i t was found that a variety of influences have shaped p r o v i n c i a l natural gas pricing. Party and ideology was found to a f f e c t the policy instrument used in revenue c o l l e c t i o n by the provincial government. The New Democratic Party demonstrated a preference for the more coercive revenue c o l l e c t i o n instrument of state ownership, while the Social Credit party favored a gross royalty. International market forces were found to have influenced provincial policy by enabling - but not mandating - price increases as international petroleum market prices rose, and l i m i t i n g domestic prices to the maximum set by the international market. Both these findings, however, did not address the 84 most salient feature of natural gas pricing, the d i s t r i b u t i o n of gas revenue among the two levels of government and the petroleum industry. The s t a t i s t arguments responsible for the offshore dispute were found to be at the heart of the federal-provincial dispute on petroleum pricing. The Constitution, by giving both levels of government methods of natural resource revenue c o l l e c t i o n , insures that o f f i c i a l s within both levels of government w i l l try to apply these methods to natural gas p r i c i n g . S t a t i s t impulses do not account for the a b i l i t y of the petroleum industry to dictate to the provincial and federal governments levels of revenue for i t s e l f that neither government would permit without outside coercive pressure however. The Marxist arguments of capital hegemony predict the influence of the petroleum industry, and are to some extent validated because of the power of the industry. There i s a flaw i n Marxist analysis because of i t s contention that c a p i t a l holds a l l the power in society. The findings from t h i s thesis c l e a r l y indicate that power l i e s with more than one class or group. Nevertheless the Marxist form of analysis has proven to be a valuable predictive tool. One case study finds that s t a t i s t forces alone are responsible for p olicy, the other finds both s t a t i s t and Marxist arguments are largely responsible for policy. What accounts for the d i f f e r e n t findings? One answer revolves around what i s at stake for the actors in each area. In the offshore dispute, 85 while there i s potential for signi f i c a n t commercial discoveries, reserves remain unproven. Each l e v e l of government i s motivated to capture the offshore because ownership expands i t s j u r i s d i c t i o n ; the revenue potential, while important, i s not necessary for i t to act. The petroleum industry i s not motivated to act in a j u r i s d i c t i o n a l dispute. It i s more concerned with revenue generation, than with which l e v e l of government i t must work with to explore and develop the offshore. If the petroleum reserves thought to exist were proven, the industry would then have the incentive to try and effect a solution to the offshore c o n f l i c t . It i s t e l l i n g that the dispute on the east coast, despite i t s a r i s i n g after the west coast c o n f l i c t , was se t t l e d after the reserves in the Hibernia f i e l d were proven. Natural gas p o l i c y i s about revenue generation and d i s t r i b u t i o n , and goes to the heart of capital's motivation for action. In t h i s case the stakes are s u f f i c i e n t for the industry to bring i t s resources to bear on the governments involved, and, as we have seen, with some success. Marxists might argue that, having implied c a p i t a l i s capable of acting on any issue, government actions merely r e f l e c t the 'relative autonomy' of the state necessary for the perpetuation of the c a p i t a l i s t system. This i s a d i f f i c u l t proposition to disprove. Regardless of the scope of government actions, i t i s always possible to state that government i s acting to preserve the long term v i a b i l i t y of the c a p i t a l i s t