Canada opposition leader heads West amid oil scrap

Wed May 30, 2012 4:31pm EDT

* Mulcair to tour Suncor oil sands site Thursday

* Redford calls "Dutch disease" comments divisive

* Pembina, Macdonald-Laurier in battle of the reports

By Jeffrey Jones

CALGARY, Alberta, May 30 (Reuters) - Canada's federal opposition party leader, who has criticized the oil sands boom as harmful to the country's manufacturing sector, prepared on Wednesday to make his first visit to the massive resource development in Alberta, where his comments have sparked anger.

New Democratic Party leader Thomas Mulcair, slated to tour Suncor Energy Inc's oil sands operation on Thursday, has said the manufacturing sector is being hollowed out by a Canadian dollar that has surged due to the boom in oil exports.

Quebec-based Mulcair's comments, which characerized the situation as "Dutch disease," angered Alberta Premier Alison Redford, who said they threaten to deepen East-West divisions. She will not meet with the leader of the left-wing party, having already committed to an economic forum in the United States.

Mulcair's tar sands tour is seen in Alberta as an important introduction to an industry that has eschewed the left-leaning NDP with its history of support from organized labor. Nationally, recent opinion polls have shown Mulcair and his party approaching and even surpassing Prime Minister Stephen Harper's Conservatives, major supporters of the oil-industry.

"Our simple message is simply that we want to work for sustainable development in all regions of Canada," Mulcair told reporters in Ottawa. "There's nothing specific to the West in our message ... we're going to say that we want legislation enforced and legislation that is there to protect human health and ecosystems."

Joe Oliver, the federal natural resources minister, said the opposition leader's trip to the heart of oil country does nothing to change an anti-industry stance. The NDP has also been highly critical of the environmental impact of development.

"The NDP is trying to dress up an anti-resource agenda in sheep's clothing. It is clear that they want to shut down an industry that employs hundreds of thousands of Canadians and provides billions in revenues to governments across Canada to pay for social programs such as education and health care," Oliver said.

'OIL SANDS FEVER'

The Pembina Institute, an environmental research organization, released a report backing Mulcair's assertion that the resourced-based economies in western Canada have boomed over the past decade and outperformed exports from the manufacturing centers in Ontario and Quebec, where their goods have become uncompetitive as the currency has climbed.

"While Canada is exploiting its comparative advantage with respect to natural resource extraction, the rate of change is causing significant challenges in central Canada - making it difficult for this region to adjust to incredibly rapid structural changes in the economy," Pembina wrote.

That is one, though not the only, factor in the loss of 550,000 manufacturing jobs between 2004 and 2010, it said.

"The result appears to be a uniquely Canadian strain of the Dutch disease that could be called 'oil sands fever' - a strain that is beginning to create clear winners and losers in Canada's economy and could pose a significant risk to Canada's competitiveness in the emerging clean energy economy," it said.

Pembina recommended setting up a Norwegian-style federal savings fund for oil and gas revenue to work against currency appreciation and to soften the impact of boom-and-bust commodity cycles while moving to cleaner energy sources.

However, another think tank, the more conservative Macdonald-Laurier Institute, released a paper arguing that Ontario, Quebec and other provinces enjoy benefits from the oil and gas industry that outweigh any negative effects from the higher Canadian dollar.

The institute said that while foreigners are buying more oil and fewer manufactured goods from Canada, numerous studies have shown that the energy and pipeline industries are spending more to buy goods and services across the country.

"This shows the danger in a naive assumption of the 'Dutch disease' critique of Canadian energy exports," it said, referring to a term first used to describe the decline of the manufacturing industry in the Netherlands in the 1960s following the discovery of major North Sea natural gas reserves.

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