Greetings from the Throne

Prime Minister Stephen Harper intends to announce his presence with authority in his Speech from the Throne, which will outline a renewed parliamentary session.

The New Democratic Party (NDP) and the Bloc Quebecois have as much as said they would vote the speech down; a throne speech is, by tradition, a matter of confidence, so those two parties seem to be ready to go to the polls.

But it’s up to Liberal Leader Stephane Dion. The Liberals hold 96 seats in Parliament and can prop up the minority Conservative government if they accept Harper’s legislative plan.

The throne speech, a vestige of Canada’s British colonial past, was written by Harper and will be read by Gov. General Michaelle Jean, Queen Elizabeth II’s representative in the country, tonight in Ottawa.

Harper has said his agenda will include new anti-crime legislation and tax cuts, as well as plans to assert Canadian sovereignty in the Arctic and to raise the country’s profile abroad. The measures are designed to boost Conservative support in southern Ontario and rural Quebec, regions considered key to winning enough seats to form a majority government.

The Conservatives are 28 seats short of a majority in the 308-seat House of Commons.

The Bloc Quebecois set five conditions, including a freeze on federal spending in provincial affairs. NDP Leader Jack Layton has said he wants the government to pull Canadian troops out of Afghanistan and do more to combat greenhouse gases.

Until last week, the Liberals were warning that they’d join the other parties in rejecting the agenda, unless Harper met their demands for a climate-change bill that would force Canada to meet its Kyoto treaty commitments.

Closer…Closer…

An Ipsos Reid survey released Oct. 13 put the prime minister’s Conservatives up by 12 points on the official opposition Liberals, 40 percent to 28 percent. That’s the lowest level of support for the Grits since the last federal election in February 2006. 

But a Strategic Counsel poll conducted for The Globe and Mail and CTV News puts the Conservative lead at five percentage points, 34-29. The Conservatives opened up the five-point lead largely by gaining in Quebec; the Liberals fell there. In an August Strategic Counsel poll, the Tories and Liberals were tied, 33-33.

Parties traditionally need to capture more than 40 percent of votes cast in Canada’s first-past-the-post electoral system.

Harper hammered out a compromise over the contentious Atlantic Accords, giving Atlantic Canada a greater share of provincial resource revenues than originally contemplated but not as much as desired. And the Tories are pushing the Bloc Quebecois in Quebec, too.

The rest of Canada may not be ready to hit the voting booth, but Quebecers have lately come to a conclusion about Stephane Dion.

The Liberal boss’ trouble in his home province dates to 1998; Dion had a significant role in events leading up to a Canadian Supreme Court ruling on the unilateral secession of Quebec, which found that there’s no right, under international law or under the Constitution of Canada, for Quebec’s National Assembly to affect the secession of Quebec unilaterally.

He also played a prominent role in the creation of the Clarity Act of March 2000. Dion’s image suffered immensely in Quebec under the perception that he had sought to undermine fundamental democratic rights to self-determination. He was portrayed in the Quebec press as a rat and described as the most hated politician in the history of Quebec.
 
But as support for independence has waned in recent years, Dion has been unable to establish the Grits as the federalist party in Quebec. It’s an ironic and stunning turn that may prove decisive in Harper’s quest to win a majority.

And it could prove to be the ultimate failure for Dion, a guy who couldn’t revive his party’s brand in his own neighborhood. But this is a situation kind of like the hilariously bleak assessment a basketball coach once issued for his team: We’re short, but we’re not quick.

The Liberals knew going in that Dion had a Quebec problem. But his performance in the top slot–quite apart from the issues that now will be used to color in the details of the obituaries of his leadership–is its own story. More last straw than fatal flaw, Dion won’t last long after an election from which the Tories establish a majority government.

That’s the working assumption at this point, and it’s a good one. At least that’s what the sample sets reveal. 

Dion will have to pull a dictatorial, cranky rabbit named Stephen out of a hat if he’s to stave off the prime minister’s long-coveted majority. That means the Canadian public ex-Quebec will have to perceive the authoritarian streak the Liberals have spoken of in recent weeks, and Dion will have to color it vivid and loud.

Our friends up north don’t like concentrated power, and their political games are less bloody. That doesn’t mean they don’t like their politicians boring and flat.

Dion still faces a tough choice. He can support the throne speech, surrender majority-like power to Harper and sacrifice all opposition cred. What’s the point of being the official opposition if all you’re going to do is lengthen and strengthen the life of a minority government?

Or he can reject the throne speech along with the New Democrats and the Bloc Quebecois. That would constitute “no confidence,” and Harper would shortly call an election.

The numbers say a majority win is at least now possible. The record suggests Dion hasn’t the gravitas to capture Canadians’ imaginations. We’re prepared to be surprised.

All things considered, Dion’s a short-timer.

Alberta Royalties

Alberta Premier Ed Stelmach isn’t the kind of guy to deliver sound-byte ready or press-release friendly answers.

Chairman of the Alberta Royalty Review Panel Bill Hunter framed his group’s recommended answer that way by saying all of its fixes be adopted.

Stelmach hinted that he won’t take that bait last week and, in a way, established his own frame for proper governmental action.

