Controlling oil sands pace a risky move for Alberta

Fri Jan 15, 2010 4:25pm EST
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Alberta's new energy minister would face more flak from the very oil industry he is trying to mend fences with if he tried to regulate the pace of development in the Canadian province's vast oil sands, analysts said on Friday.

Ron Liepert, whom Premier Ed Stelmach named as head of the key energy department this week, told a newspaper that Alberta needs to look at ways to moderate growth in oil sands output. He later backed away from comments that suggested government changes to policies that promote investment.

Any suggestion that the government will start putting the brakes on development of the largest oil source outside the Middle East will further erode industry and investor support for the Conservative government of Premier Ed Stelmach, said Chris Feltin, analyst at Macquarie Securities Canada.

"That gets into a very tricky situation for government, if that is the case, just simply because they'll be put into a position to determine why some projects should proceed ahead of others," Feltin said.

"They're going to get into a position of picking favorites and I don't think that's what the government should or wants to get into with regard to their relations with the industry."

An oil-sands development rush led to onerous cost overruns and project delays as oil prices escalated into 2008. However, as much as C$90 billion ($87 billion) worth of developments were canceled when prices tumbled in the latter half of that year.

"I believe we have an opportunity to sit down as cabinet and have that discussion and say, 'As this thing starts to crank up again, are we going to change our policy of come-one, come-all into the development of the oil sands?'" Liepert said in an interview with the Globe and Mail newspaper.

A government spokesman said on Friday that Liepert later clarified those remarks at a swearing-in ceremony in Edmonton. Liepert was referring to ways the government itself could be better prepared for the next boom, such as ensuring the labor force was available and infrastructure could handle the influx of people and money, spokesman Jerry Bellikka said.   Continued...