David George-Cosh

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Jim Davidson, the former deputy chairman of investment bank GMP FirstEnergy, is warning Alberta may seek further autonomy in the wake of Monday’s federal election results amid a mounting feeling of being “alienated and underappreciated.”  

Davidson noted the re-elected Liberals may need to deftly find a way to work with the Conservative Party of Canada if they are serious about building the Trans Mountain pipeline expansion while maintaining a level of support from the New Democrat Party and Green Party, both of which oppose the project. Prime Minister Justin Trudeau won a second term on Monday although the Liberals were reduced to minority status in Parliament.

“These minority governments last, give or take, two years,” Davidson said in an interview on BNN Bloomberg Tuesday. “They will have to work together. The Liberals want to continue to build the Trans Mountain expansion and I think it’ll actually be built.”

“That will play out over the next little while once the dust settles and we can see how this minority government is going to be able to act.” 

A completed Trans Mountain pipeline would help assuage Albertans’ frustration after years of serving as a major economic driver for the rest of the country, Davidson said. 

“Alberta has been the driving force in the confederation over the last 30-plus years and propping up the provinces that have underperformed. They were willing to do that, they were able to do that, they were happy to do that, but right at the moment they’re feeling alienated and underappreciated,” Davidson said.

“My sense is that Premier Jason Kenney is a pragmatist and a federalist by nature, but he will be forced to listen his constituents and be forced to be more truculent than he has in the past and possibly seek to have Alberta position itself in a more autonomous fashion in a way that Quebec has done so within this confederation.”

Grant Fagerheim, president and CEO of Calgary-based Whitecap Resources Inc., echoed Davidson’s comments on how Alberta could continue to seek further autonomy from Ottawa.

In an interview with BNN Bloomberg, Fagerheim said he wants to see more concrete action from the federal government  in support of the energy sector, rather than just words, adding that there’s “a level of mistrust that is pervasive across the provinces” that needs to be addressed following years of a Liberal majority government.

“People here have historically been Canadians first,” Fagerheim said. “If you talk to people in Saskatchewan and Alberta right now, they’ll consider themselves to be from Alberta or Saskatchewan. They’re not saying they’re Canadians first. That is a challenge that we’re all going to have to be responsible for.”

Davidson, who in 1992 co-founded FirstEnergy, which helped raise billions of dollars for Canada’s oil-and-gas sector, also predicted the recent downturn in the energy space may lead to further layoffs and consolidation in the industry. 

“I believe we will start to see some M&A activity take place now that the results of the election are in,” Davidson told BNN Bloomberg. “People have been holding their breath waiting, hoping for a different result. Now that we know the result, we need to move forward in the best way we can.                                                                                                                                                              

The election results will also likely keep foreign investors away from Canada’s oil-and-gas industry and compel boardrooms to conserve capital and pay down debt, Davidson said.

“[Companies] will continue to buy back shares because of the current level of undervaluation, which is at a historic low. And, I would assume that the stocks would continue to meander along this bottom and possibly, with tax-loss selling coming in at the end of the year … I think we could probably see some continued weakness in that area,” he said.