Company reaction until recently was limited largely to predictions of dire consequences and dramatic threats of capital withdrawal. Well, Mullen Group Income Fund went a step further Friday, announcing the temporary layoff of 100 workers based on the implications of the panel’s report and the continued declined of natural gas drilling activity in Alberta. 

Mullen said its clients have made it clear they’ll make further spending cuts in Alberta if the government raises its take from high-yielding gas wells, as the panel recommended. The oil field service business usually slows in the fall, the shoulder season between the summer and winter drilling seasons.

The Canadian Association of Oilwell Drilling Contractors reported this week that 206 drilling rigs were operating in Alberta last week, 42 percent of the province’s fleet. A year ago, 354 rigs were operating in the province.

Stelmach has to make some changes. That’s basically what he’s said since Sept. 18, when the report was released, and that’s basically what he said last week. There’s a lot of room to move based on his public comments, but assume at least that Alberta-based oil and gas projects will become more expensive.

Stelmach will reportedly reveal his royalty decision on or around Oct. 24.

The Roundup

Oil & Gas

Canadian Oil Sands Trust (COS.UN, COSWF) reported Oct. 11 that Syncrude introduced feed into Coker 8-3 on Oct. 5, with production from the unit currently averaging about 55,000 barrels per day (bpd), down from 70,000 bpd before an Oct. 1 “operational upset.” Syncrude estimated it would take about a week to increase production rates toward capacity.

Syncrude’s total production is currently averaging about 300,000 bpd, or approximately 110,000 bpd net to Canadian Oil Sands. Canadian Oil Sands Trust is a buy up to USD33.

PrimeWest Energy Trust (PWI.UN, NYSE: PWI) unitholders will vote Nov. 21 in Calgary on the CD5 billion (CD26.75 per unit) takeover offer from Abu Dhabi National Energy Co, the Abu Dhabi state energy firm also known as TAQA. The agreement requires 66.3 percent approval of shareholders, as well as court and regulatory agreement.

If it’s approved, PrimeWest will pay a final 25-cent-Canadian distribution on Nov. 15. If the TAQA takeover isn’t approved by the end of November, distribution payments will continue to be made under “certain circumstances.”

The deal is scheduled to close Nov. 30. Hold PrimeWest Energy Trust.

Electric Power

Primary Energy Recycling Corp (PRI.UN, PYGYF) continues to delay its declaration of a September cash distribution for payment in October until results of an inventory adjustment at its Harbor Coal facility are known. Primary has to have the inventory adjustment results before completing third quarter financial reporting and to assess its compliance with senior debt and subordinated note indenture covenants.

The company said the results could still be several weeks away. “The Board is concerned by the lack of information that forces the delay of decisions about distribution declarations. It is our strong desire to pay distributions on a timely basis. We remain hopeful that the Harbor Coal negotiations will produce a favorable resolution to many of these problems in the longer term,” said Michel Lavigne, chairman of Primary’s board.

It’s likely that the decision about the declaration of October’s cash distribution, payable in November, could be delayed because of the timing of when final third quarter inventory results are provided. Sell Primary Energy Recycling Corp. 

Business Trusts

Menu Foods Income Fund (MEW.UN, MNUFF) said recall costs will be 22 percent more than it anticipated as returns increased. Expenses will total CD55 million, up from a previous estimate of CD45 million, the second increase since the company began removing food from shelves in March.

Costs are rising because customers continue to return the cans and pouches of cat and dog food. Menu Foods also said it will cost about CD6.2 million in cash to scale down operations as a result of the lost business, including a 10 percent to 15 percent reduction in its workforce. Menu had 924 employees at end of 2006.

Menu also completed its sale of its production plant in North Sioux City, SD, to Mars. Along with the sale of other assets and some contract settlements, proceeds will total CD26.3 million.

Mars notified Menu Foods in August that it will make its Nutro Products and Royal Canin brand pet foods itself instead of contracting the work out to Menu Foods. Menu Foods Income Fund is a sell. 

Newalta Income Fund (NAL.UN, NALUF) has entered into a new, amended credit agreement with a lending syndicate of seven financial institutions led by CIBC. The two-year, CD425 million extendible revolving credit facility will be used to fund growth capital expenditures as well as general corporate purposes. Newalta Income Fund is a buy up to USD25.

Yellow Pages Income Fund (YLO.UN, YLWPF) operating unit Yellow Pages Group has executed a deal with Google to market its customer advertisements online through Google AdWords. AdWords will allow Yellow Pages customers to be associated with certain keywords so that their advertisements will appear beside search results for Google and Google Maps Internet searches.

Yellow Pages will be the first Canadian-based reseller of Google AdWords advertisements. Buy Yellow Pages Income Fund up to USD15.

Natural Resources Trusts

TimberWest Forest Corp’s (TWF.UN, TWTUF) application to the British Columbia Labour Relations Board to force a vote on an offer made to TimberWest workers has been rejected. The United Steelworkers (USW) said the ruling “contains a unique letter of understanding” that allows TimberWest to contract out logging operations, while workers maintain rights with TimberWest as their original employer.

The company sought to alter this arrangement in its final offer. TimberWest is reviewing the ruling and studying its options.

About 7,000 forestry workers represented by the USW walked off the job on July 21. Hold TimberWest Forest Corp.