Good Canadian income trusts, like good US corporations, have to sell themselves to investors at some point. And representatives for several major oil and gas producer trusts were on hand at the Washington, DC Money Show a week ago to do just that.

From my perspective, it was another opportunity to ask some key questions. And I was able to moderate a panel of representatives from four trusts: Canetic Resources (CNE.UN, NYSE: CNE), Enerplus Resources (ERF.UN, NYSE: ERF), Enterra Energy (ENT.UN, NYSE: ENT) and Provident Energy (PVE.UN, NYSE: PVX).

I had three key takeaways from the meeting. First, though they continue to fight for changes, trust managements are proceeding as though 2011 corporate taxation is a done deal. They concede they lost the argument within the current Conservative Party government. They’re also hopeful the opposition Liberal Party will win upcoming elections (no date set as yet) and follow through on its current promise to roll back taxation.

None, however, is basing its strategy on the idea that things will go back to where they were before Halloween 2006. Simply, there are too many ifs.

On the plus side, none expect to be paying anything close in taxes to the statutory rate of 31.5 percent, which kicks in with 2011. In fact, one trust’s representative went as far as to state his trust could wind up paying something closer to the 6.5 percent average paid by ordinary Canadian corporations, which has been my contention for some time.

All four trusts pointed out that they’d be making judicious use of tax pools, or noncash deductions and expenses related to exploration and development. As we’ve pointed out in Canadian Edge, tax pools have the potential to shelter several years of income for many trusts. The representatives did point out, however, that not all tax pools are created equal and advised investors to check out the breakdown before valuing a trust on that basis.

As for restructuring moves, the consensus is that everything’s still on the table. Each trust stated the intention of increasing its US production of oil and gas, from the standpoint of growth and diversification and tax avoidance—since US income will be exempt from 2011 taxation. As of yet, only Provident has actually put US assets into a limited partnership, though the others raised the possibility of doing so at a later date.

Trust managements emphasized that they were considering many options and would continue to do so up until 2011. They were also unanimous in affirming there was no advantage to leaving the trust structure at this time. All also affirmed their desire to continue to pay big dividends well after 2011, regardless of their form of organization then. And although conceding that some dividend adjustments were likely no matter how much tax avoidance proved possible, the line “12 percent is the new 9 percent” is encouraging that the ultimate amount will still be generous.

Another key takeaway from the panel concerned energy prices, specifically that of natural gas. Trusts are most concerned about the volatile, depressed state of the gas market, which makes rational planning and production decisions exceedingly difficult.

The general expectation is that the price of gas will recover in the next year, if for no other reason than falling output causing the current inventory glut to contract. All four trusts continue to hedge their output aggressively to lock in cash flow and ride out the volatility.

Interesting enough, Provident’s natural gas liquids division is actually a natural hedge against falling gas prices. Simply, gas itself is the primary input and the natural gas liquids (NGLs) are sold at oil-like prices.

As a result, profit margins have widened dramatically as oil has gone from seven to eight times gas prices to 13 to 14 times. Eventually, if gas prices recover, the NGL business will be less profitable. At that point, however, the company’s natural gas production operation will return to strong profitability.

The third and most important takeaway from the panel was it reaffirmed the growing differentiation within the Canadian oil and gas producer trust sector itself. It was clear that Enerplus and Provident—as well as Canetic—are moving aggressively to deal with both economic and political challenges facing their industry. Battered Enterra, on the other hand, faces some severe challenges to its survival.

In my view, all oil and gas trusts are cheap now. Expectations for the sector are very low, and the fear level is high. As a result, it’s possible even the smallest and weakest in the group will be bailed out by a takeover, a recovery in natural gas prices and/or a favorable change in trust taxation.

It’s also possible, however, that the sector’s weakest players will continue their current death spiral. The takeover premiums for the likes of Thunder Energy have been meager. And in any case, the strong are also candidates for takeovers—though at strong premiums—and they’ll also benefit greatly from a recovery in gas or a change in prospective 2011 taxation.

In short, despite the low prices, there’s still no reason to buy or hold the weakest oil and gas trusts. Rather, stick with the strong, both for weathering the current crisis and to profit from the inevitable recovery.