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UpstreamOnline: Departing Klein backs hands-off approach

EXTRACT: Shell Canada rattled the industry in July with word that an expansion that had been expected to cost C$7 billion ($6.4 billion) now could come in as high as C$12.8 billion due to labor shortages and ballooning materials costs.

THE ARTICLE

By Upstream staff

Oil sands developers, not the Alberta government, must decide when multibillion-dollar projects should go ahead as demand for limited skilled labour leads to huge cost overruns and delays, the Canadian province’s outgoing leader said today.

Speaking to reporters in Edmonton after his final legislative session, Premier Ralph Klein said it would be a mistake for his successor to assume Alberta’s booming economic growth is not a problem.

But more stringent regulation of the industry that is fuelling the boom is not the answer, Klein said. He declined to say if royalty incentives for oil sands projects should be removed with oil prices at $70 a barrel and higher.

“I’m a firm believer in letting the market prevail and not putting in … government rules and regulations to control growth because they are so difficult to remove once they are brought in,” said the Conservative leader, who is set to retire this autumn as Canada’s longest currently serving premier.

“Secondly, we now see and we’re now hearing about projects being put on hold because of labour shortages, because of the high cost of materials and other factors – living accommodations and so on.”

Numerous companies have announced delays and surging costs. Shell Canada rattled the industry in July with word that an expansion that had been expected to cost C$7 billion ($6.4 billion) now could come in as high as C$12.8 billion due to labor shortages and ballooning materials costs.

The oil sands development boom, now valued at more than C$100 billion, is being driven by the world’s thirst for secure oil supplies and the northern region’s massive reserves.

The rush has prompted major population growth, straining infrastructure and public services like the health system.

The Klein government, which is expecting its 13th straight budget surplus, has boosted spending since big cuts a decade ago and this month added C$1.8 billion to a fund to improve highways, schools and water treatment plants to help cope with the population influx.

“We’re dealing with a situation that is the envy of other jurisdictions, but we’re dealing with a situation that presents its challenges as well,” he said. “Can we accommodate growth? Yes, I think with proper planning and proper programs, whatever those programs might be.”

Klein, a 63-year-old former television reporter once known for his folksy touch, had expected to keep his job for one more year after winning four elections. But he garnered only lukewarm support from his party at a leadership convention last spring, which prompted his quicker departure.

He has tried but failed to push through several controversial policies in the past year, including a drive to more privately run health services in a programme he called the “third way,” and a second round of “dividend” payments for Albertans, funded by soaring energy revenues.

Now nine contenders aim to take over his job this autumn, led by former Alberta Finance Minister Jim Dinning.

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