On Tuesday night the left leaning New Democratic Party (NDP) was elected to govern the Province of Alberta. The NDP’s victory ended 80 years of conservative governments in Alberta that began with the election of the Social Credit Party in 1935.

Highlights of last night’s historic election include:

  • Alberta’s centre right Progressive Conservative Party was defeated after being in power for over 44 years
  • The NDP went from 4 of 86 seats in the Legislature to 53 seats
  • The NDP leader, Rachel Notley, will become the fourth Premier of Alberta in the last four years. Ed Stelmach resigned as Premier in 2011 after his new royalty framework had a detrimental effect on the Province’s economy. Allison Redford resigned as Premier in 2014 due to controversy over her use of provincial assets for personal matters. And Jim Prentice resigned last night following the Conservative’s defeat after only eight months in office.

The NDP victory creates uncertainty for Alberta’s energy sector at a time when it is already struggling with drastically reduced revenues following the collapse of oil and natural gas prices.

The NDP’s initial challenge will be to calm nervous oil and gas producers. They have concerns that the NDP is inexperienced in governing and Ms. Notley may have difficulty finding a strong cabinet from the NDP’s newly elected MLAs.

In addition, the NDP has been more closely associated with energy workers than the managers of energy companies and has criticized the Conservatives for being too friendly with the energy sector. The NDP campaigned on:

  • In addition to increasing the tax rates on wealthy individuals raising the provincial corporate rate from 10% to 12%. That increase would raise the total corporate tax rate from 25% to 27% which would reduce after tax income by 3%
  • Undertaking a review of the Province’s royalty regime. Although promising that review Ms. Notley has not committed to change royalty rates. Presumably in any such review the NDP will be mindful of how unsuccessful Mr. Stelmach’s new royalty framework was for Alberta and the potential negative impact on capital spending and employment in the industry that may result from any changes.
  • Stopping the Province’s support for the proposed Keystone and Northern Gateway pipeline projects that are intended to provide access for Alberta oil to export markets.

Ms. Notley has however committed to bring a fresh approach to developing new markets for Alberta’s oil and gas. In this regard the NDP will continue to back the Transmountain expansion and Energy East pipeline projects.  The NDP view these projects as being more likely to succeed than Keystone and Northern Gateway. And Ms. Notley has said that Alberta’s environmental policies will be reviewed to address concerns from export markets like the United States that Alberta has not been aggressive enough in reducing GHG emissions, although costs from additional regulation in this and other areas may be a burden on the industry.

Ms. Notley also reached out to the energy sector in her victory speech indicating her awareness of the importance to the Province of a healthy resource industry.

How the NDP agenda will be implemented and its impact on Alberta’s energy sector will be made clear in the budget that the NDP will be under pressure to prepare and present as soon as possible.

In preparing the budget, the NDP will face the same economic challenges that the Conservatives faced as a result of low oil prices and plunging Provincial royalty and tax revenues and will have to make hard choices that will likely disappoint many, including some of its supporters.