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According to Sayer Energy Advisors, the oil patch racked up just more than $50-billion worth of mergers and acquisitions in 2014, comprising purchase prices plus assumed debt. (iStockphoto / Getty Images)
According to Sayer Energy Advisors, the oil patch racked up just more than $50-billion worth of mergers and acquisitions in 2014, comprising purchase prices plus assumed debt. (iStockphoto / Getty Images)

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NDP seeks to reassure Alberta oil sector and green interests Add to ...

In Fort McMurray, even New Democrats sport “I Love Oil Sands” T-shirts.

“We’re an energy- and resource-based economy,” said local New Democratic Party candidate Ariana Mancini, days after coming second behind Wildrose Party Leader Brian Jean in Tuesday’s election. The Grade 1 French-immersion teacher appeared at a local rally recently wearing the shirt that has become popular in this city in the heart of oil sands country.

“We have to learn to work with the hand that feeds us,” she said, before referring further questions to NDP headquarters in Edmonton.

While environmentalists hailed the stunning election of the New Democratic Party as a repudiation of the oil-based economy, premier-designate Rachel Notley has since Tuesday sought to reassure the oil industry and its investors. She has echoed Ms. Mancini’s message that the new government will have to work with the oil industry.

Ms. Notley faces an enormous challenge in meeting expectations on the left, while protecting the jobs that the oil sector generates.

She promised to raise corporate taxes and review royalties for the industry, as well as bring in tougher environmental regulations campaigned on higher taxes and royalties for the industry and tougher environmental regulations – burdens that producers will be hard-pressed to shoulder if crude prices remain weak.

On climate policy in particular, the premier-designate faces tough decisions and tight deadlines. She has only a month to indicate how her government will address greenhouse gas emissions (GHGs) in the province, and specifically in the oil sands sector, which is the fastest-growing source of emissions in the country.

Current emissions regulations covering the oil sands and coal-fired power plants expire in June. As crude prices slumped, the outgoing Progressive Conservative Premier Jim Prentice extended the deadline for renewing the regulations, a move Ms. Notley slammed as “profoundly irresponsible.”

At the same time, the federal government is awaiting word from Alberta on its climate plan so Ottawa can make its submission to the United Nations on national emission targets for the post-2020 period and how Canada will meet them.

Already behind schedule, Prime Minister Stephen Harper has promised to release that submission prior to the Group of Seven meeting of leading industrialized countries to be held in Germany on June 7. In December, global governments will gather for a climate-change summit in Paris, with the lofty aim of reaching an international climate agreement.

And so the pressure will build on Ms. Notley and on the province’s oil sands producers, which have been targeted throughout North America and Europe as climate villains.

Expecting his government’s re-election, Mr. Prentice had intended not only to bring in new GHG rules for large industry but also to launch a climate framework that would serve as the basis for Alberta to work with Ontario, Quebec and British Columbia on a national climate plan.

Mr. Prentice favoured a “double-double” approach, sources in Alberta say. The province’s 2005 regulations required a 12-per-cent reduction in emissions per barrel over time, with a levy of $15 a tonne when the regulated limit was exceeded. Mr. Prentice was planning a 24/30 plan, which would see per-barrel emissions reduced by another 12 per cent with the levy rising to $30.

Ms. Notley will have to decide quickly whether to adopt Mr. Prentice’s plan temporarily while working on a longer-term NDP policy, or to delay any decision until her new government – which doesn’t even have a cabinet yet – can get its bearings.

“Albertans have voted for change, and that change includes the environmental record of the province,” Ed Whittingham, president of Calgary-based environmental think tank Pembina Institute, said in an interview. “First and foremost, that means dealing with greenhouse gas emissions.”

After crude prices plummeted through last fall and winter, Mr. Harper insisted it would be “crazy” to impose new carbon levies on the oil sands sector, especially when U.S. competitors producers that are competing for investment and markets faced no such cost burden.

And, indeed, the sector has been hit hard, with key companies recording first-quarter losses.

Oil prices have rebounded sharply since March, particularly Western Canada Select, which is the benchmark for oil sands diluted bitumen. But prices are still well below levels needed to drive new investment.

Wildrose’s Mr. Jean said the NDP government will have to move very cautiously to ensure it doesn’t do further damage to a sector that has been the engine of growth, not only for Fort McMurray but for the province as a whole.

“We’re concerned about the interests not just of Fort McMurray but of all Alberta,” he said in an interview. “Any change to the current tax or royalty regime or any additional regulatory burden would mean the loss of jobs.”

The industry recognizes it will have to accept a higher carbon levy, but is hoping it will be delayed until prices have rebounded, said Greg Stringham, vice-president of the Canadian Association of Petroleum Producers (CAPP).

He said previous estimates of rapid emissions growth have to be revisited in light of the downturn and cancelled projects; CAPP will be issuing a new forecast in June that will significantly reduce the anticipated production after 2020.

In an article released Friday, former Conservative adviser Mark Cameron argued that Ms. Notley should shelve plans to increase royalties and corporate taxes, and instead focus on imposing a higher carbon tax that could be aligned with other provinces and California.

There was a slew of taxes proposed in Mr. Prentice’s budget – including 4 cents a litre on gasoline – and in the NDP platform that could be forgone in lieu of a carbon tax, said Mr. Cameron, a former policy adviser in Mr. Harper’s Prime Minister’s Office. He said the move could blunt international opposition to the industry and help it win access to new markets. “Doing serious carbon pricing will have far more impact internationally than lobbying and ad campaigns,” he said.

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