Alberta's energy regulator has warned the provincial government that it must ensure oilsands development doesn't further strain the infrastructure in the Fort McMurray area.

The Energy and Utilities Board gave the warning in its decision to grant conditional approval for the Calgary-based Suncor Energy Inc. to develop a surface mine and bitumen upgrader near the northern community, which is in the Municipality of Wood Buffalo.

"The EUB believes that additional infrastructure investment in the Wood Buffalo region is needed, and it believes that there is a short window of opportunity to make these investments in parallel with continued oilsands development," said the agency in a news release that accompanied the decision, released Tuesday.

The regulator said the provincial government must ensure the municipality can service the region's booming population, including by helping address a lack of land, housing, health care, sewer and water, and other services.

The EUB, a quasi-judicial independent agency that oversees natural gas, electric and water utility services, placed seven conditions on Suncor's project. However, they address health and environment concerns.

Suncor announced Tuesday that its board of directors has given the nod to a $5.3-billion capital spending plan for 2007. About $4.4 billion of the budgeted spending will go to its Alberta oilsands operations.

Approval upsets Fort McMurray's mayor

The mayor of Fort McMurray, Melissa Blake, said she was disappointed that the agency approved Suncor's project.

"From the municipalities perspective, we are almost at the brink of financial incapacity," Blake said Tuesday.

'From the municipalities perspective, we are almost at the brink of financial incapacity.' -Fort McMurray Mayor Melissa Blake

"Basically our debt-borrowing is maxed out to the extent possible at this point, and we have an extensive amount of capital to deliver in the next five years."

The Municipality of Wood Buffalo has forecast its debt will be as high as $263 million by the end of 2006.

At municipal hearings held in May and June, people who have lived in the area for a long time complained that the high cost of living, pushed up by the oilsands developments, has been forcing them out. Others said no one has been monitoring the environmental effects of development.

Even the provincial environment minister, Guy Boutilier, has suggested that the energy companies help pay for municipal infrastructure in the region. However, he made it clear that he was speaking as the MLA for the area and not as a member of cabinet.

The industry argues that it already contributes enough through salaries, taxes and royalties.