Buffett, Gates and mutant fish frame oil sands debate

By Jeffrey Jones - Analysis

CALGARY, Alberta (Reuters) - In the high-stakes battle between the oil industry and environmentalists over the image of Canada's oil sands, it appears a pair of multibillionaires beats a two-mouthed fish.

The week started out tough for oil sands producers, whose shares had been beaten down as crude prices skidded and projects suffered more cost overruns.

Three environmental groups quit a northern Alberta oil sands development advisory body that also includes government and industry representatives, saying it had lost legitimacy.

Then reports surfaced that children had reeled in a fish with two jaws from a lake downstream from where tens of billions of dollars worth of projects are pumping synthetic oil.

But by midweek, the mood changed. A stealth visit to Canadian Natural Resources' (CNQ.TO: Quote, Profile, Research, Stock Buzz) new Horizon oil sands mining project by two of the world's richest men, Bill Gates and Warren Buffett, overshadowed all.

Shares of such major players as Canadian Natural, Suncor Energy Inc (SU.TO: Quote, Profile, Research, Stock Buzz) and Canadian Oil Sands Trust (COS_u.TO: Quote, Profile, Research, Stock Buzz) took off. Interest by the Microsoft (MSFT.O: Quote, Profile, Research, Stock Buzz) co-founder and Berkshire Hathaway (BRKa.N: Quote, Profile, Research, Stock Buzz) chairman was cited as a factor.

"They are some pretty astute guys; they've done fairly well. And for them to come up here and take a look, this is interesting," said William Lacey, an analyst with Calgary-based FirstEnergy Capital Corp. "But it always surprises me, frankly, what gets a market going."

It has not been made public why Gates and Buffett toured the C$9.3 billion ($8.9 billion) project north of Fort McMurray, Alberta. But local media trumpeted it as a show of support for oil sands development.

The industry and Alberta government had become used to being on the defensive over oil sands' impact on water, land and air quality and strains on local communities.

"I don't think that the Buffett-Gates visit changes too much on the environmental concern side," said Joseph Doucet, a professor of energy policy at the University of Alberta.

"But I do think it is one more data point, suggesting the interest in investment in the oil sands continues to be there for many reasons that are not going to go away."

Such high-profile curiosity shows the need for the industry and government to better understand what the environmental and social costs are, Doucet said.

TONE HAS SHIFTED

Until this year, the story of the oil sands, the largest deposit of crude oil outside the Middle East, centered on billions of dollars in investments, fast-growing production and Canada being a secure supplier to the huge U.S. market.

But the tone shifted. Greenpeace, the Natural Resources Defense Council and other green groups have mounted a offensive to tell Canadians and Americans that development of Alberta's "dirty oil" is worsening global warming, destruction of boreal forest and water pollution.  Continued...