When it comes to a pipeline in Canada, politics are never far away, and the Trans Mountain may be the most polarizing project in the country. The recent election results, unfortunately, will raise even more questions about the pipeline’s future.
While Liberal support for the pipeline wasn’t convincing enough to win over voters in the oil sands, the government still owns the Trans Mountain, potentially putting it in a very difficult situation.
With the Liberals winning only a minority government, that just about guarantees that the Trans Mountain will be used as a political tool.
Although the project did receive the go-ahead to begin construction, it’s not expected to be completed until 2022, meaning that there is still plenty of time for things to go astray.
After all, there are still appeals that will be heard that could jeopardize the future of the Trans Mountain.
Opportunity for other political parties to use their leverage
The uncertainty is likely going to open the door to lots of dealing, especially as the Liberals look to gain support while other parties look to advance their own agendas.
The problem is that the one party that would want to see the Trans Mountain move forward, the Conservatives, is the least likely to team up with the Liberals.
The NDP, however, has long been seen as a possible way for the Liberals to be able to get the support they need in a minority government.
NDP leader Jagmeet Singh, however, isn’t in favour of the pipeline, and Elizabeth May of the Green Party is already suggesting that he use the pipeline as a bargaining chip.
This creates many question marks as to what might happen next. While there’s definitely an incentive for the Liberals to allow the Trans Mountain to get built, especially if they want to help create jobs in the industry and build support in Alberta, but support of the pipeline has also put them at odds with voters focused on climate issues.
It’s a difficult situation for the current government to be in, and it’s not clear what will happen next. However, it does appear inevitable is that another political battle could be on the horizon, with the pipeline being right in the middle of it.
What does this mean for investors?
For stocks like TC Energy Inc (TSX: TRP)(NYSE: TRP) and others in the oil and gas industry, it makes the situation even more unnerving.
Pipelines were already a struggle to move forward when the Liberals had a majority and owned a pipeline. Now, with a minority government, the issues will only get more complicated.
It’s hard to see a scenario at this point where oil and gas stocks are better off than they were before the election results.
TC Energy has had enough of a headache with the Keystone XL and getting that project approved, news of the issues in Canada getting potentially more problematic is not going to get investors excited about investing in the stock or industry.
Although TC Energy is up more than 30% over the past year, the stock has been a very volatile one. If we look at the past five years, its returns are actually closer to 20%.
Had it not been for the dip in the markets that occurred late in 2018, TC Energy’s returns would likely look much different today.
While the company still runs a very profitable business and the stock pays a good dividend, it’s the outlook and uncertainty in the industry that will keep investors at bay.
