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Vol. 16, No. 14 Week of April 03, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Democracy Canadian-style

Harper government toppled in historic vote, leaving unfinished energy business

Gary Park

For Petroleum News

Canadians will elect a new federal government for the third time in five years, or the fourth time in seven years, or the fifth time in 10 years. Take your pick.

What it does translate into is a level of extreme discontent among voters and extreme anxiety in the business world, above all the petroleum industry.

The campaign to voting day on May 2 will dwell heavily on whether Prime Minister Stephen Harper has undermined democracy and operated in contempt of parliament.

That’s what the three opposition parties will allege, regardless of how fragmented they are in their own political beliefs. Harper, on the other hand, will warn that defeat for his Conservatives will result in a “coalition of the unwilling” seizing power.

Frustrated by what they viewed as Harper’s increasing concentration of power in his own office and his refusal, beyond a few token gestures, to consult with them, the Liberals (once a dynasty), New Democratic Party (Canada’s socialist voice of conscience) and Bloc Quebecois (dedicated to independence for Quebec) ganged up on March 25 and toppled the Conservative government.

Grounds were contempt

In a non-confidence vote, they made Canadian history by defeating the Harper administration on grounds of contempt, by withholding the financial details of plans to spend C$30 billion on corporate tax cuts, C$30 billion on new fighter jets and C$10 billion on new prisons.

Entering the election campaign, the Conservatives held 143 seats in the House of Commons, Liberals 77, Bloc Quebecois 47, New Democrats 36; there are also two independent Members of Parliament. Three electoral districts were vacant.

Early polls indicate that Harper could win a third minority government and possibly even emerge with a majority victory, meaning he would no longer need the support of any minority party to pass legislation. But the pendulum has swung so erratically over recent months that anything is possible in a five-week campaign.

Neither Harper, nor Liberal leader Michael Ignatieff has been able to capture the full trust and enthusiasm of Canadians — Harper because he has concentrated power in his own office and Ignatieff, who has shown indecision on key issues and is accused by the Conservatives, despite his own denials, of being willing to form a coalition government with the NDP and the Bloc Quebecois.

Last-minute initiatives

Faced with defeat, Harper took two last-minute initiatives affecting the oil and gas sector by introducing a new water-quality monitoring system for waterways in the vast Athabasca oil sands region of northern Alberta and reaching an accord with the Quebec government for offshore oil and gas development in the Gulf of St. Lawrence.

Environment Minister Peter Kent said the water program, to be run in conjunction with the Alberta government, is just the first step toward tougher standards to protect air quality and biodiversity. It also allows the Harper government to proclaim, in a subdued fashion, its resolve to start cleaning up Canada’s worst environmental eyesore.

In Quebec, always the most volatile electoral region of Canada, the offshore accord opens the door to the first commercial petroleum development in a province that spends about C$16 billion a year importing oil and gas.

By ruling on a 47-year undersea boundary dispute between Quebec and Newfoundland, the Canadian government freed up a prospect known as Old Harry, which has an estimated 2 billion barrels of oil and 5 trillion cubic feet of gas.

Under the accord, Canada will retain jurisdiction over the offshore play, but Quebec will collect 100 percent of any royalties, although there is no guarantee that offshore exploration will be any more popular among Quebec residents than development of 50 tcf of onshore shale gas, which is under a moratorium pending an environmental evaluation.

Industry has cause for concern

The petroleum industry has ample cause for concern should the Conservatives lose, removing a close ally from power in Ottawa.

Ignatieff has said he is willing to scrap the final installment of a five-year Conservative program to cut corporate taxes by lowering the rate in 2012 to 15 percent from 16.5 percent, an important element of Harper’s strategy to attract capital and create jobs.

While refusing to abandon those cuts, the Conservatives introduced a budget March 22 that was never put to a vote in the House of Commons.

In an aggressive bid to claw back an estimated C$4.1 billion over five years, Finance Minister Jim Flaherty closed tax loopholes that have allowed corporations, notably oil and gas companies, to defer paying taxes at a time when tax rates have been declining.

The three opposition parties have also, in varying degrees, called for Canada to: impose a carbon tax as part of climate-change legislation that would be independent of whatever action the United States takes; ban crude oil and LNG tanker traffic off the British Columbia coast; introduce tough legislation to effectively end oil and gas exploration in Arctic waters; and refuse to provide any direct or indirect financial support for corporate partners in the Mackenzie Gas Project.

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