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Vol. 16, No. 19 Week of May 08, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Harper has stacked energy plate after big win in Canadian election

For the first four weeks of a five-week campaign there was a feeling that everyone was sleepwalking through the Canadian election. The only possible outcome seemed to be preservation of the status quo for the third time in five years.

In the homestretch the nation was awakened with a jolt that ended May 2 with a political upheaval that has few, if any parallels in Canadian history.

There were two resounding victors and two shattered losers.

Above all, Conservative leader Stephen Harper overcame his stodgy, single-minded reputation and waltzed to a majority win, capturing 167 of the 308 seats in the House of Commons, 24 more than entering the campaign, giving him the freedom to govern for the next four years without fear of being toppled by the opposition and forced into another early election.

Although he attracted only 40 percent of the votes, Harper was in the same popularity league as all but former Prime Minister Brian Mulroney over the past 37 years. The elected prime minister has consistently garnered around 38 percent to 43 percent of the votes.

Harper’s winning margin could quickly look like a landslide as the three leading opposition parties struggle to adjust and, in two cases, remake themselves.

Homestretch run by NDP

Of all the surprises, the most stunning was the homestretch run by the leftist New Democratic Party, under leader Jack Layton, to win 102 seats (65 more than in 2008), become the main opposition party and wipe out the voice of Quebec separatism that has controlled that province’s role in the House of Commons for 20 years.

While achieving its best federal election result in 50 years, the NDP has no time to celebrate. It must now try to figure out those candidates who won in Quebec, many of them after entering the contest at the last minute.

Among the NDP’s 58 Members of Parliament from Quebec are four university students (one of them a 19-year-old, making him the youngest elected representative in Canada’s history), one former member of the Communist Party and a barmaid, who speaks only rudimentary French in a French-speaking province and spent most of the campaign on holiday in Las Vegas.

The two smoking carcasses were the Liberal Party, once known as Canada’s “natural governing party,” which captured only 34 seats and whose leader Michael Ignatieff lost his own seat and resigned 12 hours after the polls closed; and the Bloc Quebecois, reduced to rubble, with only four seats of the 75 available in Quebec.

The final surprise was left to Green leader Elizabeth May, who will be her party’s first representative in the House of Commons, although the Greens’ share of the popular vote slipped to 4 percent from 6.7 percent.

Many industry issues for Harper

While the three largest opposition parties face challenges that are peculiar to each one, Harper has to deal with a stack of issues, many of them in the petroleum industry, most of them complex and most of them divisive.

What is beyond question, regardless of Layton’s objections, is that Harper will proceed with lowering corporate taxes to 15 percent in 2012 and not roll the clock back on a five-year program. That commitment underlies the comment of David Collyer, president of the Canadian Association of Petroleum Producers, who said the benefit of a stable, majority government “will be good for our industry and for investors.”

Otherwise the list includes:

• A decision on whether to introduce Canada’s own climate-change legislation, rather than doing as Harper has insisted all along and wait for the United States to make a move and attempt to harmonize the two approaches. Any prospect of Harper and Layton finding common ground is out of the question, given Layton’s insistence on cap-and-trade legislation and a moratorium on new oil sands projects. Rick George, chief executive of Suncor Energy, Canada’s dominant oil sands producer, said climate-change decisions should be determined by technology, predicting there will be major research and development advances over the next five to 10 years. He said the industry has already demonstrated it is capable of “reducing CO2 intensity per barrel and reducing air, land and water impacts. Now we have a chance to show over the next period of time how much better we can be. (Suncor) is not the only company that is making big investments in R&D.”

• The gulf is just as great between the two leaders on proposals by Enbridge to build its Northern Gateway pipeline, leading to crude oil exports to Asia, plus proposals to export LNG to Asia from British Columbia. Layton has crusaded for a moratorium on tankers operating out of northern British Columbia ports. Although Harper has yet to take a firm stance, he has shown no enthusiasm for tanker bans.

• Harper faces a tough job dealing with international critics of the oil sands, starting with the European Union, which plans to make fuel suppliers reduce the carbon footprint of fuels by 6 percent over the next decade. Canada has argued those standards would restrict a possible future market for oil sands production and has threatened to scrap a proposed free-trade pact with the EU on the grounds of “unjustified discrimination.”

• The Conservatives now have the power to allow greater foreign investment in the resource sectors, although Harper insisted during the campaign that state-owned enterprises hoping to acquire Canadian resource companies must demonstrate that they operate on a “commercial basis.” The key indicator on that issue will be a federal ruling on PetroChina’s deal to invest C$5.4 billion in a joint venture with Encana to develop Cutbank Ridge gas deposits in British Columbia.

• Finally, there is the big unknown about the Harper government’s true feelings on the Mackenzie Gas Project, which now hinges on Ottawa’s willingness to negotiate an acceptable fiscal regime with the proponents. Even if the two sides can come to terms, there is little likelihood that Layton will support any pact that contains overt or covert subsidies.

—Gary Park

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