‘Woe is Us’: Oil Industry a Hot Mess After NDP Alberta Victory

woe is usWhile Jim Prentice and his Progressive Conservative cadre lick their wounds after last night’s landslide victory by the New Democratic Party and leader Rachel Notley, punditry about the oil industry’s place in the transformed province is in full force.

Even before the results were in, Canadians were being warned new leadership in Canada’s oilpatch will mean very scary things for the economy: fleeing investors, abandoned projects, market uncertainty.

Now that the victory bells have rung, the hand-wringing has leveled up.

The NDP win is “completely devastating,” for the energy industry, Rafi Tahmazian, fund manager for Canoe Financial LP, told Bloomberg.

The oil patch will pack up and leave – Woe is us.

The oil patch will pack up and leave,” Licia Corbella, editor of the Calgary Herald’s editorial page, tweeted. “Woe is us.”

Yet many other onlookers are saying fresh leadership in Alberta could bring long-overdue policy changes that not only benefit a broader cross-section of society, but industry itself, by remedying systemic imbalances that have granted an unhealthy amount of power to oil interests for far too long.

NDP Win a “Clear Negative”?

Notley, who has promised to review the royalty regime around oil and gas production, raise corporate taxes, ban corporate political donations and stop pushing for the Keystone XL and Northern Gateway pipelines, is poking an exposed nerve for companies already feeling on the outs after the oil economy’s dramatic downturn.

The perception from the market based on their comments is they’re extremely dangerous,” Tahmazian said.

Bloomberg reports the NDP victory could result in a massive sell off of Canadian energy stocks and stall investment in the oilsands (Cenovus stocks dropped four per cent on the TSX on Wednesday).

It’s a clear and material negative,” Martin Pelletier from TriVest Wealth Counsel Ltd. opined. “Just when we’re starting to look like we’re recovering here, we get another layer of uncertainty.”

a change in Alberta’s royalty regime would be dangerous for industry.

Jeff Gaulin, vice president of communications at the Canadian Association of Petroleum Producers, Canada’s largest oil and gas lobby, echoed those concerns, saying a change in Alberta’s royalty regime would be dangerous for industry.

Now is not the time for a royalty review,” he told Reuters. “The uncertainty that that would create for investment would jeopardize jobs in Alberta.”

According to Jeremy McCrea, analyst with AltaCorp Capital Inc. in Calgary, American investors began dropping stocks even before the elections results were in. Energy shares, McCrea warned, are threatened by Notley’s royalty review — and a potential hike in rates.

But not all commentators see such doom and gloom in the NDP’s sudden rise to power.

New NDP Rule Could be “Good for Pipelines”

The Progressive Conservatives and the Wildrose parties have been called out for running what amounts to a “fear campaign” based on threats the NDP would wreck the economy.

But with the Albertan economy already in shambles — with a deficit running at $5 billion — voters were apparently left unconvinced that sticking with the status quo would be in their best interest.

The fear of the unknown was a big factor the NDP had to overcome,” Chris Hall, national affairs editor of the CBC said. “I think what people voted for was change.”

Hall acknowledged that Notley’s campaign promises could be a “disincentive” for new investors looking to get involved in the oilpatch, but he added Notley is “not a particularly radical New Democrat.”

The environment, for example, comes in under ‘other matters’ on their platform.”

Notley will proceed with caution as she presumably doesn’t want to be a “one-term premier.

Andrew Coyne said he anticipates Notley will proceed with caution as she presumably doesn’t want to be a “one-term premier.”

This is still an oil-producing province,” Coyne said. “She can’t just step all over that.”

He added: “What she may have an advantage of is presenting a more environmentally friendly face in terms of the outside world and if she plays her cards right could actually increase the odds of getting a pipeline built if that’s the way she’s inclined.”

Max Fawcett, editor of Alberta Oil, said industry’s “nervousness is a gut reaction” and that he anticipates measured policy under Notley.

The new premier isn’t likely to “pick a fight” with industry and represents policies that are actually much closer to the PCs than one might think.

The new premier isn’t likely to “pick a fight” with industry and represents policies that are actually much closer to the PCs than one might think.

Fawcett points to Andrew Leach’s detailed analysis on the NDPs position, saying “they’re not the fire-breathing leftist radicals some might think.”

As Leach puts it, “an NDP government would certainly lead to changes in Alberta, but perhaps not of the radical sort feared by many in the province.”

So, despite the gnashing of teeth, the new guard doesn’t necessarily represent doom and gloom for the oil industry. After all, much of Alberta’s former policy (with ample help from the federal Conservatives) has put the oil industry in hot water.

Notley Promises to be Good Partner to Industry and First Nations

In her victory speech, Notley promised to maintain good working relations with industry, but also emphasized her hope to repair long-damaged relationships with First Nations in Alberta.

To Alberta’s Indigenous peoples,” she said, “the trust we have been given tonight is a call to be better neighbours and partners. I’m looking forward to consulting with you and learning from you.”

Currently oilsands operators are facing two major legal challenges from First Nations with traditional territory in the oilsands region.

The Athabasca Chipewyan First Nation (ACFN), whose legal challenge was thrust into the spotlight with Neil Young’s Honour the Treaties tour last summer, is arguing the cumulative impacts of rampant oilsands development threatens their treaty rights.

Although the Albertan and Canadian governments fought to have the case dismissed, the Alberta Court of Appeals decided the case was legitimate — with potentially huge implications for all oilsands operators.

In response to the NDP victory, the ACFN said they are “optimistic to finally have a government that that recognizes and respects Indigenous rights and territories.”

While the ACFN have raised multiple issues over the years relating to land management, environmental, health and education, we are finally looking forward to possibly resolving our concerns through a meaningful working relationship with the NDP government.”

The Beaver Lake Cree First Nation is also taking its oilsands fight to the courts, a challenge given greater weight since the unstoppable CNRL bitumen leak began on its territory in 2012.

Alberta’s “black eye” reputation when it comes to climate and the environment hasn’t been doing industry any favours.

Alberta’s “black eye” reputation when it comes to climate and the environment hasn’t been doing industry any favours.

Obama’s ambivalence on Keystone XL, Europe’s efforts to label oilsands crude as “high carbon,” and the explosion of major climate and pipeline protests across Canada are all symptom’s of Alberta’s failure to get the oil industry on a 21stcentury track.

A lack of social licence for oilsands operators has meant “uncertainty” for industry (to the tune of $17 billion by some estimates) long before the NDP took their seat at the throne.

Clearly the status quo wasn’t working perfectly — for anybody. While entrenched oil interests are fearing the worst, there’s obviously plenty of room for improvement.

This article was originally published on Desmog Blog
Carol Linnit is a writer and researcher focusing on energy development, environmental policy, wildlife, Canadian politics, transparency and democracy. She joined DeSmog in June 2010 as a researcher, focusing much of her time on the natural gas industry and hydraulic fracturing.  

One Response

  1. Frank Came

    The election results are more a reflection of voter dissatisfaction with overly complacent and less than competent government than a dramatic shift to the left. The new Premier is a realist and understands that her government must work positively with the oil and gas sector. But the more progressive leadership in those sectors will seize the opportunity to start afresh and to establish a more realistic working relationship with the government. The industry is remarkably adept at adapting to new realities.