As most predicted, Albertans woke up Wednesday to a brand new government.
Jason Kenney’s United Conservative Party defeated soon-to-be-former Premier Rachel Notley’s New Democratic Party government in Tuesday night’s 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 Kenney-led 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to have the biggest impact on independent power producers is the carbon tax, which Kenney has promised would be repealed as his government’s first order of business.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 federal-provincial negotiations will make final resolution of key policy issues and project approvals harder to achieve,” the Eurasia report said.