Fear and optimism in the oilpatch after Liberal win

The oilpatch lost its biggest defender last night in the Harper government, ending the era of unconditional love from provincial and federal governments. What does this mean for the energy sector?

Canada's energy sector says a Liberal majority may not be all bad

Prime Minister Stephen Harper, left, was a booster for the oilpatch, but some in the energy industry think Justin Trudeau can do better. (Darryl Dyck and Paul Chiasson/Canadian Press)

Some fear and quite a lot of cautious optimism are the prevailing emotions in the oilpatch today, as it adjusts to the loss of a second Conservative government in less than seven months.

There's a little hostility because of his heritage, but there's a generation of people here that don't know what the hell we're talking about with the National Energy Program.- Jim Gray, oilpatch veteran

Fear because a Liberal government led by Justin Trudeau may not shower the oilpatch with quite as much unconditional love as the Conservatives. Optimism because that unconditional love may have done more harm than good.

Fear of Trudeau

There are still some in Calgary who feel any prime minister with the last name Trudeau will be bad for the energy sector.

Memories are long and it was almost exactly 35 years ago that the National Energy Program was introduced by then-prime minister Pierre Trudeau. The program placed onerous taxes on energy production in order to subsidize lower oil and gas prices in Eastern Canada. It decimated the industry in the 1980s and drove a wedge between East and West.

At an energy roundtable event in Calgary last week, the NEP reared its head. Whitecap Resources chief executive Grant Fagerheim was asked about a Trudeau government and said that he was concerned, in part, because of the spectre of the National Energy Program.

That is not the consensus view though.

"It's so long ago, I hope that it's not something that people can even contemplate." said Scott Saxberg, chief executive of Crescent Point Energy.

"There's a little hostility because of his heritage with his father, but that's a generation ago," said oilpatch veteran Jim Gray. "And there's a generation of people here that don't know what the hell we're talking about with the National Energy Program."
A Calgary investment bank suggests that the Liberals will rescind the permit for the Northern Gateway pipeline project. (Canadian Press)

Northern Gateway dead?

In more concrete terms, there's some concern in the patch about the removal of exploration tax breaks, something the Liberal platform described as subsidies, but the industry sees as incentives. On balance, that's not expected to make a material difference, according to energy investment bank FirstEnergy.

What is likely to make a difference though is the expected demise of Enbridge's Northern Gateway pipeline project. In a report released this morning, FirstEnergy said it expected the Liberal government to officially rescind the permit for Gateway and be much more cautious before issuing a permit for Kinder Morgan's TransMountain expansion to British Columbia.

There has been a growing feeling in the industry that Northern Gateway would never be built. FirstEnergy pointed out that it doesn't believe that the market had included any value for Gateway in Enbridge's share price, which is up in mid-afternoon trading.

Cautious optimism

There is no question that Prime Minister Stephen Harper was a booster for the oilpatch.

His vision was of Canada as an energy superpower. A vision that was impossible to achieve without pipelines to get product to market. On the pipeline file, there's little question that the Conservative government fell short.

The hope, strangely enough, is that the Liberals will do better.

"I take an optimistic view that having a voice in support of market access coming from central Canada may be more effective than having that voice coming from Alberta," said Gray. "Because it's a Canadian issue, it's not a regional issue. This could have a surprisingly positive outcome."

Gray said although Harper, on balance, was good for the industry, in recent years, his voice wasn't being heard. "It was a record that played over and over. It got so acrimonious, it's time for a new voice."

That feeling is echoed by Scott Saxberg, the founder of Crescent Point Energy Ltd.

"If he's speaking to the Energy East pipeline, it may have more sway than in the past when the perception was that the voice was coming from the West."

While the prime ministe-designate has so far withheld judgment on Energy East, there is a general sense that Trudeau does not see the energy sector as a whipping boy.

"One of the things that stood out to me before the election was that he came out to Calgary, met with some guys, try to get their views on things," said Saxberg.

National Energy Strategy

Trudeau campaigned early and often in Calgary, doing his best to distance himself from his father's energy policies, and championing a national energy strategy. That is something that is almost universally accepted as a good idea, from the drilling industry to the explorers and pipeline companies.

"Looking forward to what we can be, instead of chasing things and looking backward," said Michal Moore, an economist with the University of Calgary.

"Or finding just a single solution that you beat on over and over again, like beating on the U.S. over one pipeline. There needs to be strategic intent," he said.

"I think that this means that the energy sector got a new lease on life." 


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