system, at the expense of short term losses by 86 c a p i t a l , providing those actions do not lead d i r e c t l y to the downfall of the system. Yet the degree of involvement by both leve l s of government in petroleum revenue c o l l e c t i o n goes beyond what might conceivably be needed to serve the long term interests of c a p i t a l . The state's role in legitimation of the c a p i t a l i s t system does not require the huge sums of money extracted from petroleum revenue by both levels of government. The state has an interest in accumulating revenue for i t s own purposes. Both the co l l e c t i o n and expenditure of revenue by governments allows opportunities for career advancement, expansion of government a c t i v i t y , d i s t r i b u t i o n of increased benefits to the ci t i z e n r y , and gives each level of government the resources to pursue the ongoing federal-provincial c o n f l i c t that t y p i f i e s Canadian federalism. The study of B r i t i s h Columbia's natural gas pricing p olicy suggests a fascinating dynamic in policy formation. What has been presented i s that i t i s a balance of powers that i s responsible for policy formation. The provincial government, the federal government, and the petroleum industry have a l l been found to possess the p o l i t i c a l resources necessary to influence the content of natural gas pricing policy. When any of these actors perceive that entering into the policy formation process i s in i t s interest, i t i s able to do so with remarkable success. At the same time, none of the participants i s able to dominate the policy process. Rather each actor i s constrained by the actions of the other two. Repeatedly, when one actor or another has made a grab for an 87 unacceptable l e v e l of control the other two actors have brought the resources to the struggle necessary to curb the expansionist actions of the aggressor. The study of B r i t i s h Columbia's natural gas pricing policy has provided some useful insights into the four explanatory variables employed. The main finding to emerge i s that none of the variables can stand on i t s own in accounting for po l i c y . It i s rather a combination of influences that explain government actions. From what has been presented in this thesis, party and ideology has a far smaller role to play than often portrayed by i t s advocates, and the same i s true of international arguments. 1 0 4 The a b i l i t y of the state to formulate and enact i t s own policy preferences, for too long ignored in the study of public policy, emerges as a force of considerable power. This thesis has found that government actors have interests independent of society, and the capacity to act on those interests. The Marxist school of thought i s at least i n part supported. If the hegemony accorded to c a p i t a l i s found lacking, the a b i l i t y of business interests to influence government policy has nevertheless been c l e a r l y demonstrated. It might be thought that the NDP's effor t s to keep a l l the windfall revenue accruing after the formation of the BCPC i s indicative of differences in party preferences. While preferences may d i f f e r , the point to be made i s that the success of the petroleum industry in forcing more money out of the NDP government renders party differences in policy superflous. 88 Bibliography Alberta, Energy Resources Conservation Board. Report on F i e l d  Pricing of Gas in Alberta. Edmonton: Queen's Printer, 1972. Atkinson, Michael M., and Marsha A. Chandler. Eds. The P o l i t i c s of Canadian Public Policy. Toronto: University of Toronto Press, 1983. Blake, Donald E. 2 P o l i t i c a l Worlds: Parties and Voting in  B r i t i s h Columbia. Vancouver: University of B r i t i s h Columbia Press, 1985. Block, Fred. "The Ruling Class Does Not Rule." in S o c i a l i s t  Register. 