CALGARY – The new reality of an orange-tinged Alberta was beginning to sink in across the oilpatch and Bay Street on Wednesday and, though there were some jitters, many are awaiting more details before they pass judgment.
The NDP’s landslide election victory in a province that’s been a Progressive Conservative bastion for 44 years stunned Sonny Mottahed, president and CEO of Black Spruce Merchant Capital in Calgary.
“I’m pretty shocked, quite shocked,” he said. “There’s been quite a bit of chatter this morning about capital already looking at a way to invest outside of Alberta just across borders into B.C. and Saskatchewan.”
The NDP has said it would raise corporate taxes to 12 per cent from 10 per cent and examine whether Albertans are getting their fair share of royalties.
The last time Alberta increased royalties, under former premier Ed Stelmach in 2007, there was an uproar from the industry and the changes were rolled back months later. At the time, the global economic downturn was just taking hold and producers were concerned the royalty increase would only compound their woes.
Mottahed said raising taxes and royalties in the current economic environment — with crude prices just beginning to bounce back from six-year lows — would be similarly “catastrophic.”
“I think people are now going to be sitting in boardrooms and devising plans and thinking what to do.”
Energy stocks were hurting on Wednesday. The group as a whole was off about 2.75 per cent. Major oilsands producer Cenovus Energy Inc. (TSX:CVE) was down six per cent, while Suncor Energy Inc. (TSX:SU) and Canadian Natural Resources Ltd. (TSX:CNQ) were down about three per cent.
“It’s a bit of a knee-jerk reaction, in my opinion, but at the end of the day what the NDP has brought in is a level of uncertainty, especially on the royalty structure side,” said Glenn Paradis, portfolio manager at Canoe Financial.
That means it’s going to be harder for Alberta energy companies to make spending decisions, said Paradis.
On Wednesday, incoming premier Rachel Notley said her government would “work collaboratively” with industry leaders and that decisions wouldn’t be made without their input.
Jeff Gaulin, vice-president of communications at the Canadian Association of Petroleum Producers, said the group is “very confident that we will be able to work with the new Alberta government.”
CAPP has made contact with Notley’s team and is expecting to meet with her in the coming weeks.
“The oil and gas industry works with governments of all political stripes across the country, at the federal level, at the provincial level and at the municipal level,” he said.
During the campaign, Notley also said she would take a less hands-on role in stumping for certain pipeline proposals — unlike past Progressive Conservative premiers who actively promoted projects like Keystone XL and Northern Gateway.
The CEO of Enbridge Inc. (TSX:ENB), the company aiming to build the contentious Northern Gateway oil pipeline to the West Coast, said he’s not worried.
“Energy is such a critical issue to Alberta. I’m really not that concerned that it’s not going to get the right attention or the right support from the new government,” Al Monaco said.
Asim Ghosh, CEO of Husky Energy Inc. (TSX:HSE), said it’s “business as usual” for its oil and gas operations in Alberta.
“I just remind you we’ve been around as a company for 75 years,” he said.
“You can’t change the wind but you can adjust your sails — that’s our approach. We don’t change our business approach because of political changes.”
— With files from Ian Bickis in Calgary and Alexandra Posadzki in Toronto.
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