By Scott Haggett and Jeffrey Jones
CALGARY, Alberta (Reuters) - Alberta remains a strong supporter of its oil industry after a provincial election that left the Progressive Conservatives in power to focus on new markets for Canadian crude and to try to persuade Washington to let the Keystone XL Pipeline go ahead.
The Conservatives, led by Alison Redford, won 61 of 87 seats in the provincial legislature in Monday's election, capturing 44 percent of the popular vote despite lagging in opinion polls throughout the campaign.
The victory came despite lingering resentment in the powerful oil industry over an attempt four years ago by Redford's predecessor as premier, Ed Stelmach, to raise royalties on oil and gas production.
That pushed many angry oil and gas producers into the arms of the new Wildrose Party, where they offered enough support to turn a right-wing splinter group into the Conservatives' main challenger in the hard-fought election.
It's a lesson the Conservatives are unlikely to forget as they seek to boost oil and gas output and find new markets for rising output from the province's oil sands.
"You don't take on big oil. The Conservatives have learned that," said Peter McCormick, a political science professor at the University of Lethbridge in southern Alberta. "So (Redford) won't. The royalty issue is dead."
The Conservatives, however, actually increased their share of the vote in Calgary, where most of Alberta's energy industry is based, winning 20 of the city's 24 seats in the legislature.
"We expect the focus of the government will be on maintaining a stable, healthy economy, one that continues to attract investment to our province, provides good jobs and improves Alberta's overall quality of life," the Canadian Association of Petroleum Producers said in a statement.
"Alberta has the opportunity to 'set the tone' and demonstrate leadership for policy and regulation that enables responsible oil and gas development."
Indeed, Redford used her first news conference after her victory to re-affirm her support for the industry.
She said she'll keep pushing the U.S. Obama Administration approve TransCanada Corp's Keystone XL pipeline to move crude from the oil sands to the Gulf Coast.
"We'll continue doing the work that we've done with the proponents of the project, with the Canadian ambassador in Washington, with our own representatives in Washington and Chicago to make sure we're advancing Alberta's position with respect to the pipeline," Redford told reporters.
"That is critical to what we do as we move forward because that is how we'll succeed in continuing to open up our markets."
Redford, who took over as premier in October following Stelmach's departure, campaigned on promises to increase Alberta's role within Canada and to boost support for increased oil sands production through a national energy strategy. That strategy would both push oil sands crude into Eastern Canadian markets now served by foreign oil and see new pipelines built to the Pacific to serve Asian markets.
"Now she'll have to put some meat on the bones of the national energy strategy that she campaigned on," said Andrew Leach, a business professor at the University of Alberta.
"She campaigned on the premise that you could get the other Canadian provinces and more of the Canadian people on side with oil sands development as a national priority. That's probably at job one, and job two is doing the same thing in the U.S."
Alberta, Canada's richest province, derives about a third of its revenue from its vast reserves of oil and gas. Its oil sands are the world's third-largest crude storehouse, and it is the single biggest supplier of energy to the United States.
Redford's support for a greater role for Alberta within Canada was in contrast to the policies of the Wildrose Party, led by Danielle Smith, a 41-year-old former journalist.
Like the Conservatives, Wildrose backed increased oil and gas production and promised to trim regulations on the industry. But it also wanted Alberta to limit its participation in federal programs such as the Canadian Pension Plan and to replace the Royal Canadian Mounted Police with a provincial force.
Observers say Smith's refusal to censure two candidates who made racially charged and anti-homosexual statements damaged the party, as did her statements that man-made global warming had yet to be proven.
"The people in Calgary and Edmonton who know how important the oil sands are to us ... were shaking their heads and thinking 'We cannot have a woman who denies climate change representing us in Ottawa, New York and Washington'," said Bruce Cameron, president of polling firm Return on Insight.
"So that the extremism that was tolerated by Danielle Smith became something that was economically scary."
Smith's party ended up with 17 seats and 34 percent of the vote as many voters who backed the moderate Liberal Party and the left-wing New Democrats voted Conservative to block a Wildrose victory.
(Reporting by Scott Haggett; Editing by Janet Guttsman; and Peter Galloway)