With the Canadian dollar free-falling below .70 cents US, the NHL could be feeling the effects for some time.

Of course, the league’s felt the pinch of the shrinking value of the “loonie” for the past two seasons. In 2014, the projected salary cap raise to $71.1 million came up short, reaching $69 million. A year later, an initial prediction of over $73 million instead became $71.4 million.

The NHL will continue feeling the effects of a declining Canadian dollar.

The NHL will continue feeling the effects of a declining Canadian dollar.

On Dec. 7, 2015, NHL commissioner Gary Bettman projected the cap ceiling for 2016-17 could rise by $3 million, putting it around $74.5 million. Bettman, however, cautioned that it depends upon “a variety of factors.”

The biggest factor, of course, is the value of the Canadian dollar. At the time of Bettman’s projection, the loonie was worth around .74 cents US. Over a month later, it’s worth .68 cents and showing no signs of leveling off anytime soon.

Unless the dollar makes a stunning recovery between now and June 2016, it’s unlikely the NHL salary cap for next season will reach $74 million. With seven Canadian NHL franchises accounting for one-third of league revenue, the American-based revenue streams must significantly improve this season to offset the difference.

The immediate effect of a lower-than-projected salary cap will be felt by every NHL club in the offseason. Last November, with the loonie at around .75 cents, I observed how only a handful of teams could have sufficient cap space to be active in next summer’s free-agent market. A potentially stagnant cap could also adversely affect the players eligible for UFA status.

The low loonie is also having an impact upon escrow payments by the players. Unhappy over high escrow clawbacks from their salaries, there was speculation last season the players might vote against the five percent escalator clause. Ultimately, they voted for it, allowing the cap to rise to its current level.

This season began with the players getting 16 percent of their salaries clawed back in escrow. TSN’s Rick Westhead recently reported it could reach as high as 20 percent before season’s end. That’s one-fifth of their paycheques lost to escrow.

If the players weren’t happy with 15 percent last season, it’s not hard to imagine the discontent over losing 20 percent. It could make it more difficult for the NHLPA leadership to convince the players to vote for the escalator for next season. If they vote against it, the possibility of the cap remaining at its current level, or perhaps even declining, is a real one.

The lower loonie could be among the reasons behind the league dragging its feet on approving an expansion franchise for Quebec City. Had the Canadian dollar remained at par with the American dollar, it likely would’ve made it more enticing for the board of governors to approve that bid.

The long-term effects remain to be seen. As the Canadian dollar is tied to world oil prices, it could rebound within the next couple of years once there’s a reduction in the current glut of oil. Assuming it doesn’t, however, the Canadian dollar could remain at .70 cents US or less for several years, perhaps for a half-decade or more.

The last time the Canadian dollar was this low was during the 1990s and the early years of this century. That was an unhappy time for Canadian-based NHL teams, who pay their players in American dollars but earn revenue in Canadian dollars.

Two franchises (Quebec City and Winnipeg) relocated to the United States. The Edmonton Oilers came within a hair’s breadth of moving to Houston. The Ottawa Senators went bankrupt. The Calgary Flames and Vancouver Canucks were mentioned in relocation talk. The Montreal Canadiens couldn’t find a Canadian-based buyer. Only the Toronto Maple Leafs could afford to bid competitively for free-agent talent or to re-sign their top stars.

Commissioner Bettman assures fans that things are different now compared to 15-20 years ago. The current CBA ensures a more robust system of revenue sharing to aid struggling franchises. In the short term, that should ensure stability for the Canadian franchises.

However, if this stretches out over the next decade, this could become a significant issue.  At the very least, it puts to rest the ridiculous notion proposed by a Canadian-based think tank claiming the country could support 11 franchises.

If the cap only makes marginal increases in the coming years, it will become increasingly difficult for general managers to build and maintain a successful roster. Compared to recent years, where they could count on cap increases upwards of $5 million, they won’t have as much cap space to work with. Free-agent players will also find lucrative contracts harder to come by.

A long-term drop in the Canadian dollar could also lead to a reopening of labor negotiations behind the current CBA expires. The league and the NHLPA each have an out-clause; the league on Sep. 1, 2019, the PA by Sep. 19, 2019. Regardless of which side pulls the pin, the 2019-20 season would be the final one of this CBA.

The league could opt out if revenue flat-lines or only marginally increases, perhaps pushed by Canadian-based owners seeking a better deal. The players could opt out if they feel they’re losing too much in escrow clawbacks.

So settle in, NHL fans, and especially those of you who support Canadian-based franchises. In the coming years, we could face a bumpy ride.