Earlier this month, Prime Minister Justin Trudeau enjoyed an official visit to Washington that attracted significant attention and generated positive headlines for Canada-US relations. At the top of the agenda was the common goal shared between the leaders to combat climate change. Although “#Trubama” (the twitter moniker given to the pair) only have until November to work together before the US election, it will be interesting to see what impact a renewed focus on climate change will have on M&A in the oil and gas industry.
Much of the media’s coverage focused on the apparently warm relationship between the two leaders, but the pair’s public commitment to curbing climate change also featured prominently. For example, the Obama administration indicated that it wants to cut methane emissions by nearly half in the oil and gas industry by 2024 and Prime Minister Trudeau communicated that his government was committed to “a clean and prosperous future”.
The current cooperative approach to combat global warming is a notable departure from the relationship between Prime Minister Harper, who invested significant energy in expanding Canada’s oil and gas industry, and President Obama who rejected the Keystone XL pipeline.
Before Trudeau’s visit to Washington, analysts predicted that a large portion of domestic and inbound M&A activity for 2016 would be in the oil and gas and mining sectors and, in fact, the first quarter has shown an uptick in M&A in the sector with some players doing discount buying.
So what impact might the “#Trubama” approach to climate change have on this trend of M&A activity in the oil and gas industry? A renewed focus on climate change may cause some players to reevaluate their pricing models. While neither President Obama or Prime Minister Trudeau have surprised with their moves to combat climate change, the speed with which the bi-lateral alliance has moved towards material policy change is striking. The market will have to account for the significant political and regulatory challenges that lie ahead.
The author would like to thank Andrew Nicholl, articling student, for his assistance in preparing this legal update.
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