Trump a mixed gift for energy industry
Canadian oil and gas players fear carbon-tax impact will now be worse
Donald Trump’s election appears to present a double-edged sword to Alberta’s oilpatch, where industry backers crave U.S. approval of a major pipeline while they fear conflicting carbon policies will pose a big disadvantage in Canada.
Trump has vowed to accelerate natural resource development and slash environmental regulations. It leaves little doubt a price on carbon and limits on methane emissions — signature pegs of Alberta’s and Canada’s climate change agendas — have no place in a Trump White House.
There are concerns this disparity will place Canadian energy producers on unequal footing with their American competitors, who are not expected to face the same carbon costs and methane regulations.
“In a country like Canada, with a low-growth economy, the only one that can pick us off the mat is the oil and gas sector,” said Gary Leach, president of the Explorers and Producers Association of Canada.
“We cannot be hobbled with policies that our major competitors are not embracing.”
Alberta Premier Rachel Notley told reporters Wednesday she planned to stay the course on her government’s climate change agenda, arguing the U.S. had no firm plans to set a price on carbon when Alberta announced its carbon tax.
Notley said Canada’s agreement with the U.S. under the Obama administration to reduce methane emissions was merely a “feather in the cap,” but wasn’t necessary for the province’s strategy.
“Our climate leadership plan was designed and modelled on the basis of Alberta acting alone,” the premier said, noting the strategy gives some consideration to trade-exposed industries, such as oil and gas.
This firm stand to press on with a carbon tax will hurt Alberta’s energy industry, said Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors.
“Alberta is going to continue to be less competitive and, ultimately, that is bad news for Alberta’s economy and Alberta workers,” Scholz said in an interview.
Saskatchewan Premier Brad Wall, who has been critical of carbon pricing schemes, said he was also worried about the fallout from having contrasting carbon policies in Canada and the U.S.
“It makes no sense for our federal government to push ahead with imposing a national carbon tax when our biggest trading partner — and our biggest competitor for investment and jobs — is not going to have one,” Wall said in a statement.
Still, energy analyst Dirk Lever said he wasn’t convinced the carbon tax will necessarily hurt Alberta’s industry, noting the increased costs may be offset by the benefits of a new pipeline.
Trump said during the U.S. election campaign he would approve Keystone XL, an $8-billion pipeline that would give Alberta energy producers greater access to U.S. markets but was rejected by President Barack Obama over environmental concerns.
“The prospect for having better flow of our products into the U.S. under the new administration I think is a positive,” David Smith, president and CEO of Calgarybased Keyera Corp., said on a conference call with analysts Wednesday.
“But at the same time there’s also been noises made about increased protectionism. I think we just have to wait and see what actually happens over the course of the next few years.”
Lever, an analyst at the investment banker AltaCorp Capital, said the pipeline that would send more than 800,000 barrels of oil per day from Western Canada to U.S. Gulf Coast refineries would help avoid future supply bottlenecks.
It’s also expected to reduce the discount Canadian producers accept for their oil, which he said could at least partially offset the impact of a carbon tax.
“We have to see how these things play out,” he said. “I’m loath to jump and say, the Canadians are disadvantaged. I don’t think that one has enough information to make that statement and it may not ever be true...
“We actually run with higher environmental standards than the Americans and yet we can still compete.”