Battered oil patch uncertain

Two schools of thought emerge as Canada awaits energy policy from new government; unease spreading as industry layoffs increase

GARY PARK

For Petroleum News

Now that Canada’s new Liberal government is immersed in giving shape and content to its myriad campaign promises, the petroleum industry finds itself being pulled in opposite directions.

Some say the regime of Prime Minister Justin Trudeau will reverse the previous Conservative government’s efforts to streamline regulatory processes by opening up hearings for projects such as oil sands pipelines, delaying final decisions and driving up industry costs in the process; apply greater pressure on the industry to reduce its greenhouse gas emissions; and show less desire to promote the oil sands in the global marketplace.

They also believe that promises of a new era in federal relations with First Nations will scuttle at least Enbridge’s Northern Gateway pipeline and erect barriers to a whole array of other energy plans.

Others say it’s too soon to assume that Trudeau will start closing the door on fossil fuel development by introducing punitive costs on carbon emissions, showing favoritism to green energy ventures and putting environmental activists on the same footing as industry proponents.

The result, they warn, could be a second round of layoffs for 500,000 Canadians who earn their living from the energy business.

Whatever the outcome, the current mood of unease is spreading through an industry that faces an almost daily round of payroll cuts on top of the 37,000 already announced, increasingly coming from powerhouse companies such as TransCanada which has announced a second layoff phase by eliminating 20 percent of its corporate directors on top of its earlier decision to reduce its ranks of senior managers by 20 percent.

Four pipelines in play

Of the four major pipelines proposed to deliver increased production from the Alberta oil sands to North American and global markets, one stands out as the leading candidate for the chopping block - Enbridge’s planned Northern Gateway system to deliver 525,000 barrels per day of crude bitumen to Asia.

But even that venture won’t be easily scuttled by the incoming Liberal administration.

Trudeau had, during the 11-week election campaign, pledged to scrap the earlier approval along with 209 conditions imposed on Northern Gateway by Canada’s National Energy Board and the federal cabinet, telling many organizations that his party opposed the pipeline on the grounds that regulators failed to fully consult stakeholders, notably local communities and First Nations.

He also promised a moratorium on oil tankers operating in northern waters off the British Columbia coast, partly to protect the highly prized Great Bear Rainforest, which covers 12,000 square miles of the central and northern coast.

At the same time, Trudeau told the Vancouver Sun that Vancouver and its surrounding waters have a long industrial past and are vital to the export of resources that are a vital element in Canada’s Gross Domestic Product.

Northern Gateway dead?

“We can’t say ‘No’ to everything. We need to find a path to ‘Yes,’ but in a manner that people are comfortable that we have addressed the fundamental issues,” he said.

Wilkinson, a former chief executive officer of an environmental technology company, noted that resource development is critical to helping fund education and health care.

But “in my mind - and I think Mr. Trudeau has been pretty explicit on this - Northern Gateway is dead,” he said.

The project could be delayed while the Liberal administration works on changes to the environmental assessment system that critics say was watered down by the Conservative government of Prime Minister Stephen Harper.

Under that act, the federal cabinet does not have the power to cancel the certificate of approval for Northern Gateway without amending the legislation, said Robert Janes, an attorney for the Victoria-based JFK Law Corp.

However, he said construction delays initiated by the government will give it time to rework the legislation, while courts could rule in favor of First Nations who are challenging the Northern Gateway approval.

Janes is the lawyer for a group of First Nations who have made legal arguments before the Federal Court of Appeal which he said is likely to deliver a verdict in six to eight months.

Enbridge confident

A spokesman for Enbridge said it remains “confident in the rigor and thoroughness” of the work completed by a review panel.

“We look forward to the opportunity to sit down with Prime Minister Trudeau and his government to provide an update on the progress of our project and our partnerships with First Nations and Metis people in Alberta and British Columbia,” he said.

FirstEnergy Capital said it expects the incoming government to officially rescind the Northern Gateway permit.

TransCanada’s Energy East and Kinder Morgan’s planned expansion of its Trans Mountain system also face the prospect of having their projects sidelined as the Liberals consider changes to environmental regulations.

Normally projects that had already been submitted for approval would survive even if a new government changed regulatory rules.

But Ross said a Liberal cabinet would find it politically difficult to approve controversial pipelines that were reviewed under a process that Trudeau had publicly condemned as lacking credibility.

Brenda Kenny, president of the Canadian Energy Pipeline Association, said the regulatory process was merely streamlined to avoid duplication between agencies and levels of government and “in no way undermined the rigor with which a breadth of issues are being reviewed.”