Encana Domicile Move Wake-up Call For New Trudeau Government?
The Canadian flag is flying at half-mast in Calgary with Encana Corporation’s Oct. 31 announcement that it is planning to domicile in the U.S. and change its name to Ovintiv Inc.
The Canadian oil and gas industry has been pummeled since crude oil prices crashed in the second half of 2014 and the Trudeau and Notley majority governments were elected into office in 2015. But Encana’s decision appears to be the proverbial straw that broke the camel’s back.
Fortunately, it is always darkest before the dawn. Encana’s corporate move and name change could in fact serve as a wake-up call for the new Trudeau government.
Despite being an extremely harsh critic of the Trudeau majority government (see, for example, Trudeau Minority Government Next?) — I must admit the fledgling minority version has shown some early signs of greater support for the western Canadian oil industry.
Prime Minister Justin Trudeau appears to have come to the realization that Canada’s clean energy transition will require funding, while he is no more likely to want to preside over the disintegration of Canada than was his father Pierre.
Election night promise
Trudeau recognized the divided state of the country during his victory speech on the evening of the Oct. 21 federal election. “Dear Quebeckers, I heard your message tonight. You want to continue to go forward with us, but you also want to ensure that the voice of Quebec can be heard even more in Ottawa,” Trudeau said. “And to Canadians in Alberta and Saskatchewan, know that you are an essential part of our great country. I’ve heard your frustration and I want to be there to support you.”
Line in sand
In a speech to the Alberta Legislature the next day, Premier Jason Kenney warned of rising separatist sentiment in the province. “If the frustration and alienation in Alberta continues to mount, it will pose a very serious challenge to national unity,” Kenney said.
During his speech, Kenney also said he heard “fine words” about support for Alberta and Saskatchewan during Trudeau’s victory speech, but these words must now be followed by real actions. “If you want to support us then you must support us to get our oil and gas to international markets,” Kenney said. “Support us as we reduce our emissions as well so we can have the cleanest oil and gas industry in the world.”
Kenney went on to draw a line in the sand for Trudeau, warning him to not use the federally owned Trans Mountain expansion (TMX) crude pipeline project as a bargaining chip to win ongoing support from either the New Democratic Party (NDP) or Bloc Québécois (BQ). “If the prime minister means what he said last night about listening to Alberta and Saskatchewan, the clearest way he could do so would be to unequivocally commit this new government to the completion of the pipeline that the federal government owns,” Kenney said.
On Oct. 23, the very next day, in his first — and only — public appearance since election night, Trudeau said his government is planning to forge ahead with the TMX project, as it is viewed in the national interest, with the goal of completing it as “quickly as possible.”
In addition, Trudeau ruled out the possibility of forming a formal or informal coalition with any of the other political parties in the House of Commons. This approach should allow his minority government maximum flexibility, especially in the all-important areas of energy and climate change.
Trudeau also vowed to find a way to include representatives from Alberta and Saskatchewan in his cabinet, despite the Liberal Party failing to win a single seat in either province. He said he had already spoken to the premiers of each province to discuss the matter. One possibility is to appoint a well-respected individual from Alberta and Saskatchewan to the Senate, and then have each of them serve in cabinet.
On Nov. 5, The Globe and Mail reported combatting climate change and developing a green economy would be the top priority of the Trudeau minority government — important bones for both the NDP and BQ. On the surface, this would appear to be bad news for Western Canada’s oil and gas industry.
But on Oct. 24, Finance Minister Bill Morneau appeared to channel the Norwegian climate-energy model (see Canada Should Follow In Norway’s Energy Footsteps) when he argued the TMX project is a crucial piece of the puzzle to finance Canada’s transition to a clean energy economy.
He said he expects the expanded pipeline to earn $500 million a year, which he promises the Liberal government will spend on the country’s clean energy transition as long as the feds continue to own the pipeline, and will do the same with the proceeds from the eventual sale of the pipeline to the private sector.
As the industrial base in Central Canada continues to crumble, including Ontario’s automotive industry and Quebec’s aerospace and urban transit industries, the Liberal government appears to be reassessing the importance of natural resources to the Canadian economy.
Speaking at the World Economic Forum in Davos, Switzerland, in January 2016, shortly after becoming prime minister, Justin Trudeau said: “My predecessor wanted you to know Canada for its resources. I want you to know Canadians for our resourcefulness.”
Lofty sentiment, but the natural resource sector’s share of Canadian exports has jumped to almost a half, compared to a quarter in the year 2000, with the oil industry leading the charge. The country’s manufacturing sector has seen a commensurate collapse in its share of exports.
Finally, the Trudeau government has taken a great deal of heat over its response to the Encana bombshell. It released a lone statement the day of the announcement, attributed to natural resources ministerial press secretary Vanessa Adams.
From my perspective, no grandstanding by Trudeau was a nice change and a possible sign of growth. More importantly, the words from Ms. Adams appeared sincere, and seemed to reflect an increased awareness of the importance of Alberta, and the western Canadian oil industry, to the economic well-being of Canada as a whole. She wrote:
“We are aware of Encana’s recent announcement, and we are disappointed to hear this news. Encana has been at the forefront of the Canadian oil and gas sector … Alberta is a key driver of Canada’s economy, but we know this has been a very challenging time for the energy sector and for Alberta’s economy, with 99 per cent of our oil going to a single customer — the United States … We will continue taking the necessary steps to ensure Canada and Alberta remain competitive, and that our energy sector remains a source of good, middle class jobs.”
That last bit may be a bit rich, given the Trudeau majority government’s passage of Bill C-48 and C-69 in June, but what is more important is how the minority one acts moving forward. Does the new Canada Energy Regulator assess interprovincial pipeline projects with a light or heavy touch? Does the Trudeau minority government stand down after Indigenous-led Eagle Spirit Energy successfully challenges the northern B.C. crude export ban in court (see Oil Industry Could Prosper Despite Trudeau Minority Government)?
Based on early indications, we may be pleasantly surprised by the answers to these two pivotal questions.