Canadian oil industry leaders are trying to get a better idea what the impact of a new import tax in the United States would be on Canada's energy sector if the Trump administration embraces it.

The tax would essentially make Canadian oil and gas more expensive for U.S. refineries to buy, and there are serious concerns about potential ramifications including whether it could lead to investment dollars shifting stateside.

The policy, also called a border adjustment tax, is being pitched to president-elect Donald Trump by Republicans in the House of Representatives — although it's not clear whether or not it will be enacted when he takes power.

"We've had a ton of questions in the last couple of weeks about the potential for an import tax from the U.S.," said Martin King, a commodities analyst with GMP FirstEnergy, during a presentation to oil and gas industry members on Tuesday morning.

"In three days, [Trump] will be president, so we have to keep a close eye on this." 

'It's really unclear how this will work out. There are lots of twists and turns in this whole process.' - Martin King, GMP FirstEnergy

The Republicans have worked on the protectionist policy for some time to give incentive to buy U.S. products and resources. The policy is complex, but essentially it would reduce or eliminate the cost U.S. companies can deduct from revenues for importing goods. The legislation would raise the price of imported goods, which presumably applies to all products, materials, and resources, such as smartphones and natural gas.

"In theory, he could do it. It's not clear to me where you draw the line," said  Marshall Auerbach, research associate at the Levy Economics Institute at Bard College in Annandale-on-Hudson, N.Y., about what products and resources would be impacted by the tax. "It will take him a while to do it, but it certainly won't be good for Canada."

Impact on oil and Canadian dollar

The U.S. has drastically increased how much oil it produces, but it still relies on importing oil from countries like Canada, especially to supply markets on the east and west coasts. An import tax would increase the price at the pumps in the United States, but Canadian suppliers wouldn't benefit.

"All you've done is raise domestically the price of crude oil, increase the price of gasoline, while the rest of the crude coming into the U.S. stays at a world price," said King.

Like much of Trump's prospective policies, it is difficult to decipher what is talk and what could become reality. It's possible Canada could get an exemption from the import tax, or it could file a NAFTA claim.

The impact on the loonie could be significant because of how much Canada exports to the U.S. every year.

"Maybe it could come down five per cent, 10 per cent, 15 per cent — nobody really knows," said King. "It's really unclear how this will work out. There are lots of twists and turns in this whole process."

Rampant speculation

The oil industry isn't concerned about immediate impacts, since legislation takes time to be passed. In the future, however, an import tax could result in companies investing more money drilling for oil and gas in the U.S. instead of in Canada. There is also speculation in the oilpatch about whether companies would move their Calgary headquarters to the United States as a way to avoid the import tax.

"What could it do to Canada?" King said to reporters. "What's it going to do to the companies? Are they going to be able to get the gas out, get the oil out? It remains to be seen."

Trump himself seems uncertain about the tax. He said this week in an interview with the Wall Street Journal an import tax may be "too complicated." In addition, he said, "anytime I hear border adjustment, I don't love it."