Varcoe: As elections loom, change could sweep across energy industry

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In less than two years, the political landscape in North America could be profoundly redrawn, with seismic implications for Canada’s energy sector.

With many opinion polls showing Donald Trump slightly ahead in the U.S. presidential race and federal Conservative Party Leader Pierre Poilievre leading in Canada, speakers at the Global Energy Show examined what the upcoming elections could mean for the country’s energy industry in 2025.

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Any switch in government would lead to policy changes — and how the two countries tackle issues such as security of supply, supporting major infrastructure projects or the pace of the energy transition would be closely watched.

Looking at the upcoming U.S. election, there’s a risk of either Joe Biden or Donald Trump introducing sweeping trade measures after the November vote that could lead to higher tariffs or a trade battle with China, said Amrita Sen, research director of London-based consultancy Energy Aspects.

That’s why it’s important for Canada — after decades of relying on one customer — to diversify its exports to other markets beyond the U.S., she said. And that’s now been made possible by the Trans Mountain expansion beginning operations, and with the expected startup of the LNG Canada project next year.

“There’s a risk, of course, that if it’s a broad sweeping measure which includes every other country, that Canada can get pulled into it,” Sen told a panel during the second day of the Global Energy Show at the BMO Centre.

“Uncertainty has become such a huge part of the industry . . . that’s where a Trump presidency is going to be potentially very problematic because, on the one hand, it’s probably great for oil and gas producers in the United States . . . But any kind of tariff war, trade war, that he starts with China is extremely negative for global growth.”

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Biden’s administration cancelled the permits to the Keystone XL pipeline, introduced the U.S. Inflation Reduction Act (IRA) — attracting major investment into clean energy — and in January, it temporarily paused approving LNG exports, affecting new projects.

The previous Trump administration broadly supported the oil and gas sector — including the Keystone XL pipeline — but also was aggressive on trade policy and renegotiated the free trade agreement in North America.

“Diversify, keep going to Asia, because one of the things I will say with the Biden administration pausing the LNG exports, Asia has been really rattled, they’ve always thought of the U.S. as a reliable supplier . . . LNG Canada couldn’t come at a better time,” Sen said in an interview.

“You can’t control what happens in the U.S.”

Canada is the largest supplier of oil and gas to the United States, shipping an average of 3.9 million barrels per day south last year. The U.S. is the largest provider of foreign crude to Canada, supplying about three-quarters of all crude oil imports.

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In 2023, all energy trade between the two countries was worth US$152 billion, according to the U.S. Energy Information Administration, but it was tilted heavily in Canada’s favour.

The value of Canadian energy imported into the U.S. last year totalled $125 billion, easily eclipsing the $27 billion of American energy that moved north.

“The one thing I would just flag for a Canadian audience in the American election is the risk of us being side-swiped by tariffs,” Greg Lyle, president of the Innovative Research Group, told the panel.

Meanwhile, if there’s a change in the federal government in Canada in the next election — expected to take place before October 2025 — it could lead to a different stance on energy development, Lyle added.

“My highest hope for the Poilievre government is that the approval process for all types of projects gets streamlined very quickly, and I think that is not an unrealistic hope,” he said.

Questerre Energy president Michael Binnion told the panel he hopes a change in both governments would mean “a complete reset on our energy and environmental policy” in Canada.

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If Trump wins in the U.S. election, many planks within the IRA will likely remain in place in some form, although there would be setbacks on a lot of the decarbonization policies adopted by Biden, such as subsidies for purchasing electric vehicles, Sen said.

Carbon border adjustment taxes are another area for Canada to watch, as they might affect the oilsands, she added.

Speaking to reporters at the conference, Premier Danielle Smith noted Alberta has previously had a strong relationship with Republican and Democratic administrations, but said it would probably be “a little easier time” getting new pipelines built with a Republican administration.

“In the case of the Democrats, maybe we talk a little bit more about hydrogen and natural gas and building out that infrastructure for the new hydrogen economy. Maybe when we talk to the Republicans, we might be able to start the conversation again about how we get more of our bitumen down to the substantial refining resources in Texas,” Smith added.

“It changes the nature of the conversation and maybe the emphasis that we have, but I think we’ll continue to have a robust trading relationship, regardless of who is in the White House.”

For energy industry leaders, they’re looking for certainty and a broader conversation about the energy transition that includes the issues of affordability, security of supply and decarbonization.

“The investment perspective is all about predictability,” Vern Yu, CEO of Calgary-based AltaGas, said in an interview after speaking at the show.

“To me, it doesn’t matter what stripe of government you are, so long as you provide business with a predictable framework to make your investment decisions.”

Chris Varcoe is a Calgary Herald columnist.

cvarcoe@postmedia.com

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