April 11, 2011 / 11:34 AM / 8 years ago

RPT-West Coast oil line leads Canadian energy debate

(Repeats April 10 story without changes)

* Northern Gateway, tax policy frame energy debate

* Harper has been supporter of energy sector

* Ignatieff would offer incentives to cut emissions

By Jeffrey Jones

CALGARY, Alberta, April 10 (Reuters) - A battle over a C$5.5 billion ($5.7 billion) oil pipeline to the West Coast and oil sands tax policy have led a thorny debate over energy and the environment early in Canada’s election campaign.

Canada has become the biggest energy exporter to the United States with its oil sands the main supply, prompting Conservative Prime Minister Stephen Harper to tout the country as an emerging energy superpower.

It’s a been double-edged sword. The industry has helped Canada’s economy withstand some of the worst effects of the recession. But the unconventional crude is the target of environmentalists at home and abroad concerned about high greenhouse gas emissions and the impact of development on the water and wilderness of northeastern Alberta.

The campaign leading up to the May 2 vote has shown deep divisions over energy policy. As usual, energy threatens a political rift between oil-producing Alberta, Harper’s Conservative power base, and the rest of Canada.

“Therein lies one of the problems — as soon as you mention the words national, energy and policy, you create a reaction to what happened in the early 1980s,” said Tim Marchant, professor at the University of Calgary’s Haskayne School of Business.

Former Liberal Prime Minister Pierre Trudeau launched his protectionist National Energy Program in 1980, imposing a low domestic oil price and earning the wrath of Albertans.

“So, we need to find a different form of words to move that forward,” Marchant said.

One major issue is whether to tap oil markets in Asia as a way to boost prices for land-locked crude production that currently is exported almost solely to the United States.

For Enbridge Inc (ENB.TO), the main proponent of the Northern Gateway pipeline to the coast from Alberta, much rides on the vote, as only the Conservatives favor the increased tanker traffic the line would attract to Kitimat, British Columbia.

The National Energy Board and Joint Review Panel are examining the proposal, which would ship more than half a million barrels of oil sands-derived crude a day to the coast, where it could be shipped to China and other Asian markets.

Enbridge Chief Executive Pat Daniel has said the project is too important for Canada to die in an election.

Michael Ignatieff, the leader of the main opposition Liberal Party, has said he would keep a moratorium on tanker traffic to protect northwestern British Columbia from potential oil spills.

“Enbridge has not made its case here. It’s going through a review, it’s got to persuade aboriginal Canadians, it’s got to persuade the NEB, and we’re saying, ‘You haven’t proven your case and we’re maintaining that tanker ban because we don’t think this can be done safely’,” he said.

Still, Ignatieff — whose party trails the Conservatives in opinion polls — has said he is supportive of oil sands development. However, he has cautioned that tax breaks must be removed, especially with oil over $100 a barrel, and replaced with incentives to invest in technology to cut carbon emissions.


University of Alberta business professor Andrew Leach said he had expected energy policy would play a bigger role in the campaign than it has.

Instead, much of the focus has been on Harper’s charges that the opposition parties plan to form a coalition, or Ignatieff’s accusations the government is wasting billions on unneeded fighter jets and corporate tax cuts.

“They are probably some of the most important elements when you look forward for probably the next 10 years,” he said. “That’s where a lot of our growth, a lot of our success could come from, or where we could take a lot of knocks on.”

The Conservatives have imposed few burdens on the energy sector since taking office in 2006, with the exception of the move to scrap income trusts, which had been a popular vehicle for oil companies to raise cash and pay little tax.

The Conservatives abandoned Canada’s commitments to cut greenhouse gases under the Kyoto accord and set less stringent targets, offering public funding to develop carbon capture and storage projects.

Harper has also been an enthusiastic salesman for oil, pressing Washington to approve TransCanada Corp’s (TRP.TO) $7 billion Keystone XL pipeline to Texas and lobbying the European Union against moves that could harm oil sands exports.

However, his government, faced with scientific studies showing inadequate monitoring of oil pollution in the oil sands region, has also been forced to beef up enforcement.

For his part, the leader of the left-leaning New Democrats, Jack Layton, has taken a tough stand against unfettered oil sands development, decrying what he said amounts to C$2 billion in annual subsidies to the sector.

Layton, whose party is third in the polls and is not expected to win any seats in Alberta, has said he would redirect the money to solar, wind and other renewable energy technologies.

Elizabeth May’s Green Party, which currently has no seats in Parliament, would also end subsidies for the fossil fuel and nuclear industries.

$1=$0.96 Canadian

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