Oil and natural gas industry men and women who wake covered in sweat due to thinking about what happens should Elizabeth Warren or another anti-fossil-fuel presidential candidate actually reach the White House in January 2021, turn your head to the north for perhaps a preview.
Last week, Canada held its national election. Premier Justin Trudeau, who had been the country’s leader and head of the majority Liberal Party, now leads the minority Liberal Party – and must partner with a lesser party to get anything done with the U.S.’s northern neighbor.
That partner will be the left-leaning New Democratic Party (NDP), which is known as an outright pipeline hater and anti-fossil fuel subsidies-type, Kallanish Energy reports. Trudeau last year put down $3.4 billion to acquire the Trans Mountain Pipeline, and maintain he wants to continue with the line’s long-simmering – and costly – expansion and sell off all the steel eventually. Expect NDP backers to protest anything Trudeau does with the line.
While all of Canada’s oil and gas may be in for tougher times politically, considered the immediate fate of its western oilfields without any representation in Ottawa — furthering alienation in a region already frustrated with the federal government’s energy and pipeline policies.
Trudeau’s Liberals failed to win a seat in either Alberta or Saskatchewan, the heart of Canada’s oil industry. The party received just 13.7% of the vote in Alberta and 11.6% in Saskatchewan.
The Liberals will govern after taking 33.1% of the national popular vote, less than the Conservatives, who won 34.4% nationally and swept all but one seat in the two provinces.
The Conservatives won 69.2% of votes cast in Alberta and 64.3% in Saskatchewan.
Worried about being ignored in Ottawa
The national results leave Canada’s energy sector, already hit by slumping capital investment and weak oil prices, worried about being ignored by decision-makers in the east.
The term “Wexit,” a western Canadian version of Brexit, was trending on Twitter after the vote.
In his victory speech one week ago, Trudeau appealed directly to Alberta and Saskatchewan, calling them “an essential part of our great country.”
Smiling through clenched teeth
The major Canadian producer trade group issued a statement following the final election results, smiling through clenched teeth.
“The Canadian Association of Petroleum Producers (CAPP) congratulates prime minister Justin Trudeau and the Liberal Party on securing a minority government,” said CAPP president and CEO Tim McMillan.
“The election of a minority government reflects the diversity of Canadians and the need to work constructively together to achieve our mutual goals. CAPP is committed to working with the federal government. A strong oil and natural gas industry can contribute to the government’s mandate and benefit all Canadians by providing affordable energy, prosperity, and creating opportunities for Indigenous communities.”
‘Sustaining the negative sentiment’
Royal Bank of Canada (RBC) forecast more pressure for domestic oil storage and pipeline businesses the day after the election. “We see the election result itself as likely sustaining the negative sentiment towards the pipeline and midstream sector,” RBC Capital Markets said, in a research note.
Mistrust of the Trudeau name is long-standing in the western oil provinces after former prime minister Pierre Trudeau, Justin’s father, tried to impose more federal control over the energy sector in the 1980s.
How would you feel if the leader of a minority party in the U.S., carrying a great deal of political power, said the goal was to shut down the Permian Basin within a decade?
Shut down the oil sands
Consider this declaration from Canada’s Green Party leader Elizabeth May at the federal leadership debate: “We’re shutting down the oil sands by 2030.”
May was elected to office on Vancouver Island last week.
Right-leaning leaders, federally and provincially, are taking up the western cause in hopes it will help them defeat Justin Trudeau in the next election. Minority governments rarely last more than 2-1/2 years in Canada, Reuters reported.
“There is a fire burning in the Prairie provinces,” Saskatchewan premier Scott Moe told reporters one week ago. He said he wanted to meet Trudeau with a proposal to extinguish the fire, “and I’m asking him not to show up with a gas can.”
Alberta premier Jason Kenney said on Twitter he’s spoken to Trudeau and underscored the “deep frustration expressed by Albertans is very real.”
Frustration, alienation could challenge national unity
“If the frustration and alienation in Alberta continues, it will pose a very serious challenge to national unity,” Kenney told reporters later.
The sense of western alienation is most acute in Alberta, where the provincial economy has been struggling since the 2014-15 global oil price crash and unemployment is higher than the national average.
The immediate reaction from analysts was the election result could translate into lower spending and production growth from Canada’s oil sands.
Production growth slowing
“After growing 210,000 barrels per day, on average, in the past five years, we see Canada slowing to only 50,000 Bpd on average in the next five years,” Goldman Sachs said, in a note.
Others agreed. “The lack of pipeline capacities is likely to slow the growth in Canadian oil production,” Commerzbank said, in a note. “The oil that is produced in the province of Alberta has to be transported by rail, which is only profitable at substantial discounts as compared with West Texas Intermediate.”
The Canadian situation indeed looks bleak. The oil and gas industry has to hope the Trudeau-led coalition did not do further damage to their livelihood.
And to the south, their U.S. brethren hear of bans on fracking, new regulations and – always a political favorite – new taxes on product.
The one thing the U.S. has going for it is its national politicians tend not to attack “hot” topics with much gusto, even when controlling both houses of Congress and the White House.
This post appeared first on Kallanish Energy News.