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Liberal majority leads Canada’s oilpatch further into uncharted waters

Canada’s oilpatch is in unfamiliar territory as it begins to grasp the new reality of...
Justin Trudeau speaking at the Calgary Petroleum Club

Canada’s oilpatch is in unfamiliar territory as it begins to grasp the new reality of a much different political landscape, after nearly 10 years under a Stephen Harper-led Conservative government and on the heels of new NDP provincial leadership in Alberta.

On October 19, the Liberal Party, under Leader Justin Trudeau, won a solid majority capturing 184 seats. The Conservatives took 99 ridings while the NDP finished third with 44 seats.

The Conservative party announced Harper’s resignation and most pundits believe NDP Leader Thomas Mulcair will follow suit.

And while the scope of the change in leadership and the resulting impacts on the oil and gas industry remains to be seen, it’s a new era for Canadian politics and the sector’s dialogue with the federal government.

The Liberals seized a Parliamentary majority, a turn in political fortunes that smashed the record for the number of seats gained from one election to the next. The centre-left Liberals had been a distant third place party before this election.

"My friends, we beat fear with hope. We beat cynicism with hard work. We beat negative, divisive politics with a positive vision that brings Canadians together," Trudeau, 43, told a crowd of cheering supporters in Montreal.

"This is what positive politics can do."

During the election campaign, Trudeau pledged his government would work with the U.S. on the proposed Keystone XL pipeline to the Gulf Coast, a project he has endorsed on the campaign trail.

He has been somewhat non-committal regarding support for the Energy East pipeline project.

Trudeau said his government would “provide national leadership and join with the provinces and territories” to take action on climate change, put a price on carbon and reduce carbon pollution.

While promising to put a price on carbon, Trudeau has yet to provide a firm reduction target, nor a potential cost on carbon emissions to industry.

Together with provincial and territorial leaders, Trudeau said a Canadian consortium will attend the Paris climate conference in December, and “within 90 days formally meet to establish a pan-Canadian framework for combating climate change.”

Reaction of oil and gas industry associations

Gary Leach, president of the Explorers and Producers Association of Canada, said that with a Liberal majority government, the industry needs to get acquainted quickly with their energy agenda.

“However, Mr. Trudeau didn’t offer a lot of details during his campaign and the Canadians who voted for the Liberals were mostly looking for a change of leadership.

“There are two key areas we will be looking for some clarity: firstly, how will the new government address the several pipeline projects to the West Coast, East Coast and U.S. and, secondly, how successful will they be attempting to cobble together a coherent national position to take to the Paris climate change conference in Paris later this year?”

In terms of a national climate change strategy, Leach said that the Liberal position basically amounts to letting the provinces pursue their own agendas, whether carbon taxes, cap and trade or more regulation on large emitters.

“He also promises to convene the provinces within 90 days of the Paris conference to put some details around how national GHG reduction targets would be achieved,” Leach said.

On pipelines, Leach said that Trudeau at least has “somewhat nuanced views” though more clarity will be needed.

“He appears to recognize the need to access new markets. Hopefully the well advanced Trans Mountain project to Burnaby will proceed without undue interference from Ottawa when the NEB [National Energy Board] decision arrives at the cabinet table sometime next year,” Leach said.

“Mr. Trudeau offered little clarity on where he stands on the Energy East project, but he has indicated support for the Keystone XL project to the U.S. Gulf Coast; if nothing else, he derided the Harper government for failing to get support from the [Barack] Obama administration,” he added.

“[Trudeau] is adamant oil shipments from the North Coast of B.C. would not be permitted which seems a difficult challenge for the Northern Gateway pipeline which already has NEB and federal approval.” 

On balance, Leach said there can be “some optimism” that a Liberal government will be “eager to promote economic growth in Canada and the energy sector remains a key to achieving that goal over the next four years” of Trudeau’s new government.

Especially, he added, as the industry eventually recovers from current commodity pricing and market conditions felt of late.

Tim McMillan, president of the Canadian Association of Petroleum Producers, said CAPP’s message and dialogue with the new federal government will not change.

“Our priorities are going to be the same — that market access is crucial to our ongoing long-term success and [we need] a continual eye on ensuring that we are competitive, that we are attracting investment and that Canada is well positioned for long-term economic growth in the oil and gas sector,” he said.

McMillan said that CAPP met with Trudeau earlier this year and will engage with the prime minister and his camp further once the dust settles.

“When appropriate and in the coming weeks and months we’ll continue that and, in fact, look to ensure that we are contributing to the new government as they are setting a course for our country in the coming months and years,” he said.

“I think in a very general sense that as a new government, as with all governments, they will want to see economic growth in Canada. Our sector is, and has been, the largest investor into the Canadian economy and we employ over a half-million Canadians. The ability to ensure prosperity for our nation needs to look at how the oil and gas industry can continue to be successful.”

McMillan and CAPP hope that a Trudeau government will tell the story of the industry’s continuing efforts to lesson its environmental impact.

“We, as an industry, are one of the largest investors in technology. We are continuing to see improvements in our performance and as the new government is representing Canada and Canada’s position, I think it will be important that they put forward a vision of our country and our performance that reflects the success that we’ve had, and the direction in which we are moving,” McMillan said.

“I don’t want to pre-judge the work [Trudeau] will do, but I think it’s incumbent upon us as an industry to ensure that he’s fully aware and engaged in what’s transpired and the direction in which we are going.”

Other views

Duane Bratt, Mount Royal University’s chair and professor in the department of policy studies, says it will be interesting times as the relationship between industry and the new federal government evolves.

“I’ll be very interested to see what message Trudeau will take to Paris. He’s said he wants to align himself with the provinces, so from an ideological point of view there’s a lot he shares with the premiers of Ontario and Quebec and even Alberta Premier Rachel Notley. But getting them all on the same page is very difficult to do,” Bratt said.

“I think there will be a clear change in tone when they get to Paris, but I’m not sure they’re going to show up with a real policy prescription. I think that just the fact it’s a non-Harper government showing up will be a real change.”

Bratt expects that the Trudeau government will act to implement tougher rules and standards regarding GHG emissions.

“Trudeau was vague on how he wanted to do that — he kept saying that he will talk to the provinces. Does that mean the cap and trade Ontario/Quebec model, does that mean a carbon tax? I think we’ll see more movement on the environmental front, but we don’t know what that’s really going to look like,” Bratt said.

Michal Moore, an energy economics professor with the University of Calgary’s School of Public Policy, agrees with Trudeau’s pledge to engage the provinces in finding national solutions to combat climate change. However, it won’t be easy.

“I think what Mr. Trudeau is saying is there’s a reality in how we have to go forward and it won’t happen if the federation stays in splintered bits and pieces. But how do you unite people and provinces into a common goal when they’ve had their own way for so long?

“Getting the provinces unified is in the best interests of all Canadians and I suspect that’s where Trudeau is going when he says there’s a unity that could take place.”

Although Keystone XL remains in limbo, Bratt said Trudeau may be able to make progress on other proposed pipelines.

“Although Trudeau has said he supports it, the Keystone XL project was never in Canada’s hands and I expect the Obama administration will put it down. But that doesn’t mean it won’t get re-started again when there’s a change in the presidency in the U.S.,” Bratt said.

“On the other issues surrounding pipelines, Trudeau has indicated some support for Energy East. I think Trudeau supports that and I think one of the blockages around Energy East in Ontario and Quebec was actually the Harper government.

“So could Trudeau supporting the same thing as Harper did have more success in getting it through politically, particularly in this honeymoon phase he’ll have right now? Maybe.”

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