UPDATE 1-Energy industry keeps wary eye on Alberta political turmoil

Thu Mar 20, 2014 3:18pm EDT

(Recasts with comment from energy executives, political analyst)

By Nia Williams and Scott Haggett

CALGARY, Alberta, March 20 (Reuters) - Alberta's powerful oil and gas industry is keeping a close watch on the uncertainty sparked by Alison Redford's abrupt resignation as leader of the Canadian province, even though no change is expected in energy policy for now.

Redford stepped down on Wednesday as premier of the ruling Progressive Conservative party following a controversy over her travel expenses and caucus infighting that left her party floundering in the polls.

Some observers fear the political instability risks deterring potential investors in the province's vast oil sands, the world's third-largest crude reserve behind Venezuela and Saudi Arabia.

After several lean years, energy deals are on the rise again in oil-rich Alberta, with a number of acquisitions announced since the start of the year.

Sonny Mottahed, chief executive officer at Black Spruce Merchant Capital Corp in Calgary, said Redford's resignation could steal some of that momentum.

"Any sudden departure will stir some excitement and create some pause in short-term investment sentiment. The bigger question will be what is next? Who will be her replacement?," he said, adding there could be a big opportunity for the right-wing Wildrose party, now the official opposition, to gain ground.

The Progressive Conservatives are one of North America's most successful political dynasties, having run Alberta for more than four decades.

But they have changed premiers three times since 2006 with a fourth expected to be appointed within six months. Dave Hancock, Redford's deputy, was chosen on Thursday to govern in the interim.

"This is the third premier in eight years. They seem to bring them in, chew them up and spit them out," said Keith Brownsey, a politics professor at Mount Royal University.

"The party is in a great deal of trouble and business certainly needs political stability. Investors will look at this and say what kind of goofball is this? They are throwing a premier out every two or three years."

Redford's predecessor Ed Stelmach had attempted to raise energy royalties, but backed off in the face of fierce industry opposition and the impact of the global financial crisis.

The Progressive Conservatives have since been steadfast supporters of Alberta's oil industry. The Wildrose party is also firmly business friendly.

Redford won plaudits from business leaders for promoting the oil sands industry in Ottawa and Washington, supporting TransCanada Corp's controversial Keystone XL pipeline and setting up the Alberta Energy Regulator in a bid to streamline the approval process for new projects.

ENERGY POLICY

Despite the uncertainty, analysts said there was little chance of an abrupt switch in energy or fiscal policy. Alberta, the largest source of U.S. oil imports, is flush with cash from oil sands production in the northern part of the province.

"Redford's resignation doesn't really change Alberta's near-term outlook, Warren Lovely, senior economist at CIBC World Markets. "The province can still be expected to lead the country in terms of economic growth in the year(s) ahead. Nor does her departure jeopardize the immediate fiscal outlook."

Attention is now focused on who will succeed Redford, but none of the potential candidates, who include Finance Minister Doug Horner and Justice Minister Jonathan Denis, are expected to change direction.

"I have not heard about any of the potential candidates talking about any energy policy other than the status quo," said Mike Dunn, an analyst at FirstEnergy Capital.

Interim premier Hancock, a long-serving member of the Progressive Conservative party, represents a constituency in Edmonton, the provincial capital, and was first elected in 1997. He has served as deputy premier since December. (Editing by Paul Simao, Jeffrey Hodgson and Diane Craft)

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