Earlier this month, Prime Minister Justin Trudeau enjoyed an
official visit to Washington that attracted significant attention
and generated positive headlines for Canada-US relations. At the
top of the agenda was the common goal shared between the leaders to
combat climate change. Although "#Trubama" (the twitter
moniker given to the pair) only have until November to work
together before the US election, it will be interesting to see what
impact a renewed focus on climate change will have on M&A in
the oil and gas industry.
Much of the media's coverage focused on the apparently warm relationship between the two leaders, but
the pair's public commitment to curbing climate change also
featured prominently. For example, the Obama administration
indicated that it wants to cut methane emissions by nearly half in
the oil and gas industry by 2024 and Prime Minister Trudeau communicated that his government was committed
to "a clean and prosperous future".
The current cooperative approach to combat global warming is a
notable departure from the relationship between Prime Minister
Harper, who invested significant energy in expanding Canada's
oil and gas industry, and President Obama who rejected the Keystone XL pipeline.
Before Trudeau's visit to Washington, analysts predicted that a large portion of
domestic and inbound M&A activity for 2016 would be in the oil
and gas and mining sectors and, in fact, the first quarter has
shown an uptick in M&A in the sector with some
players doing discount buying.
So what impact might the "#Trubama" approach to
climate change have on this trend of M&A activity in the oil
and gas industry? A renewed focus on climate change may cause some
players to reevaluate their pricing models. While neither President
Obama or Prime Minister Trudeau have surprised with their moves to
combat climate change, the speed with which the bi-lateral alliance
has moved towards material policy change is striking. The market
will have to account for the significant political and regulatory
challenges that lie ahead.
The author would like to thank Andrew Nicholl, articling
student, for his assistance in preparing this legal
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