By Scott Haggett
CALGARY, Alberta, Oct 3 (Reuters) - Alison Redford, the new premier of Alberta, may be hard pressed to narrow the Canadian province's budget deficit as softer energy prices cut into the revenue of the largest oil exporter to the United States.
Redford, 46, a former human rights lawyer in her first term in the legislature, emerged as a surprise winner on Sunday in the race to replace outgoing Premier Ed Stelmach. He resigned on the heels of infighting among his Progressive Conservative government and a lingering rift with the energy industry over an ill-fated attempt to raise oil and gas royalties.
Backed by donations from big oil and gas companies and executives, including Suncor Energy Inc (SU.TO) Chief Executive Rick George and Murray Edwards, the vice-chairman of Canadian Natural Resources Ltd (CNQ.TO), Redford beat out Gary Mar, a former provincial health minister and the front-runner in the preliminary round of voting by party members.
Once sworn in, the former provincial justice minister will become the fifth Conservative premier in the party's four-decade dynasty in Alberta. She is due to call an election in the western province of 3.5 million people some time next year.
Redford will have to move to heal rifts within her party, and shore up provincial finances that have been weakened by falling energy prices.
"We might be moving into a period of softer energy prices," said Todd Hirsch, senior economist at ATB Financial. "Alberta is not out of the woods on the deficit and balancing the budget, or a least managing the budget for the next couple of years is going to be a big issue ... That will dominate the challenges she is going to face."
Alberta posted a C$3.4 billion ($3.2 billion) budget deficit in the 2010-2011 fiscal year, its fourth straight, but forecast a return to surplus in 2013-2014.
That said, the government spending plans were based on an average oil prices this year of $89.40 a barrel, well below its current price of under $78 per barrel.
Redford may have an easier time mending fences with the energy industry. Her policy platform includes industry friendly measure such as support for regulatory reform and development of a national energy policy, as well as backing construction of an oil pipeline to Canada's West Coast to tap Asian demand.
"We have had a constructive working relationship with Alison Redford in her prior roles in government and look forward to continuing that in her new capacity as premier," David Collyer, president of the Canadian Association of Petroleum Producers, said in a statement.
Redford is also expected to be a more effective promoter of Alberta's interests than her predecessor, Ed Stelmach, who often appeared ill at ease when speaking publicly.
"She's extremely articulate and bilingual and I think that people outside Alberta are going to be surprised and impressed," said Doreen Barrie, a political science professor at the University of Calgary.
The new premier will also need to be more adroit at deflecting criticisms from the environmental groups concerned about greenhouse gas emissions from the province's oil sands and those seeking to block U.S. approvals from TransCanada Corp's (TRP.TO) proposed Keystone XL pipeline.
"She will be an articulate defender of Alberta and a strong advocate for Alberta internationally and in the United States," Hirsch said. "She'll put forward the arguments that sometime aren't made about why the pipeline should go ahead."