A deal with the provincial government has paved the way for construction of an upgrader in Sturgeon County, which could begin as early as this fall.
The deal announced last week allows North West Upgrading to start some construction this fall with full construction expected in 2012 on its 50,000 barrel-per-day bitumen upgrader in northeast Sturgeon County. It will cost an estimated $5 billion and at its peak create 8,000 jobs.
The project, which is expected to be completed in 2014, is the first upgrader project in Sturgeon to set a construction timetable, as the other proposed projects have largely been stalled or cancelled all together.
Announcing the deal, Premier Ed Stelmach said the province had often stepped in to encourage important industries.
"Albertans and their government have never been afraid to make bold decisions," he said. "We had faith in the potential of the oilsands when no one else thought it was a viable resource."
Stelmach referenced Encana, Telus and the Alberta Treasuries Branch as important businesses that began with the government's help.
Citing his often-repeated line that shipping bitumen out of the province was the equivalent of a farmer selling his topsoil, Stelmach said this deal was good for the long term.
"When we upgrade our own resources in our own province, we are creating future prosperity. We are creating a value-added opportunity."
The details of the agreement are myriad and complex, but in essence the province will pay North West for the cost of upgrading the province's bitumen and share in the proceeds when the company sells its diesel on the open market.
The government will pay roughly three-quarters of processing costs, which will be taken out of its share of revenues from selling the diesel. The government will not be required to pay up front for the processing costs and is not loaning the company funds or becoming an equity investor.
The province will have the bitumen to transfer through its bitumen royalty in kind (BRIK) program, which was announced several years ago as part of the royalty review.
North West chairman Ian MacGregor said with the deal in place, the company would be able to complete the detailed engineering and get going on the upgrader.
"The contract we have signed with the province under BRIK allows us to start construction and we are going to do that immediately."
MacGregor said the announcement was very important for the future of the industrial heartland and for Albertans.
"You are very lucky to be here today, history is being made," he told the assembled crowd of provincial cabinet ministers, oil executives, municipal politicians and journalists. "It will create great value for Albertans."
Sturgeon Mayor Don Rigney was also overjoyed at the announcement, noting the county had waited years for good news about its investment in the heartland.
"This is really an exciting setup. We are going to have a lot more certainty now."
He said the county was ready for the project and will be able to mitigate the impacts on citizens.
"We have spent a lot of time putting in roads and water and sewer so it is there. We basically are ready to go, " he said. "We have been very proactive."
Not everyone is pleased with the announcement. Anne Brown, a member of the group Citizens for Responsible Development, which has spoken against several upgraders at government hearings, said the environmental and health impacts of these plants are still not understood.
"With the go-ahead of this plant it is more emissions, more pollution to the area and again our issues about health, about air quality have not been addressed."
The 50,000-barrel per day project is just the first of three phases the company plans for the site, each with the same capacity. The deal with the province allows for an extension to cover the second phase of the project but does not specifically include it.
The upgrader has received regulatory approvals from Alberta Environment and zoning changes from Sturgeon County.
Each of the three stages has a capacity of 50,000 barrels per day. In each of the first two phases 12,500 barrels per day will come from the company's partner in the project, Canadian Natural Resources Limited.
Carbon line
The announcement of the upgrader was twinned with the government's support of the Alberta Carbon Trunk Line, a massive carbon capture and storage project that will tie into both North West and the Agrium Fertilizer plant in Sturgeon.
The line will take carbon dioxide from those plants and transport it to central Alberta where it can be used to recover oil from long abandoned wells.
The government is spending $495 million on this project and Stelmach said it was part of the government's commitment to protecting the environment while developing the oilsands.
"We are committed to developing our resources in an environmentally sustainable way," he said. "This is groundbreaking technology and only will you see it in the province of Alberta."
Allowing old oil wells to be re-commissioned is also expected to have an economic benefit to the province, leading the government to collect royalties when the wells start pumping again.
MacGregor said the trunk line allows oil previously thought to be unrecoverable to come out of the ground and he believes there will be a demand for the carbon dioxide the company produces.
"The CO2 from our refinery will unstick the stuck oil."
Construction on the trunk line is expected to get under way in 2012 and Enhanced Energy, the company behind it, has estimated it will create about 2,000 jobs during construction.
