Alberta Wants Input, Clarity on Oil Sands Takeover Rules

Alberta is pressing the Canadian government to allow input and give clarity on rules banning foreign takeovers in the oil sands by state-owned companies, more than a year after the restrictions were announced.

“We, as the owner of the resource, want to have significant input into how those parameters are structured,” Alberta International and Intergovernmental Relations Minister Cal Dallas said in an interview in Ottawa, referring to the takeover rules. “We continue to seek clarity.”

Prime Minister Stephen Harper said in December 2012 that state-owned enterprises would be banned from buying majority stakes in the oil sands outside of “exceptional circumstances.” Approval of the $15.1 billion takeover by China’s Cnooc Ltd. of Calgary-based Nexen Inc., announced at the same time, was not a precedent, Harper said.

Deals in Canada’s oil and natural-gas sector slumped in 2013 as the nation’s energy producers struggled to raise funds under the restrictions and transportation bottlenecks lowered the price of heavy crude. Alberta is home to the oil sands, the world’s third-largest pool of crude reserves behind Saudi Arabia and Venezuela.

Acquisitions by foreign investors in Canada’s oil patch plummeted last year to the lowest since 2004, falling 82 percent from a year earlier to $6.92 billion, according to data compiled by Bloomberg.

“There’s little question that it’s had an impact, but our need for capital in Alberta and in particular foreign investment hasn’t changed,” Dallas said. The province estimates its crude producers need C$43 billion per year of capital, he said.

Net Benefit

Canada’s Industry Ministry automatically reviews foreign takeovers of companies with at least C$354 million in assets to determine if the transaction of “net benefit” to the country.

“Foreign investment has been welcomed into Canada, but just not a controlling foreign investment by a state-owned enterprise,” Industry Minister James Moore said today on a conference call with reporters from Berlin, when asked about Alberta’s position. “It’s a pretty clear policy.”

Canada’s fourth-largest province by population has had “meaningful dialog” with the federal government on possible changes to the rules, Dallas said. The province would like more detail on how the government defines state-owned enterprises and “exceptional circumstances,” among other things, he said.

Former Alberta Premier Alison Redford, who resigned this month, told reporters in September on a trip to Shanghai that she wanted the federal government to specify under what conditions it would allow Chinese state-owned enterprises to buy companies in the oil sands.

Rejected Calls

Harper rejected calls for more clarity last year, telling a business-school audience in Toronto that Canada shouldn’t be totally transparent in its foreign-investment rules.

“It is absolutely necessary, when the investor is a foreign government, for the government of Canada to be able to exercise its discretion and have direct conversations with those foreign investors,” Harper said in November. “When you are dealing with large state investors -- foreign governments as the investor -- I think it would be foolish for the Canadian government to provide absolute clarity.”

Canada cited security concerns in October when it rejected the C$520 million sale of Manitoba Telecom Services Inc. (MBT)’s Allstream unit to an investment firm co-founded by Egyptian billionaire Naguib Sawiris.

In 2008, the government blocked the sale of MacDonald Dettwiler & Associates Ltd.’s space business to Minneapolis-based Alliant Techsystems Inc. In 2010, Harper rejected Melbourne-based BHP Billiton Ltd.’s bid to buy Potash Corp. of Saskatchewan.

Greenhouse-Gas Emissions

Dallas also said Alberta is prepared to do more to reduce greenhouse-gas emissions by oil and gas producers. Still, the provincial government prefers to act in concert with the federal government and the U.S.

President Barack Obama has said the U.S. won’t approve the Keystone XL pipeline, which would link Alberta’s oil sands to refineries on the Gulf Coast, if it significantly worsens carbon pollution.

“This has got to be a cohesive effort,” Dallas said. “The energy industry in North America is integrated.”

Alberta currently requires companies that emit more than 100,000 metric tons of greenhouse gases a year to cut emissions per barrel by 12 percent or pay a penalty of C$15 per ton. The proceeds from the levy are paid into a fund that companies can use to develop technology to cut carbon output.

To contact the reporter on this story: Andrew Mayeda in Ottawa at amayeda@bloomberg.net

To contact the editors responsible for this story: Paul Badertscher at pbadertscher@bloomberg.net Chris Fournier

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