Oil Industry Could Prosper Despite Trudeau Minority Government

Prime Minister Justin Trudeau and his Liberal party may have won a strong minority mandate on Oct. 21, following four-years of majority rule, but this does not mean the sky will continue to fall for the western Canadian oil and gas industry. It partly depends on how Trudeau decides to secure majority votes in the House of Commons, and to a greater degree whether the massive Indigenous-led Eagle Spirit Energy Corridor project moves forward.

Type of minority

Justin could follow in his father’s footsteps and form a coalition government, as Pierre did with the New Democratic Party (NDP) in 1972. The price of this pact was the creation of state-owned Petro Canada.

Or Justin could follow in the footsteps of Conservative leaders John Diefenbaker, Joe Clark and Stephen Harper and “govern as if” he had a majority government, forming alliances on an issue-by-issue basis. This approach would allow a Trudeau minority government maximum flexibility, especially in the all-important areas of energy and climate change.

The Liberals’ two potential coalition partners, the NDP and Bloc Québécois (BQ), are both anti-crude oil pipelines, anti-oilsands, and to a lesser degree anti-hydraulic fracking and LNG. At a minimum, these two parties are likely to demand an end to the 590,000 bbl/d Trans Mountain expansion (TMX) pipeline project to buy their ongoing political support.

This would leave the new Trudeau government with substantial egg on its face — since the majority Trudeau government bought Trans Mountain from Kinder Morgan in an attempt to save the expansion project — alienate Indigenous-led groups hoping to buy the expanded pipeline, and feed rapidly growing Western alienation, already apparent from the federal election result.

The Liberals obtained a mere 13 per cent of the popular vote in Alberta and Saskatchewan, compared to over two-thirds for the Conservative party, and lost all five seats in these two oil producing 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.

But the completion of TMX is a long ways from a slam-dunk even if Trudeau decides to not bargain it away, with the project facing continuing resistance from the global environmental movement, some First Nations along the pipeline route, as well as hardcore NIMBYism — especially in the Greater Vancouver area. Similar could be said for TC Energy’s 830,000 bbl/d Keystone XL and Enbridge’s 370,000 bbl/d Line 3 replacement projects, with the latter’s 540,000 bbl/d Line 5 under threat as well.

Eagle Spirit Energy to rescue?

On the bright side for Western Canada’s oil industry, the Indigenous-led Eagle Spirit Energy Corridor will be tough to stop, whether the Trudeau minority government chooses to pander to potential coalition partners or not (see Eagle Spirit Energy Corridor Could Kill Four Birds With One Stone).

The multi-use energy corridor was originally to run from northern Alberta to the Prince Rupert area on the northern coast of British Columbia, with two 48-inch oil pipelines, each transporting two million bbls/d of partially upgraded crude, and two large-diameter gas pipelines shipping 5.8 bcf/d each.

The promoters of Eagle Spirit Energy have since adjusted the route for the two natural gas pipelines to ship only gas from northeastern B.C., to avoid federal jurisdiction over an interprovincial route. In addition, two of the 35 First Nations along the crude pipeline route are planning to challenge Bill C-48, the ban on exporting western Canadian oil from northern B.C. ports, in court.

“What we are saying to the prime minister on Bill C-48 (is) that it’s a ridiculous law that is aimed at ensuring that First Nations remain in poverty,” said Calvin Helin, chairman of the Eagle Spirit Energy project, as federal, provincial and territorial governments have a “duty to consult” before passing laws or approving projects that negatively impact Indigenous communities. “There was no consultation.”

And just in case the court challenge to Bill C-48 fails, the promoters of Eagle Spirit Energy are already in negotiations with U.S. officials to export western Canadian crude oil from an Alaskan deepwater port instead. Helin and Fred Schneider, CEO of the project, met with Alaskan government in Juneau in mid-September, and on October 22 — the day after the federal election — with 15 U.S. senators, including Alaskan Senator Lisa Murkowski, in Washington, D.C. to discuss the project.

“The Alaskan government is super supportive,” said Helin in a telephone interview. “But it would be sad if we had to go this route, providing a foreign jurisdiction with all the benefits of a crude export facility instead.”

The first phase of the project is to be a natural gas pipeline to come online in 2024 at an estimated cost of C$12 billion. The next three phases, each expected to cost 30 per cent to 40 per cent less, are targeted to begin operations in consecutive years thereafter.

Ironically, if Eagle Spirit Energy moves ahead, and the Trudeau minority government continues to ramp up policies to combat climate change, Canada will have adopted the highly successful Norwegian climate-energy model — a vibrant oil and gas export industry to help finance a rapid shift to a low-carbon domestic economy (see Canada Should Follow In Norway’s Energy Footsteps) — by default.