Encana Corp.'s decision to shift its head office to the United States and change its name to the less-elegant Ovintiv is a sobering development for already-anxious Albertans. The question now is whether the loss of a key name in the country’s oil and gas sector creates any sense of loss, or urgency, in Toronto and Ottawa.
Encana is no run-of-the-mill Canadian company. It can trace its lineage back to the building of the Canadian Pacific Railway, was once the largest natural gas producer in North America and even has – or had – a bit of Canadiana in its name.
“How would we feel if Royal Bank moved to New York?” Calgary energy and finance veteran Rick Grafton said.
Albertans have witnessed a steady parade of bad news in recent weeks – including layoffs at Husky Energy Inc., and an austerity budget from the province that will see services and public-sector jobs cut. That’s on top of longer-term worries such as a lack of new pipeline capacity, rising mortgage-arrears rates and the steady exit of international oil companies.
Encana chief executive Doug Suttles insists Encana’s move isn’t related to politics. He has also said that there won’t be job losses in Canada as a result. But the decision to move the headquarters to the U.S. doesn’t bode well for the hundreds of workers who look out from offices in Calgary’s instantly recognizable Bow tower. And Encana’s announcement has given Alberta Premier Jason Kenney an opening to make even more demands to Ottawa.
“You can say it’s not political. But it’s political,” said Mr. Grafton, who cites Prime Minister Justin Trudeau’s mention of phasing out the oil sands three years ago, along with talk of winding down the industry from the NDP and the Green Party, as examples of the sentiment from political leaders that is making companies turn away from Canada.
It’s been a long road for Encana. The chain of events that led to Encana being created began in 1883, when Canadian Pacific workers digging a well in Southern Alberta discovered natural gas instead of water. In 2006, part of a boom period in Alberta, the company booked the biggest annual corporate profit in Canadian history. At that time – before the company was split and oil assets were spun off to a new company called Cenovus – its shares traded at more than $57. On Thursday, those shares traded for just more than $5.
The company’s former chairman, David O’Brien, said he’s disappointed with Encana’s move to the U.S., “but also realistic. A champion is gone and we’ve got the big Bow there and not many people to fill it. I’m a bit sad, but it’s also understandable.”
The real reasons for Encana’s departure will be debated endlessly. Encana has long been described as a “struggling” company – even before the oil-price crash of 2014, and even before the election of the federal Liberals in 2015.
And there have long been signs that Mr. Suttles, an American, was unhappy with his Calgary base. Last year, he took up residence in Denver. He said (at the time) that there were no plans to move the company’s HQ south of the border. Earlier this year, he said that the Montney oil and gas region in B.C. and Alberta would be significantly more productive if government regulated it more efficiently, like in the U.S. He called Canadian rules “cumbersome.”
There is no doubt that oil and gas companies are facing increasing questions over climate change. Even in the U.S., where investment dollars are more plentiful, there are now concerns about the future growth of the industry.
But as Mr. Trudeau has often said, he cares about balancing the environment and the economy. To rebuild a relationship and trust with the West, the federal Liberals will need to do more than appoint the able and widely respected Anne McLellan as an adviser. There has to be some way for the industry to move forward in a political environment where climate change is top of mind.
The Liberals will need to clarify whether the Trans Mountain pipeline expansion – which, yes, I know the government bought and are pledging to build – will be the last heavy-oil pipeline project in Canada, ever. They need to say whether they would consider any changes, perhaps through regulations (as per Senator Doug Black’s suggestion) to laws passed earlier this year that the industry says is choking off investment and will prevent major projects from being built, including pipelines.
Encana’s name is bigger than the company’s current standing. It means more to Alberta and Canada than its shrunken share price. Mr. Trudeau has to take the news seriously. And his promise to do “a lot of listening” in the West must soon have some meaning.
With a report from Justin Giovannetti in Calgary
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