OTTAWA — Alberta’s energy sector, which heralded Donald Trump’s surprise 2016 presidential victory as a “huge win” for the province’s economy, was slower to uncork the champagne bottles last week after Trump won a second, non-consecutive term on a more protectionist platform.
Ex-Alberta premier Jason Kenney told the National Post that Trump’s proposed global 10 per cent tariff on all imports is the big mood killer this time around.
“Everyone is rightly concerned about the tariff,” Kenney said in an interview.
Trump still hasn’t said whether he’ll exempt Canadian oil and gas from the tariff and has little incentive to show his hand as he’s promised to pursue a new round of trade negotiations with Canada and Mexico.
A recent University of Calgary study estimated that the tariff could cause Canadian energy exports to the U.S. to decline by as much as 22 per cent, with losses concentrated in Alberta and the other western provinces.
Alberta shipped C$133.6 billion worth of energy products to the U.S. last year, accounting for more than 80 per cent of its total cross-border exports.
Alberta Premier Danielle Smith told reporters last week that she was “not worried” about Trump slapping tariffs on the province’s energy products but still looks to be hedging her bets by courting state-level officials.
On Thursday, Smith inked an energy security pact with a dozen U.S. governors, all members of Trump’s Republican Party. Smith and her co-signatories pledged to pursue energy policies that promoted lower energy costs and increased reliability for consumers.
Louisiana Governor Jeff Landry fired what looked to be a warning shot at Trump in a statement welcoming Smith into the coalition.
“I welcome… the insights (Smith) will bring as the leader from a fellow energy-producing province, that like my state, is under a federal system of government where national imperatives are not always aligned with state or provincial interests,” Landry wrote.
Smith spokesperson Erin Allin told the National Post that she plans to pitch the other Canadian first ministers on the pact.
“(Smith) will be raising the coalition and its mandate at future meetings with her federal and provincial counterparts here in Canada,” Allin told the National Post in an email.
Smith said in an interview on Friday that she’ll deal with energy partners in the U.S. unilaterally until the Trudeau government agrees to cancel the planned federal emissions cap.
“If the federal government is insistent upon going down that pathway, we’ll take care of our own interests,” said Smith.
She added in a separate interview this weekend that she was encouraged by Trump’s choice of ex-North Dakota governor Doug Burgum as his administration’s interior secretary and energy czar.
“One of the things (Burgum) has realized,” in his former role, “is that getting pipelines built requires coordination across multiple (levels), including especially on federal lands,” said Smith.
Smith say she will be in Washington, D.C. for Trump’s inauguration in January.
Several experts, including Trump’s ex-commerce secretary Wilbur Ross, have said that he’s likely to exempt Canadian energy from the global tariff because he’s also promised to slash gasoline prices and electricity bills.
However, analysts also expect Trump’s return to office to coincide with a global oil glut, diminishing Canada’s ability to play the energy card in renewed trade negotiations.
Kenney says that Canadian negotiators could still sway Trump by tying continental energy production to overarching security concerns.
“Trump is very focused on American energy independence,” said Kenney. “And when his team talks about that they are implicitly including Canada in the concept.”
“When it comes to U.S. security interests, almost nothing is more important than access to Canadian energy,” said Kenney, pointing to outgoing President Joe Biden’s draining of the U.S. strategic oil reserve.
The reserve now sits at its lowest level since the early 1980s, after Biden tapped into it repeatedly to shield American consumers from a global oil crisis triggered by Russia’s invasion of Ukraine.
Kenney also said he wouldn’t rule out the revival of the derailed Keystone XL pipeline expansion with Trump back in office.
“All the pre-construction work and regulatory permitting has basically already been done,” said Kenney. “It’s now a question of raising the necessary debt and equity to finance the project.”
Trump gave Keystone XL the green light immediately after taking office in January 2017.
However, just 1.2 miles of pipeline was built on the U.S. side during Trump’s first term, after the project was derailed by a barrage of legal and regulatory challenges.
In July 2020, the conservative-majority U.S. Supreme Court upheld a lower court decision revoking an environmental permit needed to move the project forward.
Biden cancelled Keystone XL on his first day in office. Calgary-based pipeline owner TC Energy has since abandoned the project.
Kenney said that an Alberta-U.S. government partnership would likely be necessary to derisk the project, as potential private sector buyers have been scared away by regulatory uncertainty on both sides of the border.
Meanwhile, the Trudeau government looks to be sticking to its decarbonization agenda following Trump’s victory.
Federal Environment Minister Steven Guilbeault has said that Trump’s election won’t change his plan to cap oil and gas emissions to 35 per cent of 2019 levels by 2030, despite pushback from ex-colleague and former federal finance minister Bill Morneau.
Morneau said in a recent television interview that he’d be “very careful” about capping emissions, given the “context of the broader North American relationship.”
“We need to think about whether we focus on energy security in a way that makes us clearly an important part of the U.S. (strategy),” said Morneau.
“Is it really the right time for caps on emissions?”
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