By Jason Fekete, Calgary Herald, September 1, 2009

CALGARY - PetroChina's $1.9-billion venture into Alberta's oilsands -- giving the state-owned company a majority stake in key bitumen operations-- is sparking questions in Canada and the U. S. about energy security, and what say Ottawa should have in approving the deal.

The Alberta government is urging the federal Tories to quickly give their blessing to the agreement, arguing international investment in the oilsands will produce a slew of economic spinoffs. Athabasca Oil Sands Corp. announced Monday that state-owned PetroChina International Investment Co. Ltd. will buy a 60 per cent share in its MacKay River and Dover projects for nearly $2 billion, marking the largest foray to date by China in the oilsands.

Under the Investment Canada Act, any international firm acquiring controlling interest of a company with assets more than $312 million will be reviewed by the federal government to determine its total value. Included within that inspection is a requirement that the company prove the net benefit of the deal to Canada. The Deal - PetroChina to buy 60 per cent stake in MacKay River and Dover oilsands projects; Athabasca will continue to operate the projects - $1.9-billion deal is China's largest venture in Canadian oilsands. - Deal expected to close Oct. 31

But the proposed agreement would see PetroChina take a controlling interest in two projects, not the entire company, which has even Athabasca's top brass uncertain what regulatory approvals are required. Ottawa has hinted it will exercise its power to protect Canadian resources should foreign companies try to take over assets important to the country's security. Bill Gallacher, chairman of AOSC, said while his company gave the provincial and federal governments a heads-up that a deal was on the way, he is unsure which regulatory hurdles have to be cleared.

"We know there will be some (regulatory approvals needed), but we just don't know which ones," Gallacher said.

There's also provisions included within the federal legislation to review applicable deals for national security reasons if concerns are raised by Foreign Affairs and International Trade or Public Safety Canada, said Darren Cunningham, communications director for federal Industry Minister Tony Clement.

"You have to prove that this transaction is in the best interest of Canada," Cunningham said Monday.

Cunningham wouldn't specifically say whether Ottawa will review the PetroChina transaction under the Investment Canada Act, but noted "the government is always for international investment" because it's a boon to the Canadian economy.

However, Chinese investment in North American oil companies has sparked questions in the past about energy security.

In 2005, the Chinese National Offshore Oil Corporation--a firm largely owned by the Chinese government -- attempted a takeover of U. S.-based Unocal Corp., but the move sparked outrage in Congress. The foreign company eventually abandoned its bid for Unocal.

In Canada, federal Environment Minister Jim Prentice has said in the past he welcomes foreign investment into the oilsands because it will offer Alberta some additional export markets, rather than having to rely solely on the U. S.

Both the Stelmach government and AOSC said they're confident the federal government will green light the deal if it's reviewed, recognizing the value to Alberta and Canada.

"At the end of the day we are going to follow the proper pathways and channels needed to make sure this goes forward," said Gallacher.

The agreement could help thaw what's been a chilly investment climate in Alberta, with about $100 billion worth of mining and in situ oilsands projects being shelved since last year. It could also produce much-needed employment opportunities for a battered provincial economy that's shed tens of thousands of jobs since last fall.

"I certainly would be hopeful that they (Ottawa) would be speaking about this and what the advantages are to both the province and Canada," said Alberta Energy spokesman Tim Markle.

NDP environment critic Linda Duncan, an Alberta MP, said it's incumbent upon the Harper government to ensure the agreement produces investment that's environmentally sustainable, but also provides jobs to Canadian workers.

"We better make sure we're protecting our interests and the resource in the long term," Duncan said in an interview.

If the PetroChina deal is approved, it will send a signal to U. S. decision-makers that Alberta has alternative markets for its oilsands, regardless of the environmental concerns routinely raised south of the border, said Chris Sands, a specialist in Canada-U. S. relations at the Washington-based Hudson Institute.

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