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New Government in Oil Rich Canadian Province Spurs Fears of Energy Sector Upset

Alberta's premier-elect Rachel Notley reassures the industry she will work in partnership with the province's key job creators.
May 6, 2015, 11:10pm
Larry MacDougal/The Canadian Press

As Canadians fixated on a political sea change in the oil rich province of Alberta, attention quickly turned to what the new government will mean for the energy sector and controversial pipeline proposals.

Oil and gas stocks took a hit Wednesday, one day after the shocking defeat of a 44-year Conservative dynasty by the left wing New Democratic Party (NDP). Incoming premier Rachel Notley had said her government would raise corporate taxes from 10 percent to 12 percent, which could hurt the already struggling oil and gas industry.

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Notley also made it clear she wouldn't bend over backward to push for the Keystone XL or Northern Gateway pipelines, which would transport Alberta's golden oil to international markets. But she did hint that the Energy East pipeline had potential.

The fate of Keystone XL, which is destined for refineries in Texas, wouldn't be in her hands, though. According to political scientists VICE News spoke to, the decision on the controversial pipeline rests squarely with the US.

Geoffrey Hale, a political science professor at the University of Lethbridge, said Keystone XL is "primarily an American domestic issue that will be decided through the American political process."

Hale noted that US President Barack Obama hasn't given the project any support so far, suggesting it won't be approved before he leaves office in 2017, and the incoming president will make the decision based on domestic and foreign policy.

While US states have a bit of influence in the margins of the Keystone XL debate, the views of a premier of a Canadian province "are totally irrelevant," he said.

As for the NDP's effect on the oil industry as a whole, University of Alberta political science professor Greg Anderson minimized the potential impact.

"There's a lot of people who would like to paint the NDP as some kind of fire-breathing socialists, that they're going to collectivize everything like Stalin's five-year plan—but that's just not going to happen," said Anderson. "This is the Alberta NDP. This is a very conservative province, even though we now have an NDP government."

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At a press conference Wednesday, Notley tried to reassure the energy sector, saying she planned to reach out to key business leaders and "partners in the energy industry" over the phone.

Asked about the reaction of oil stock investors to the NDP victory, Notley said that "while we may believe there is some new consideration that needs to occur," she stressed that it will be done "in partnership with our key job creators" in Alberta.

"There isn't going to be a radical change toward the oil sector in terms of government policy," Anderson predicted, following Notley's comments.

Related: Is the Keystone Pipeline Irrelevant 

As for Keystone XL, he agreed she didn't stand a chance of influencing the future of that pipeline, but said internationally Notley could have an effect on the world's perception of Alberta if she begins to balance its "Wild West of energy exploration" image with environmental policy.

"It could mean Alberta is viewed around the world a little more like Norway and maybe a little less like Texas," he said.

University of Alberta political science professor Ian Urquhart had the impression Notley and her party were "very concerned about [the] environment" and said he "would be stumped" if she didn't press forward with environmental and climate change policies.

But he couldn't think of any specific environmental policies the NDP had promised. That's because the NDP hasn't put forward much of a concrete plan on climate change and the environment, other than vowing to "take leadership on the issue of climate change and make sure Alberta is part of crafting solutions with stakeholders, other provinces and the federal government."

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"If they are serious about the environment," Urquhart said in an interview with VICE News, "if they want to satisfy and meet the desires of the environmentalists who voted for them yesterday, then these are some of the issues that I expect them to act on. Things like renewable energy and coal-fired energy, those sorts of things."

For oil worker Drew Dwyer, the NDP win came as a shock.

The 27-year-old moved back to the east coast of Canada from Fort McMurray, one of Alberta's largest oil extraction hubs, after work slowed down in the oil sands last September.

Despite the low price of oil, Dwyer heard recently he might have a job in Alberta again, but he's not sure how the NDP's anticipated tax hikes will affect his future employment prospects.

"Especially where the oil sector is in kind of a crisis, I feel like it's a very bad time to start increasing taxes because they're already in the dumps," Dwyer told VICE News over the phone from Halifax Wednesday.

"I feel like corporations are so finicky, and even that two-percent can really mess up their bottom line, that they might not want to do business there," he said. "I feel like they had kind of a good thing going—why mess with it?"

But Urquhart didn't think a two-percent tax hike would be a "deal breaker" to energy companies, as long as they continue to turn a profit.

"I don't know how this will affect it," Dwyer said. "Overall I guess we'll just have to wait and see."

Follow Hilary Beaumont on Twitter: @hilarybeaumont