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Canadian election puzzle for oil industry

Industry bugbear Justin Trudeau may have lost his majority, but a minority government could be even less helpful for oil and gas

The Trudeau administration has been blamed for much of what has ailed the western Canadian oil patch over the past four years. But Trudeau leading a minority government, following the outcome of national polls in October, is rightly viewed with even greater trepidation. 

Prime minister Trudeau will now have to rely on support from the New Democratic Party (NDP) or Bloc Quebecois (BQ) to avoid a non-confidence vote on many issues in Canada’s House of Commons. Given the preeminence of fighting climate change amongst both parties’ manifesto policies, we must expect them to present diametric opposition to oil and gas development. 

The 21 October election result has already contributed to a surge of separatist sentiment and support in western Canada, partly bolstered by rhetoric from the premiers of Alberta and Saskatchewan—the two largest oil producing provinces in Canada—including calls for greater support from Trudeau’s Liberals for pipeline projects. 

The 40-day election campaign was a hard-fought and divisive affair, with energy and climate change front and centre

And if there is one potential bright spot for the western Canadian oil and gas industry, it is that early signs point towards the newly-minority Liberal government being slightly more pro-oil and gas than its majority version, in part to try to defuse the potential constitutional risk of growing western separatist momentum. 

Election campaign

The 40-day election campaign was a hard-fought and divisive affair, with energy and climate change front and centre. Three of the five major parties—NDP, BQ and the Green Party—are anti-crude pipelines, anti-oil sands, and, to a lesser degree, anti-hydraulic fracking and liquified natural gas (LNG). The right-leaning Conservatives are the only unabashedly pro-oil development party, with the Liberals somewhere in the middle, as is often the case with Canada’s ‘natural ruling party’. 

The Conservatives’ pro-oil development stance, in combination with an anemic climate platform that was widely panned by experts and pundits when presented in June, likely played a role in stopping opposition leader Andrew Scheer from becoming prime minister—Trudeau and the Liberals had numerous scandals haunting them before and during the campaign. A poll by Vancouver-based public opinion research organisation the Angus Reid Institute (ARI) in early September found 69pc of Canadians believe fighting climate change should be the next federal government’s number one priority. 

Results

The Liberals won 157 seats, 13 short of a majority and 20 less than when it headed into the campaign. The left-wing NDP saw its seat count decline by 15 to 24, while the separatist BQ gained 22 seats to become the third largest party in the next parliament. The Green Party inched up from two to three seats, while the Conservatives were the biggest winner, increasing from 95 to 121 seats. 

The Liberals obtained less than 15pc of the popular vote in Alberta and Saskatchewan, compared to over two-thirds for the Conservative Party, and lost all four of its seats in the two provinces. These losses included natural resources minister Amarjeet Sohi in Edmonton Mill Woods and public safety minister Ralph Goodale, who had held his Regina Wascana seat since 1993. 

Trudeau recognised the divided state of the country during his victory speech on the evening of the election. “Dear Quebeckers, I heard your message tonight. You want to continue to go forward with us, but you also want to ensure that the voice of Quebec can be heard even more in Ottawa,” Trudeau said. “And to Canadians in Alberta and Saskatchewan, know that you are an essential part of our great country. I have heard your frustration and I want to be there to support you.” 

Western alienation

In an open letter to Trudeau, Saskatchewan premier Scott Moe said the election results confirm that “there is a fire burning” in western Canada. “The path our federal government has been on the last four years has divided our nation,” Moe wrote. “Last night’s election results showed the sense of frustration and alienation in Saskatchewan is now greater than it has been at any point in my lifetime.” 

In a speech to the Alberta Legislature the day after the federal election, its premier Jason Kenney warned of rising separatist sentiment in his province. “If the frustration and alienation in Alberta continues to mount, it will pose a very serious challenge to national unity,” Kenney said. 

“There is a fire burning” in western Canada, Saskatchewan premier Scott Moe

Kenney has been playing the separatist card since his own successful election campaign earlier this year, and, despite being an ardent nationalist, has acknowledged that the threat of secession is currently more of a—and Alberta’s only real—stick to get a better deal within the confederation. 

But an ARI poll released in early February found over half of Albertans believe the four western provinces—British Colombia, Alberta, Saskatchewan and Manitoba—would be better off if they separated from the rest of Canada. In just a few days after the federal election, almost 100,000 Albertans signed an online petition calling for a referendum to decide whether the province should separate from the country. 

Kenney told the Albertan legislature that he had heard “fine words” about support for Alberta and Saskatchewan during Trudeau’s victory speech, but these words must now be followed by real actions. “If you want to support us, then you must support us to get our oil and gas to international markets,” Kenney said. “Support us as we reduce our emissions as well, so we can have the cleanest oil and gas industry in the world.” 

As a “first measure of good faith,” Kenney called on Trudeau to not use the federally owned 590,000bl/d Trans Mountain Expansion (TMX) pipeline project as a bargaining chip to win ongoing support from either the NDP or BQ. “If the prime minister means what he said last night about listening to Alberta and Saskatchewan, the clearest way he could do so would be to unequivocally commit this new government to the completion of the pipeline that the federal government owns,” Kenney said. 

Trudeau’s olive branch

On 23 October, in his first public comments following election night, Trudeau unequivocally ruled out the possibility of either a formal or informal coalition with any of the other parties in the House of Commons. This approach should allow his minority government maximum flexibility, especially in the areas of energy and climate change. 

Trudeau, as a unionist, will be wary that alienating the industry could fuel the growing western separatist tide

On that note, Trudeau said his government is planning to forge ahead with the TMX project, as it is viewed in the national interest, with the goal of completing it as “quickly as possible.” 

Trudeau also vowed to find a way to include representatives from Alberta and Saskatchewan in his cabinet, despite the Liberals failure to win seats in either of these provinces. He said that he had already spoken to the premiers of each province to discuss the matter. One possibility is to appoint well-respected individuals from Alberta and Saskatchewan to the Senate upper house, and then have them serve in cabinet. 

While early rhetoric by the prime minister is more promising for oil and gas, and could still be backed up by action, the hard arithmetic still favours significant co-operation with the NDP or BQ, and they have much less wiggle room. Trudeau, as a unionist, will be wary that alienating the industry could fuel the growing western separatist tide, but, of his potential allies, the BQ in particular will be less concerned. 

Ultimately, separation could revive the industry, but this seems less than imminent and is also dependent on British Colombia—generally more liberal-leaning than the two major oil provinces—joining the breakaway, or at least offering access to its seaboard for export infrastructure, neither of which is a given. More realistically, Alberta’s politicians and the Conservatives nationally must play their cards cleverly to ensure that Trudeau can balance the environmentalism that is popular with voters for his party and those that will support much of his legislative agenda, with some concessions to the restive oil provinces that help ensure Canada’s long-term survival in its current form.   

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