Alberta Warned Not To Change Oil Sands Rules

Suggestions that Alberta should find ways to make big oil companies upgrade raw oil sands within the province — instead of exporting it — have recently come from retiring Premier Ralph Klein as well as numerous contenders who seek to replace him. Oil patch issues, including a review of royalty rates and a possible slowing-down of energy development in northern Alberta, have been front and centre in the early stages of the leadership race. But Mr. Coutu said changing the rules in the marketplace would “basically take away value that's been created for shareholders and companies alike.” As such, he expects the Alberta government “will continue to let economics and the market guide them in their decisions, no matter who the leadership winner is,” he said. Just last week, leadership contender and former provincial finance minister Jim Dinning said he was concerned over imminent plans by large energy producer EnCana Corp. to sign a deal with a major refiner to process oil sands crude in the U.S. Midwest. “I believe that if you mine it here, you upgrade it here,” said Mr. Dinning, though he was careful to add that he would not interfere with projects that have already been approved. Mr. Klein also said that oil sands bitumen “ought not to leave the province” and instructed Energy Minister Greg Melchin to look at ways to persuade companies to do value-added upgrading and refining in Alberta. Joseph Doucet, an energy policy professor at the University of Alberta, said trying to put new rules in place in an industry where new projects have such long lead times would be messy. But fuelled by years of strong natural gas and oil prices, the energy industry requires new ways to control the speed of development, he said. “I think we will see intervention of some type — if we want to slow the pace of growth or take a second look at how much drilling or how many oil sands projects are approved,” Mr. Doucet said from Edmonton. But Mr. Doucet also said he would be very surprised if Alberta took steps to artificially impose restrictions on how and where companies could do their oil sands upgrading. If all new up graders and expansions go ahead, about 80 per cent of Alberta's future oil sands production will be upgraded within the province, Mr. Melchin said. He favours market incentives, like adjusting taxes and royalty rates to encourage companies to build their mega-projects in Alberta, rather than forcing them to comply. Alberta Liberal energy critic Hugh MacDonald said critical issues concerning how the government deals with the energy industry have been around for years, but took a leadership race to come to public light. http://www.theglobeandmail.com/servlet/story/RTGAM.20061001.woilsands1001/BNStory/Business/home

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