Alberta oil industry wary of NDP government

For the most part, Alberta's oil industry has been diplomatic withthe NDP government in charge. But this week, one company decided todialupthe pressure on the new premier.

The industry is in a holding pattern of sorts, waiting to see the policies of Rachel Notley. She's pledging to review resource royalties, hike corporate taxes and address carbon emissions.

Add them up, and you have oil companies wondering how much of a hit their bottom lines will take.

Instead of patiently waiting to see what's in store,Canadian Natural Resources (CNRL), an oilsands company, went on the offensive.

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The company cancelled an investors day scheduled for next month and blamed the decision on the uncertainty caused by the NDP. The move wasn't substantial, since such an event isn't mandatory nor is itcritical to the company's luring of investor interest. The company planned to discuss how much money it would spend on each of its oilprojects.

If the company was looking for a reaction, it got exactly that.

Within hours, the premier was facing questions about the announcement. Even more than a day later, the NDP wasstill on the defensive, as Energy MinisterMargMcCuaig-Boydkept trying to shrug off the criticism.

Taking a shot

Without spending, cutting or moving a single dollar, CNRLwas able to put Alberta's fresh-faced NDP government on its heels.

"There might be an element here of putting a bit of a shot across the bow," says John Larsenwith Zero Hour strategy, an issues management firm in Calgary."The more of these signals of concern can be sent forward, the more it will cause people in Edmonton to deliberate further and more deeply about the outcome of their decisions."

Larsen says each company is having internalmeetings to figure out the best way of approaching the new government, both publicly and behind the scenes. CNRLdeliberatelymentioned the NDP and its proposed policy changes whenexplainingwhy it cancelled its investor open house event.

"Perhaps it is a strategy," says Larsen. "Companies are not just going to idly sit by awaitingdirection from Edmonton, they are going to make their own decisions."

The CNRLannouncement made it seem like the company was going out of its way to attack the NDP.

"It'shard to say ifCNRLwas trying to beaggressive, but it comes across asaggressive andshows thefrustrationthey are probably feeling," says Marc Henry, a government andpublic relations strategy consultant with ThinkHQ in Edmonton.

"Here's the challenge forcompanies, they are used to risk. But one risk they have a low tolerance for is regulatory uncertainty."

Aggressive orobstinate?

Henry would advise companies to take a diplomatic approach, as industry players likeSuncor and Encanahave so far adopted. He points out the NDP's royalty review may not actually lead to any change for industry. There's no guaranteeeither way.

CNRL would have sent an even stronger message if there had been a financial effect to its decision, such as announcing it was lowering capital spending or delaying an oilsands project.

"Being aggressive comes across as being a littleobstinate," says Henry.

There is reason to believe other companies will follow CNRL's lead in voicing concern about the NDP. Executives with Cenovus and Crescent Point Energy have expressed worry about the party's energy policies.

"It's only prudent to run your business with caution," says Sandy Edmonstone, deputy head of global oil and gas for Macquarie Capitalin Calgary.

"Until there is clarity, I could see a lot of companies halting the decision-making process and budgeting and not wanting to provide institutional investors guidance, because they don't know what the guidance will be themselves."

Despite repeated comments by Notleythat the industry has nothingto worry about, Edmonstone takes little solace in those words, arguing there is genuine concern in Alberta's oilpatch about what's to come from the provincial government.

Resistance to royalty change

The oil sectoraired similar comments ahead of the last royalty review in 2007. In October of that year, hours before Premier Ed Stelmach announced the new royalty rates, Petro-Canada CEO Ron Brenneman told analysts there was a"pall hanging over the industry in Canada right now."

The complaints kept coming, until the government backtracked in 2010.

"Political risk is one type of riskthese companies face," saysRobert Johnston,CEO of the Eurasia Group, apolitical risk consultancy firm in Washington, D.C. "Maybe less about this government and more about any government that was moving towards apolicy change like this."

The NDP will need timebefore it takes any action on its campaign promises, and in the meantime, some industry players might keep trying to put pressure on the government totilt the agenda.