Frustration rises in Alberta oil patch after Liberal election win

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The election of a Liberal minority under Justin Trudeau has deepened longstanding anxieties within Alberta’s oil patch, amid fears that a weakened government will need to lean heavily on parties that are hostile to the energy industry.

Mr. Trudeau’s Liberals faced a groundswell of frustration on Monday from voters in Alberta and Saskatchewan who are deeply suspicious of his commitment to finish work on the Trans Mountain pipeline expansion. After five years of economic malaise in both provinces, along with Mr. Trudeau’s failure to make sufficient progress on a new pipeline during his first mandate, the Liberals were swept from Alberta and Saskatchewan.

Tens of thousands of jobs have been lost in the oil patch since 2015 and billions in international investment has fled to other global energy markets. Many producers have blamed a lack of new pipeline capacity and resulting bottlenecks for the drop in activity.

As a sign of the industry’s plight, dozens of employees streamed out of Husky Energy Inc.'s Calgary headquarters on Tuesday morning with layoff notices.

Dan Halyk, chief executive of Calgary’s Total Energy Services Inc., said he spent Tuesday morning trying to calm nervous workers. Mr. Halyk said the federal Liberals weren’t particularly strong allies to the oil and gas sector when they had a majority government. Now that the New Democrats or Bloc Québécois could have greater sway in the House of Commons, people in Calgary don’t know what will come next.

“We have a lot of employees that are pretty upset, scared and uncertain right now,” said Mr. Halyk, whose company provides labour to oil and gas operations.

He said as recently as 2015, Total’s business was focused almost completely on work in Canada. But now, the firm does more work internationally than it does at home – a shift he attributes to changes in energy policies. “We hire in the U.S. and Australia, and we lay off in Canada.”

Kevin Krausert, chief executive of Beaver Drilling Ltd., said the anger in Alberta is palpable right now. “Downtown Calgary is a sad sight,” he said.

But he said the election result makes clear that Canada can’t continue to be divided on the issue of energy and the environment. "It’s time for the adults in government and in industry to change the channel, and work on rational solutions to climate change and energy access,” he said.

According to Mr. Krausert, Canadian energy industry and its technology could be part of the global solution to climate change – such as displacing coal at power plants in Asia with natural gas, thereby reducing greenhouse-gas emissions.

One positive for investors is that the election brings some certainty to the energy market, sending a clear signal that carbon pricing is here to stay. On the other hand, the possibility of more lax regulations for future pipeline projects is off the table.

Jennifer Winter, director of energy policy research at the University of Calgary’s School of Public Policy, said any kind of stability is helpful. “The fact that it’s a Liberal minority is not the end of the world for Alberta. It really isn’t. If anything, at least there’s a consistent path in policy,” she said.

Shares in long-depressed Canadian oil and gas dipped slightly at the opening Tuesday but then rose, partly from news that the Organization of the Petroleum Exporting Countries is mulling further production cuts.

Underscoring the depth of Western discontent with Mr. Trudeau, the Liberals lost a seat in Regina that it had held through decades of up-and-down fortunes on the Prairies.

Saskatchewan Premier Scott Moe warned on Tuesday that there is a “fire burning here in the Prairie provinces” that was only made worse by Mr. Trudeau’s win. Alberta Premier Jason Kenney said his province, where nearly 70 per cent of voters cast their ballots for the Conservatives, spoke in “one loud voice of defiance” to Mr. Trudeau and fellow Canadians who voted for other parties.

In the eyes of many in the energy sector, two laws passed by the Liberal government earlier this year make it difficult for Canada to compete in a global oil market. One is the law that bars tankers from loading at ports on the northern coast of British Columbia – and is specifically intended to prevent the shipment of heavy oil from Canada, mainly Alberta.

The other contentious law is an overhaul of federal environmental assessments of major construction projects that the industry has labelled the “no more pipelines bill.” The Liberals argued the law will help make major infrastructure projects more environmentally accountable while still allowing development to proceed. However, the Liberals’ star environmental candidate in Montreal said last week it will be hard to build any more new pipelines after Trans Mountain under the new law.

Scrapping the two laws is one of the conditions laid out by Mr. Kenney in a five-page letter sent to Mr. Trudeau on Tuesday where the Alberta Premier specifies how the federal government could reduce frustration in the Prairie provinces. Mr. Kenney also called on Mr. Trudeau not to seek the help of the New Democrats, Bloc Québécois or Green Party to govern – a proposal the Prime Minister is likely to reject.

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