33:3 (May - June), 1977. B r i t i s h Columbia, B r i t i s h Columbia Energy Commission. Report  on Matters Concerning the Natural Gas Industry in  B r i t i s h Columbia, 1973. Final Report on 1975 Natural Gas F i e l d Price and Incentives Inquiry, 1975. 1976 Petroleum and Natural Gas Price and Incentives Hearing, 1976. 1977 Petroleum and Natural Gas Price and Incentives Hearing, 1977. B r i t i s h Columbia, B r i t i s h Columbia U t i l i t i e s Commission. 1980  Natural Gas price Inquiry Report, 1981. B r i t i s h Columbia, Ministry of Energy, Mines, and Petroleum Resources. Annual Reports 1957-85. V i c t o r i a : Queen's Printer. B r i t i s h Columbia Petroleum Corporation. Annual Reports 1974- 85. Vancouver, B. C. Cairns, Alan C. "The Governments and Societies of Canadian Federalism." in the Canadian Journal of P o l i t i c a l  Science. X:4 pp. 695-725. "The Other C r i s i s of Canadian Federalism." in Canadian Public Administration. 22, (Summer 1979), pp. 175-95. Cameron, David R. "The Expansion of the Public Economy: A Comparative Analysis." in American P o l i t i c a l Science  Review. 72 (1978) pp. 1243-61. Canada, National Energy Board. Annual Reports 1972-82. Ottawa: Queen's Printer. 89 Caplan, N e i l . "Some Factors Affecting the Resolution of a Federal-Provincial C o n f l i c t . " in Canadain Journal of  P o l i t i c a l Science. 2:2 (June 1969) pp. 173-186. Caplan, N e i l . "Offshore Mineral Rights: Anatomy of a Federal-Provincial C o n f l i c t . " in Journal of Canadian Studies. 50:5 (1970) pp. 50-61. Chandler, Marsha A. "State Enterprise and Partisanship in Provincial P o l i t i c s . " in The Canadian Journal of  P o l i t i c a l Science. XV:4 (December, 1982) pp. 711-40. Chandler, Marsha A., and William M. Chandler. Public Policy  and Provincial P o l i t i c s . Toronto: McGraw-Hill Ryerson Ltd., 1979. Clement, Wallace and Glen Williams. Eds. The New Canadian  Economy. Kingston: McGill-Queen's University Press, 1989. Conant, Melvin A., Ed. The World Gas Trade: A Resource for the  Future. Boulder, Colo.: Westview Press, 1986. Davis, J.D. Blue Gold: The P o l i t i c a l Economy of Natural Gas. London: George Allen and Unwin, 1984. Doern. G. Bruce, and Glen Toner. The P o l i t i c s of Energy: The  Development and Implementation of the NEP. Toronto: Methuen, 1985. Erickson, Lynda, R.K. Carty, and Donald E. Blake. "Ideology and Partisanship in B r i t i s h Columbia: A c t i v i s t s in a Bi-Polar P o l i t i c a l System." (paper presented to the XIV World Congress of the International P o l i t i c a l Science Association, 1988). Evans, Peter, et. a l . , Eds. Bringing the State Back In. Cambridge: Cambridge University Press, 1985. Glasner, David. P o l i t i c s , Prices, and Petroleum: The P o l i t i c a l  Economy of Energy. Cambridge, Mass.: Ballinger Publishing Company, 1985. Gourevitch, Peter. "The Second Image Reversed: the International Sources of Domestic P o l i t i c s . " i n International Organization. 32:4 (Autumn 1978), pp. 881-912. Gray, Earle. Wildcatters. Toronto: McClelland and Stewart Ltd., 1982. 90 H a l l , Peter. Governing the Economy; The P o l i t i c s of State Intervention in B r i t a i n and France. New York: Oxford University Press, 1986. Heclo, Hugh. Modern Social P o l i t i c s in B r i t a i n and Sweden. London: Yale University Press, 1974. Hibbs, Douglas A. J r . " P o l i t i c a l Parties and Macroeconomic Policy." in American P o l i t i c a l Science Review. 71:4 (1977), pp. 1467-87. Krasner, Stephen. "Approaches to the State: Alternative Conceptions and H i s t o r i c a l Dynamics," in Comparative  P o l i t i c s . January, 1984, pp. 223-46. Laxer, Gordon. Open For Business; The Roots of Foreign Ownership in Canada. Toronto: Oxford University Press, 1989. L e v i t t , Kari. Silent Surrender: The Multinational Corporation  in Canada. Toronto: Macmillan of Canada, 1970. Lindblom, Charles E. P o l i t i c s and Markets: The World's Political-Economic Systems. New York: Basic Books Inc., 1977. McDonald Alex. My Dear Legs: Letters to a Young Social  Democrat. Vancouver: New Star Books, 1985. Miliband, Ralph. The State in C a p i t a l i s t Society: The Analysis  of the Western System of Power. London: Quartet Books Ltd., 1969. Morley, J . Terence, et a l . The Reins of Power: Governing  B r i t i s h Columbia. Vancouver: Douglas and Mclntyre Ltd., 1983. Morton, Desmond. NDP: Social Democracy in Canada. 