Voters in oil-producing Alberta and Saskatchewan expressed their thoughts about Canadian Premier Justin Trudeau unmistakably in Oct. 21 federal elections by sending no members of his Liberal Party to Parliament. Trudeau won reelection, anyway.
Here’s how a headline in the Oct. 22 Edmonton Journal summarized results: “Federal election a kick in the shins for Albertans.” Trudeau saw things differently. “You are sending our Liberal team back to work, back to Ottawa with a clear mandate,” he said in his victory speech. “We will make life more affordable. We will continue to fight climate change. We will get guns off our streets, and we will keep investing in Canadians.”
Fight means obstruction
For the Canadian oil and gas industry, much of it in Alberta and Saskatchewan, Trudeau’s fight against climate change means obstruction. An investment slump that began after the oil market collapsed in mid-2014 continued despite the eventual upturn in oil prices because of escalating regulation. Last month, the Canadian Association of Petroleum Producers estimated the country’s exploration and production spending in 2018 at $39 billion, down 8% from the prior year, and projected this year’s outlay at $25 billion. Investment peaked in 2014 at $81 billion. Spending in the oil sands, from which most major oil companies have departed, is expected to fall again this year to $11 billion, less than half its 2015 level.
During its first term, Trudeau’s climate-focused government frightened away oil and gas industry capital by:
- Killing the Northern Gateway crude pipeline between Alberta and the Pacific and regulating into submission the Energy East project targeting the Atlantic. Oil sands producers need new outlets to international markets. Without them, bitumen at the wellhead and mine mouth suffers a punishing price discount to competitive oil. And the Energy East fiasco hardened investors’ worry about Canada’s treatment of capital at risk.
- Not aggressively defending the Trans Mountain Pipeline Expansion project. Federal approval was part of an ill-fated bargain in which a New Democratic Party government in Alberta accepted the Northern Gateway rejection and agreed to tax greenhouse gas emissions in return for federal pipeline support. When an NDP government in British Columbia blocked the federally approved Trans Mountain expansion, Trudeau dithered and eventually had to buy the project and existing crude-and-products system.
- Managing into law two strenuously antioil bills. Bill C-69 gives environmental obstructionism new clout in decisions about energy projects. Bill C-48 prohibits landing by oil tankers at ports in northern British Columbia.
- Setting a federal default standard for provincial taxation of carbon dioxide. The result is a nationwide carbon price rising to no less than $50/tonne in 2022.
Trudeau shackled the Canadian oil and gas industry in these and other ways while leading a majority government. That he lost the Liberal majority in this month’s election offers little comfort. His new minority government must depend on some form of support from some combination of the NDP, Green Party, and possibly Bloc Quebecois. All those parties oppose pipeline construction in deference to climate remediation.
The traditionally separatist Bloc Quebecois even advocates a new version of climate profiteering: an equalization scheme in which provinces with greenhouse gas emissions above the national average pay carbon taxes to their lower-emitting counterparts. Trudeau isn’t likely to embrace that Quebec-first adventure. But his victory speech suggests strongly that a shaky reelection didn’t temper his craving for international recognition as a climate leader, which modern politics distorts to mean fossil-energy scourge.
Trans Mountain?
The election thus eliminates any chance for repeal or improvement of Bills C-69 and C-48. Approval of projects involving fossil energy will be more difficult than ever to win from a government demonstrably willing to strand capital. And Ottawa’s plan for its Trans Mountain asset remains an open question.
The answer might depend on whether Trudeau worries about his country’s allure to investment and how much pressure he feels to stanch the bleeding from those wounded shins out west.
