Nathan VanderKlippe

Thursday, January 14, 2010

Calgary — Alberta's new Energy Minister says his government needs to examine ways to moderate the pace of oil sands development, signalling a shift away from policies that favour unconstrained oil patch growth.

For years, the province has resisted calls to slow the frenzy of activity around Fort McMurray. But Ron Liepert, who was named to the energy portfolio in a provincial cabinet shuffle Wednesday, says he wants to make sure future oil sands development does not again overstretch the capacity of the province's infrastructure.

“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?'” he said Thursday in an interview with The Globe and Mail.

“That's a discussion we need to have,” he said.

Although he gave few details as to how he would do it, environmental groups said his comments mark a dramatic change in Alberta's attitude toward the oil sands.

“I don't think we've ever seen any sort of explicit acknowledgment that the pace and scale of development is something that can be addressed and indeed is something the government of Alberta has the ability to address,” said Simon Dyer, the oil sands program director for the Pembina Institute.

When oil prices soared into triple-digit territory in 2008, the ensuing boom produced a sort of golden havoc for Alberta. The money poured in, but so did the problems – everything from social issues in Fort McMurray to an extraordinary rise in industry costs and significant declines in worker productivity.

But in the boom years, it would have been nearly impossible to tell a company, “we've got a new policy in place; you've got to wait your turn three years,” Mr. Liepert said.

The current lull in the oil sands, however, provides an opportunity to reassess how to do that, he said.

Even the industry has called for a more staged approach to developing the oil sands to avoid another round of overheating prices. But companies have worked to co-ordinate their activities on their own, and any suggestion that the province might take steps to slow development stirred anger in Calgary.

“There's more subtle ways of handling this than somehow thinking that an Alberta cabinet can decide on the future of tens of billions of dollars of expenditures,” said Martin Molyneaux, the managing director of institutional research at FirstEnergy Capital Corp. Any such move could scare away investment dollars, he said, adding that markets are better suited to calm overheated growth.

One way the government could slow development would be to halt lease sales, Pembina's Mr. Dyer said. But since industry has already snapped up most of the oil sands area, such a move might not have a big impact. A more controversial move would be to pause approvals of new projects, he said.

Such moves have “the potential to address some of the environmental and social problems, and the negative attention the oil sands are getting,” Mr. Dyer said.

Former Alberta premier Peter Lougheed, one of the leading voices in urging “more orderly development” of the province's huge bitumen resource, has called on the province to sequence the construction of new projects.

Mr. Liepert inherits the energy file after years of fractious relations between the province and industry, which has battled against the new royalty regime enacted by outgoing minister Mel Knight in 2007.

Mr. Liepert says he hopes to “listen and learn” from industry as he takes on a role he admits he is unfamiliar with. He has little time to educate himself, however. His first priority will be dealing with a competitiveness review that Mr. Knight launched to correct some of the failings in that royalty regime.

The review, Mr. Liepert said, will conclude in early February.

“We are working closely with industry,” he said, to determine “what is it that we need to do to get rid of government being a hurdle to future investment.”

But, he said, it may be difficult to please the companies he is now mandated to govern.

“The oil and gas industry is made up of a lot of entrepreneurs and sort of the guys that epitomize the Wild West. And there are some who believe government has no role to play,” he said. “It's not going to happen.”