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Nexen's Long Lake Phase 1 integrated oil sands facility.

Alberta issued a chilly response to Ottawa's new foreign investment rules, with senior ministers concerned that investment in the oil sands will slow now that wealthy state-controlled energy firms are essentially off-limits for more takeovers in the province.

Alberta Energy Minister Ken Hughes said the new rules may reduce foreign investment and drive up the cost of capital for companies developing projects.

"There is the potential now for less investment going into the oil sands," Mr. Hughes told a conference in Calgary. The minister said he worries that Alberta is already a high-cost jurisdiction for producing crude, and the possible increase in financing costs could reduce the competitiveness of the oil sands.

Share prices of Canadian energy companies were largely stable Monday, in the wake of the government's late-Friday announcement that greatly restricts the ability of foreign state-owned enterprises to acquire Canadian energy firms.

Indeed, chief executives from some of Canada's largest energy companies applauded the federal government's new policies, arguing that companies will find other ways to accomplish their financing and development needs.

On Monday, MEG Energy Corp., an oil sands development firm, said it agreed to raise $800-million from two share issues, including $400-million sold to the Caisse de dépôt et placement du Québec, an existing shareholder.

The financing is a sign that domestic investors remain willing to supply the funding Alberta needs. But it may have come at a price to MEG, whose shares dropped sharply early Monday in the wake of the government's policy announcement and before the financing was announced, analysts said.

Doug Horner, Alberta's Deputy Premier and Finance Minister, said the provincial Conservatives will wait for further clarification of the rules before deciding whether they support the federal government's tough stance on government-owned energy companies from countries like China buying Canadian companies.

"We believe we need to have foreign investment coming from all sectors in order for us to fully realize the potential of our resources," Mr. Horner told reporters on the sidelines of a conference in Toronto Monday. "Having said that, the federal government has made it clear the oil sands is an area where they believe control is going to be an issue for state-owned enterprise."

The provincial and federal governments have long argued that the oil sands needs outside capital in order to develop, but Ottawa's decision to limit foreign investment from state-controlled companies could put the allies at odds.

Ottawa approved CNOOC Ltd.'s $15.1-billion (U.S.) takeover offer for Nexen Inc. and Petronas' $6-billion (Canadian) deal for Progress Energy Resources Corp. on Friday as it rolled out the new rules for state-owned firms. The Chinese government controls CNOOC, while the Malaysian government controls Petronas. The deals were evaluated under the old rules in the Investment Canada Act, but the new rules will make it tougher for state-controlled companies to buy entire Canadian companies, save for exceptional, although undefined, circumstances.

Ottawa's new investment rules leave the door open for state-owned firms to strike joint ventures and buy minority stakes in the oil sands. Energy executives applauded this compromise.

"I think it is very balanced," Marcel Coutu, chief executive officer of Canadian Oil Sands Ltd., the largest shareholder in Syncrude Canada Ltd., told reporters in Toronto. "I think it very importantly recognizes the importance of the oil sands."

When state-owned enterprises have a lower cost of capital, coupled with strategic political and economic reasons for owning energy projects, they have an edge over other potential buyers. But the new rules eliminate that advantage, he said.

"We now have a level playing field which I think will be healthy for any industry," Mr. Coutu said.

Hal Kvisle, Talisman Energy Inc.'s CEO, also cheered Ottawa's revamped rules in light of the allowances for joint ventures and minority ownership positions.

"As long as any company can look to acquire 100 per cent of another enterprise, that's just naturally what they're going to do," he told reporters. If taking control looks difficult, then attention will shift toward models that are better for the Canadian oil patch, Mr. Kvisle said. Minority ownership can help lower the cost of capital for companies while retaining local leadership teams, he said.

That's healthier, he said, than a model that sees small companies build up assets to flip them to large players, a trend "that's quite disruptive to the development of strong management teams and the strong technical teams that have actually been the foundation of our success here," he said.

"This is why I'm kind of excited and enthused about something that might stimulate joint ventures," he said.