Canada: Is The Oil And Gas Industry Ready? Canadians Elect Liberal Majority Government

On October 19, 2015, Canadians elected a majority Liberal government under Prime Minister-designate Justin Trudeau.  Prior to the election, the governing Conservatives had 159 seats in the House of Commons, the New Democratic Party ("NDP") 95, the Liberals 36, with a handful of seats for smaller parties, independents and vacancies.  The new breakdown, subject to any recounts, and reflecting 30 new federal seats, is: Liberals 184, Conservatives 99, NDP 44, Bloc Québécois 10, and Green Party 1.  The Liberal Party earned the largest increase in seats in history and Mr. Trudeau has indicated he will form a cabinet divided equally between men and women, another first for Canada.

Anticipated Energy Policy and Legislative Outcomes of a Liberal Government

Milestones for a new government will include a Speech from the Throne setting out its agenda, and a subsequent budget.  Key policy issues are likely to include the development of a federal climate change regime, a greater focus on the manufacturing sector and away from natural resource industries, and further government investment in infrastructure and transit projects.  The Liberal party platform suggests that corporations and high net worth individuals may face a greater tax burden.

Of particular interest to the energy industry will be how Prime Minister-designate Trudeau addresses environmental policy, pipelines and oil and gas development. Specifically, on climate change, the Liberals have indicated that carbon pricing will be left to the provinces with the federal government taking on a co-ordinating and implementation role. The position of the new government at the December, 2015 United Nations Climate Change Conference in Paris is expected to differ significantly from the Conservatives' sector by sector approach to environmental regulation.

A further distinction of a Liberal administration will be its approach to pipelines.  The Conservative government was an advocate of pipeline development and energy market access, with vocal support for Keystone XL and Northern Gateway, among other projects. Mr. Trudeau has supported the former and opposed the latter.  The pipeline focus during the lifetime of the new government will be Energy East. The Liberals have indicated support for the "made in Canada" pipeline development generally, and Energy East specifically.  However, as Energy East moves towards its approval process in 2016, it may prove to be challenging for the new government to be as "pro-pipeline" as the previous administration, particularly if the project continues to face opposition in the Province of Québec.

The energy industry will also be directly impacted by the new government's approach to federal regulatory energy reforms set out in the Conservative's Responsible Resource Development Plan, announced as part of Economic Action Plan 2012. These commenced in 2012 with amendments to the National Energy Board Act1 and continued into 2014 and 2015 with the Extractive Sector Transparency Measures Act2 and Pipeline Safety Act3, among other legislation.

The 2012 changes to the National Energy Board Act, opposed by the Liberals, streamlined the federal approval process for energy infrastructure. Similarly, while in opposition, the Liberal Party stated that the Pipeline Safety Act, as well as rail safety and tanker safety regulations implemented by the Conservative government, did not provide sufficient environmental protection or operators' liability levels. Federal tax credits for oil and gas exploration and development, sustained through the Harper administration, may also now be subject to review.

Finally, an important policy issue for the energy sector, and one squarely within federal jurisdiction, will be how successfully a new government engages with Canada's Aboriginal Peoples. This will include the extent to which the First Nations Financial Transparency Act4 remains in force. Mr. Trudeau made a point of saying in his acceptance speech that his government would respect First Nations rights and honour treaties. Moreover, the fact that a record number of indigenous candidates won seats in this past election may serve the Liberal government well in its relationships with Aboriginal Peoples.

Addressing Potential Impacts of the 2015 Election on the Oil and Gas Industry

The impacts to domestic and international businesses navigating the new Canadian political landscape are significant.  From greenhouse gas to corporate tax rates, multiple actors in the Canadian political system will influence those changes, including elected politicians, senior civil servants and government agencies.    

Shaping outcomes that not only protect business interests, but also advance objectives, will require the following:

  • understanding the complexities of federal agencies and departments, the process and mechanics of how legislation is developed and emerging regulatory frameworks; 
  • intelligence gathering on potential legislative, regulatory and policy changes;
  • policy analysis and assessment, including the background and context for policy development;
  • identification of key government entities, decision-makers and influencers as well the relationships among them;
  • monitoring the status of issues as they move through government decision-making processes, including the network of legislative committees, ministries, regulatory agencies and public consultations;
  • navigating federal government priorities as they advance through Treasury Board; and
  • alliance building with other stakeholders, including government and non-government actors. 

Borden Ladner Gervais LLP ("BLG") will be watching and reporting on material changes arising out of the October 19, 2015 election.  As a pre-eminent, full-service Canadian law firm, BLG has in-depth experience with all political parties and at all levels of government in Canada.  It enables BLG to provide expert advice on the impact of proposed or pending policy changes, the effect of those changes and how to prepare well in advance of their realization.

Footnotes

1.RSC 1985, c N-7, as amended 6 July 2012.

2.S.C. 2014, c. 39, s. 376

3.An Act to Amend the National Energy Board Act and the Canada Oil and Gas Operations Act, SC 2015, c 21 [Pipeline Safety Act].

4.S.C. 2013, c. 7

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