2nd ed. Toronto: Samuel Stevens Hakkert and Company, 1977. Nelson, Gary A., "Offshore Petroleum Resources on the West  Coast: A Review." Unpublished paper prepared for Westwater Research Centre, 1981. Nordlinger, E r i c A. On the Autonomy of the Democratic State. Cambridge, Mass.: Harvard University Press, 1981. Panitch, Leo. Ed. The Canadian State: P o l i t i c a l Economy and P o l i t i c a l Power. Toronto: University of Toronto Press, 1977. Prichard, J . Robert S., Ed. Crown Corporations in Canada. Toronto: Butterworth and Co., 1983. 91 Smiley, Donald V. Canada in Question: Federalism in the Eighties. 3rd Ed. Toronto: McGraw-Hill Ryerson, 1980. Spann, Richard N. Government Administration in Au s t r a l i a . Sydney: George Allen and Unwin, 1979. Tomblin, Stephen G. Defense of Territory: Province-Building  Under W.A.C. Bennett. Unpublished Ph.D. Thesis, University of B r i t i s h Columbia, 1985. Winn, Conrad, and John Mcmenemy. P o l i t i c a l Parties in Canada. Toronto: McGraw-Hill Ryerson, 1976. 92 Year A p p e n d i x A GOVERNMENT REVENUE FROM OIL AND GAS Royalties Total Revenue 1957 $111,833 $4,632,839 1960 1,207,317 14,116,470 1965 5,473,338 31,956,732 1970 13,474,607 39,010,699 1971 14,667,966 46,318,144 1972 15,469,938 44,822,258 1973 20,647,546 46,554,423 1974 77,273,545 112,243,647 1975 220,351,740 245,592,826 1976 194,660,000 252,086,352 1977 216,335,220 357,848,723 1978 202,739,457 399,248,104 1979 303,810,056 516,326,240 1980 292,244,549 501,320,880 1981 213,640,158 301,750,577 1982 231,180,767 279,031,184 1983 191,722,226 258,108,331 1984 216,365,000 320,541,000 1985 172,000,000 306,000,000 Source: Annual Reports of the Ministry of Energy, Mines and Petroleum Resources. Note: Total Revenue includes Rentals and Fees, Disposal of Crown Reserves, and Royalties 93 A p p e n d i x B PRICE OF NATURAL GAS Year Wholesale Export F i e l d 1957 1972 11/73 1/74 9/74 11/74 4/75 8/75 11/75 9/76 1/77 3/77 9/77 3/78 5/79 6/79 8/79 11/79 2/80 6/80 $.21/Mcf $.31 $.58 $.73 $.97 $1.17 $.22/Mcf $.32 $.61 $1.00 $1.40 $1.60 $1.80 $1.94 $2.16 $2.34 $2.41 $3.53 $4.45 $.05/Mcf $.125 $.20 $.20 Old $.22 New $.20 Old $.35 New $.35 Old $.55 New $.65 Old $.85 New $.78 Old $1.03 New $.94 Old $1.19 New $1.74 $1.32 Old $1.67 New 4/81 $5.04 94 Y e a r Wholesale Export F i e l d 8 / 8 1 $1.90 $1.30 Old $1.62 New 6 / 8 2 $5.99 V 8 3 $ 5 . 4 5 8 / 8 3 $2.05 $1.51 o ld $1.70 New Source: N a t i o n a l Energy Board Annual Reports B r i t i s h Columbia Petroleum Corporation Annual Reports M i n i s t r y of Mines Annual Reports 

Cite

Citation Scheme:

        

Citations by CSL (citeproc-js)

Usage Statistics

Share

Embed

Customize your widget with the following options, then copy and paste the code below into the HTML of your page to embed this item in your website.
                        
                            <div id="ubcOpenCollectionsWidgetDisplay">
                            <script id="ubcOpenCollectionsWidget"
                            src="{[{embed.src}]}"
                            data-item="{[{embed.item}]}"
                            data-collection="{[{embed.collection}]}"
                            data-metadata="{[{embed.showMetadata}]}"
                            data-width="{[{embed.width}]}"
                            async >
                            </script>
                            </div>
                        
                    
IIIF logo Our image viewer uses the IIIF 2.0 standard. To load this item in other compatible viewers, use this url:
https://iiif.library.ubc.ca/presentation/dsp.831.1-0097786/manifest

Comment

Related Items