Providing coverage of Alaska and northern Canada's oil and gas industry
December 2019

Vol. 24, No.48 Week of December 01, 2019

Trudeau overhauls cabinet; new lineup to oversee resource projects

Gary Park

for Petroleum News

The Canadian government of Prime Minister Justin Trudeau has assembled the pieces for a relaunch after four years in office, though it’s far from clear whether he has engaged in more than window dressing.

For the Western Canada-based energy industry the cabinet shuffle introduces a new natural resources minister (Seamus Regan), a new environment minister (Jonathan Wilkinson), a new cabinet post with sole responsibility for dealing with the Prairie provinces (Jim Carr), along with a deputy prime minister (Chrystia Freeland) who is charged with handling intergovernmental relations.

One of Freeland’s primary jobs is to patch over national divisions that have left Trudeau’s Liberals without representation from the volatile oil producing provinces of Alberta and Saskatchewan.

Provincial issues

At this stage, however, Trudeau has given no indication how he plans to calm his two most vocal critics - the premiers of Alberta (Jason Kenney) and Saskatchewan (Scott Moe) - who feel they have been shunted aside as a left-leaning cabinet has given greater priority to imposing a carbon tax and tightening regulations that put a chokehold on plans to grow oil production.

But he could make a bold start to quiet Kenney and Moe by taking action to get construction moving ahead on the Trans Mountain pipeline expansion, TMX, and amending some of the more controversial elements of Bill C-48 which bans oil tankers from Pacific waters in northern British Columbia and Bill C-69, which overhauls environmental reviews of major resource projects - both bills that that are seen as driving away investors.

Without action on those fronts, the danger for Trudeau is that his second term will be overwhelmed by the issue of national unity that could see pressure in Alberta and Saskatchewan to hold referendums on having those two provinces separate from the Canadian federation.

The only hint he has offered since his reelection on Oct. 21 occurred in a meeting with Calgary Mayor Naheed Nenshi on November 20 when Trudeau said he was “interested” improving Bill C-69.

TMX confusion

The confusion surrounding TMX has become even more muddled with a disclosure that the Canadian and Alberta governments provided C$320 million in direct and indirect subsidies through the Canada Development Investment Corp, a government corporation designed to support Canada’s economic development that includes Trans Mountain among its subsidiaries.

That is accompanied by a partial resumption of preliminary work on TMX, even though the Federal Court of Appeal is set to start its second hearing on TMX before Christmas.

The court has left no doubt it will not be rushed into ruling whether the Canadian government has acted in good faith in meeting its duty to consult with First Nations affected by TMX and meet the concerns of indigenous communities.

Maxime Faille, an attorney for the Tsleil-Waututh First Nation, said the court has delivered a “clear message that cutting corners is not on and that frequent meetings are “not nearly enough without some meat on the bones of the process.”

If the court takes as long to render a decision as it did the first time around - almost a year - it is likely to be late 2022 before the court phase is completed, shattering hopes of shipping 590,000 barrels per day of oil sands bitumen to Asia.

First Nations action

The only mildly encouraging development for the industry is that two of the eight First Nations involved in the federal appeal court proceedings have withdrawn their opposition to TMX, saying their concerns over the pipeline route have been resolved.

But the hopes stemming from that development were just as quickly dashed when the Tsleil-Waututh and three environmental groups said they will seek permission to present their concerns to the Supreme Court of Canada, having failed to gain a hearing before the federal court.

While the legal matters preoccupy both sides there is strong interest in the prospect of First Nations acquiring a stake in TMX from the Canadian government, which is the outright owner of the pipeline.

Mark Little, chief executive officer of oil sands giant Suncor Energy, urged the government to ensure that if the time comes to sell TMX back to the private sector that should include First Nations ownership.

He also challenged the energy sector and other Canadian industries to build new aboriginal partnerships across Canada.

Little said Suncor’s C$503 million sale of a 49% stake in an oil sands tank farm to two First Nations in 2017 created a model “which we think can be used in so many other opportunities.”

Delbert Wapas, former chief of Saskatchewan’s Thunderchild First Nation, said an equity position in TMX would give indigenous communities an economic opportunity and allow them to “get away from managing poverty to managing wealth.”

Pipeline capacity

While its plate is full with TMX matters, the Trudeau government is also coming under heat from the Canadian Energy Pipeline Association, which said the industry will need more than pipeline capacity currently under development to meet even its most modest growth forecasts.

CEPA President Chris Bloomer told a membership meeting that “the debate is still very hot around the need to have more pipelines” as opponents step up their efforts to block TMX, plus the 830,000 bpd Keystone XL and 300,000 bpd Line 3 replacement by Enbridge.

But the combined capacity of 1.72 million bpd from those three projects falls far short of predictions by the Canadian Energy Regulator, which estimates Canadian oil production will climb by 2.3 million bpd over the next 20 years.

That outlook will keep the Trudeau government fully occupied far beyond its TMX challenge.


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