OILPATCH, OTTAWA TRUCE OVER EMISSIONS, FOR NOW.
Come together over emissions solutions, but election could bring abrupt end to truce
CALGARY • The fierce animosity between the Canadian oil and gas industry and the federal government has subsided over the past year, but experts wonder how long the truce will last when the election is called.
“There is increased alignment between the Canadian federal government and the energy industry on reducing GHG emissions,” said Tristan Goodman, president of the Explorers and Producers Association of Canada, which represents mid-sized oil and gas companies.
Part of the reason for the improved relationship between the two sides is because the energy industry is actively looking at ways to address climate change issues and Ottawa has expressed an eagerness to help.
“The federal government has been willing to support the industry to a degree during a period of change and I think we now have a reasonable partner that we can engage with,” Goodman said. “I think both parties are now trying to move forward in the same direction.”
The new, conciliatory tone is a remarkable change from previous years.
The Liberals and the oilpatch have in recent history squared off over tanker bans in British Columbia, the cancellation of the Northern Gateway oil pipeline project, changes to the regulatory process for the Energy East pipeline and whether revamps were needed to turn the National Energy Board into the Canada Energy Regulator.
The two sides still disagree on a range of issues, including many of the provisions in the Liberal’s labelling of plastic as pollution, the Clean Fuel Standard, which refinery owners say could cause refinery closures in Canada, and tax incentives for using captured carbon in enhanced oil recovery. On June 29, Ottawa announced its intention to phase out internal combustion engine vehicle sales in Canada by 2035, adding another possible source of conflict.
Goodman said that disagreements between the two sides have become easier to resolve given the common ground on emissions reduction efforts especially as more oil and gas companies have made net-zero emissions pledges.
But any newly found goodwill between the two sides could be in jeopardy as the Liberals have hinted at a federal election this year, and most observers expect a vote in the fall after a summer COVID-19 vaccination drive.
“There’s no question that climate change will be a significant discussion point in the election, but I think we can all agree that we’re moving in the right direction and simply bashing one or another section of Canada’s economy and also certain parts of the Canadian country is not going to be helpful,” Goodman said, adding that every federal political party has forward-thinking climate plans and the energy industry will need to play its part.
Federal officials also say the relationship has improved, and point to their own efforts to reach out to people in the industry in Alberta and Saskatchewan.
Seamus O’regan said he flew to Calgary at Alberta Energy Minister Sonya Savage’s invitation the day he was sworn in as Natural Resources Minister in November 2019. “It was important to change the tone,” O’regan said, adding that he had heard from oil and gas workers while campaigning in Newfoundland and Labrador that “felt like we were talking down to them.”
“When I came into the role, it was with a great deal of humility; we were shut out of every seat in Alberta and Saskatchewan,” O’regan said, when asked whether the tone will change during an election. “The point is not to go around vilifying sectors — we have an economy to run. But on the other hand, we have to lower emissions urgently and, I would add, orderly.”
O’regan said an “orderly” move to cut emissions is necessary because the government is aware that if they move too quickly on emissions reductions programs, Canadians have the option to choose a government that will move at a different speed.
That is what happened in Alberta and Saskatchewan, the two largest oil and gas producing provinces, during the 2019 election.
“A lot of the leaders in the energy sector really did feel like their government was attacking them,” said Mac Van Wiellingen, a founder and director of Calgary-based private equity firm ARC Financial Corp., referring to the 2019 federal campaign when Prime Minister Justin Trudeau said during the French debate he would “stand up to Big Oil.”
Indeed, former finance minister Bill Morneau said after the last election that the industry felt it was “under siege” and the federal government would work to engage with Canadians in the West and in the energy sector.
In the time since, all of Alberta’s largest oil companies have announced net-zero emissions targets, covering 90 per cent of total oilsands production. Companies such as Suncor Energy Inc. and ATCO Ltd. have announced new investments in hydrogen production and pipeliners TC Energy Corp. and Pembina Pipeline Corp. announced plans to build a carbon sequestration grid in Alberta.
“It really does look to me like the temperature has been turned down between the industry and Alberta and the federal government and there’s a clearer appreciation that it’s in all of our interests to collaborate and work together,” Van Wiellingen said.
Still, Van Wiellingen is concerned that a looming election will provide an incentive for the Liberals to campaign on the premise that the oil industry needs to be forcefully confronted by Ottawa.
“I don’t think the fundamentals will be undone or unwound in terms of the progress being made, but I do think the goodwill and quality of the relationship could be set back again,” Van Wiellingen said.
He said the improved relationship is necessary to propel Canada’s economic recovery following the COVID-19 pandemic, which has left the country with a massive $354-billion deficit, and a surge in energy investment could help the country’s sagging investment levels and labour productivity issues. He authored a report on the energy industry’s participation in an economic rebound and energy transition in Canada for the University of Calgary School of Public Policy last month.
When Marg Mccuaig-boyd was Alberta energy minister during the NDP’S time in office between 2015 and 2019, much of the oil and gas industry resisted the provincial imposition of new carbon taxes, an emissions cap in the oilsands and federal initiatives like the imposition of an oil tanker ban in northern British Columbia.
“There seems to have been a mending of fences and I don’t know if it’s that they agree with the federal government or just that they see this is the way things are going,” Mccuaig-boyd told the Financial Post.
Now, as more and more institutional investors test potential portfolio companies for their environment, social and governance (ESG) performance, Mccuaig-boyd sees less resistance and a greater willingness by the industry to align with Ottawa on items like net-zero emissions targets and carbon taxes.
“We had some that told us they get it, and they said they don’t disagree but, ‘I don’t want to get kicked out of the Petroleum Club,’” Mccuaig-boyd said, adding the energy industry generally wanted to stand together and present a united front.