SIKH VIRSA ARTICLE ( MAY 2019)

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How UCP’s victory in
Alberta could impact the
Energy Sector
- Alicja Siekierska
Jason Kenney’s United Conservative
Party defeated Premier Rachel Notley’s New
Democratic Party government in April 16th
election – a result that surprised just about
no one. A recent Global/Ipsos campaign
poll showed the UCP with a comfortable 10-
point lead over the NDP, with the top issue
of what has been a divisive campaign still
being jobs and employment.
With the expected change in Alberta
legislature imminent, many had been asking
in the lead-up to the election what a Kenneyled
government could mean for the
province and, in particular, its crucial energy
industry.
A CIBC report released this week said
the UCP policy that has the potential to
have the biggest impact on independent
power producers is the carbon tax, which
Kenney has promised would be repealed
as his government’s first order of business.
“While a potential repeal would have a
large impact on consumer electricity bills,
we expect the impact to producers would
be modest as the carbon tax is mostly a
pass through... though some producers
may choose to revisit their goal and gas
conversion plans as a reduction in the
carbon tax may make the economics of
high emitter facilities more attractive for
longer,” the CIBC report said.
In fact, CIBC said a Kenney win “would
be a net positive for coal and natural gas
fired assets and a slight negative for
merchant renewables.”
At the same time, Tuesday’s UCP
government is expected to have little impact
on utility companies operating in Alberta,
CIBC said, “but may have a modest positive
impact if fiscal stimulus results in an
increase in economic activity.”
Unsurprisingly, one of the biggest
issues throughout the election campaign
had been pipeline – specifically, a lack
of them in Alberta. Both Kenney and
Notley had pitched their respective
parties and policies as the best way to
get pipelines to tide water built in the
province.
But CIBC analysts say it’s the
upcoming federal election in October, not
necessarily the provincial one, that will
have greater implications on future
pipeline projects.
“Large scale infrastructure projects
(e.g. pipelines) are largely governed at the
Federal level and thus will be dependent
on what solutions each party proposes to
expedite the development of major
infrastructure projects,” the CIBC report
said. “As such, we prefer a wait and see
approach.”
Raymond James analysts echoed
those sentiments in a note to clients on
Wednesday, saying that “the big levers
are still firmly in the hands of the federal
government.”
“The provincial government has
precious few levers in its policy arsenal to
positively influence producer economics,
and the levers it does have aren’t overly
effective at this stage of the game,” the
note said.
Kenny also promised to reduce
regulatory red tape in order to reduce costs
for producers, but it is unclear at this point
what impact those changes will have.
“We expect these improvements will be
appreciated, but it remains uncertain how
this initiative will take shape, over what
time period, and the ultimate impact it will
have,” Raymond James said.
New York-based Eurasia Group said in
a report last week that a Kenney victory
could elevate short-term uncertain for the
energy sector, especially if Prime Minister
Justin Trudeau’s Liberal government
manages to hold onto power in October.
“A Kenney-Trudeau showdown over
energy and climate policy raises a number
of significant risks for investors, as
further delays, lawsuits and federalprovincial
negotiations will make final
resolution of key policy issues and project
approvals harder to achieve,” the Eurasia
report said. (The End)
Sikh Virsa, Calgary 62. May, 2019