Canada's oil companies are preparing themselves for possible tax increases and environmental controls from a Conservative government under pressure to enforce tougher policies on the industry, according to a letter obtained by the Toronto Globe and Mail.

In a letter to Indian Affairs Minister Jim Prentice, Canadian Association of Petroleum Producers chairwoman Kathleen Sendell addressed criticisms that the oil sands industry is unfairly subsidized and can afford tax increases, calling the industry "a major driver of the Canadian economy."

Prentice deals with the oil industry and climate change for Prime Minister Stephen Harper.

Facing a possible electoral challenge to his government later this year, Prime Minister Stephen Harper has tried to revamp his party's environmental image in the new year.

Last month, Harper replaced Environment Minister Rona Ambrose with Treasury Board President John Baird, which was seen as an admission that the party failed in its efforts to pitch its climate change plan to the nation. The Conservatives' proposed "Clean Air Act" calls for industry emission targets based on intensity, rather than overall reductions. It ignores the Kyoto Protocol deadline in favor of reducing greenhouse gas emissions 45 to 65 percent by 2050 (Greenwire, Jan. 29).

Industry experts are concerned that Harper's recent advocacy for environmental controls may come at the cost of a proposed accelerated capital cost allowance, a tax break that provides large writeoffs to oil sands companies.

In her letter, Sendell said the industry had already paid out $27 billion to federal and provincial governments last year and will likely invest $40 billion in the country this year. She added that while oil prices have risen "the economics are just as challenging now" as they were when oil prices were lower (McCarthy/Curry, Feb. 8). -- EB

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