The Canadian chemical industry is braced for a deepening of energy policies set out in Prime Minister Justin Trudeau's first term, kept in check by a minority government.

Canadian elections may mean continuity for petrochemical companies

×

“We anticipate a lot of continuity in terms of the industry,” Bob Masterson, president of the Chemistry Industry Association of Canada, told Petrochemical Update.

“Past government placed priorities in some areas, and these are likely to continue,” he added shortly after the results of the Oct. 21 elections. 

Marla Orenstein, director for the Centre for Natural Resources at the Canada West Foundation, which supports the region’s upstream industries, pointed to early positive indications.

Environment protection

“Last Parliament completed a legislative review of the Canadian Environmental Protection Act. We anticipate the government priority will now be turning review recommendations to legislation,” Masterson said.

The review proposed a new system to evaluate energy projects in Canada to include earlier community engagement and increased public participation, as well as strengthened monitoring.

In addition, the previous government also proposed to enact bans on certain single-use plastics and there may be continuity in that too, Masterson added.

“We expect this will continue to be a topic of conversation. The industry favors approaches that will enable a circular economy for plastic waste and that avoids bans,” he said.

According to a The Washington Post editorial after the elections, “there is little doubt it (carbon tax) will fully phase in early next year.”

The newspaper described the election results as a “victory for the planet” pointing to Trudeau’s stated objective to work toward net zero emissions by 2050 and planting two billion trees.

The editorial noted that Trudeau’s Liberal Party winning of 157 out of 338 Parliament seats was an “unexpected” strong result amid concerns his climate goals could erode support for him in hydrocarbon-rich provinces.

Chemical industry may risk rising costs

“The last government put in place a federal tax on carbon pricing. There are indications the new government could raise that price further,”  Masterson said.

In April, Canada’s federal government imposed a carbon tax on four provinces that had not come up with their own. The tax would initially be C$20 rising annually to C$50 by 2022.

Additional regulations could create bigger costs for the industry, Masterson said. Losing investment support could also affect the industry.

“We heard a lot of calls during the elections for the ‘end of corporate welfare’. What we have asked for is a strategy to support investments,” he added.

“In the past two years, over $12 billion of new chemistry investment has been initiated in Canada with the encouragement and support of the federal and provincial governments,” Masterson said.

“The question is: will the new government continue to encourage and support investment from the chemistry sector?” 

While the provinces have played the lead role in attracting investments “the federal government also plays an important role through its Strategic Innovation Fund,” he added.

Out of that C$12 billion in investment, the federal government contributed C$150 million in credits through this fund. Provinces, on the other hand, provided C$1 billion. 

“If we look at the program recently re-announced in Alberta, $1 billion specifically to petrochemicals projects, we could see that leading to another $20 billion initiated in the next few years,” Masterson said.

Political, trade risks heightened

With the new government being now a minority, there could be added risks for Canada.

“The biggest uncertainties will arise when the country faces a crisis, perhaps an economic crisis. That could be difficult to navigate in a minority situation,” Masterson said.

“The biggest risks to the chemistry industry in Canada and to potential investments relate to global economy uncertainties and the apparent disruption of long-standing global trade patterns,” he added.

“Even a minor disruption in global trade will have significant impacts on the Canadian chemistry sector,” Masterson said.

Upstream industries

Greater certainty for companies in the upstream industry about what to expect in terms of future environmental assessment may help new investment.

“In recent years, uncertainties around the environmental assessment process have scared off some investment. Now that the election is over, it is time for investment to come back,” said Marla Orenstein, director of the Centre for Natural Resources, Canada West Foundation.

“There is some indication that the federal government will support the hydrocarbon sector, as they have said they want the Trans Mountain pipeline completed as quickly as possible. We don’t know yet what this means in terms of support more broadly for the sector,” Orenstein added.

Trudeau’s government approved earlier this year the expansion of the TransMountain Pipeline that connects the Alberta region with British Columbia despite opposition from environment and native groups. 

Meantime, the Canadian Association of Petroleum Producers separately pointed that with the new government being a minority reaching accords would pose challenges.

“The election of a minority government reflects the diversity of Canadians and the need to work constructively together to achieve our mutual goals,” the petroleum producers association’s president Tim McMillan said.

The oil producers group “is committed to working with the federal government. A strong oil and natural gas industry can contribute to the government’s mandate,” McMillan said.

By Renzo Pipoli