Government of Alberta reverses support for $6.6 Billion Value-Added Bitumen Refinery
Project would help avoid the export of thousands of jobs, billions of dollars in GDP and bitumen via pipeline
EDMONTON, Feb. 24, 2012 /CNW/ - Teedrum Inc. and the majority of Alberta First Nations announced today a decision made by the Government of Alberta to suddenly withdraw prior conditional support for the construction of a $6.6 billion refinery in the Alberta Industrial Heartland region.
The proposed Alberta First Nations Energy Centre (AFNEC), which has been under development for the past four years, is dedicated to upgrading bitumen to produce gasoline, diesel, jet fuel and petroleum products primarily for export via pipeline to the west coast. By processing 125,000 barrels of bitumen daily, AFNEC will bring significant, on-going revenue to the province, attract international investment and meet government policy objectives for a made-in-Alberta solution to retain the full value of provincial bitumen resources. AFNEC will contribute an estimated $100-billion to Canadian GDP over 20 years, with the potential of billions of dollars in new revenue flowing directly to Alberta taxpayers over the course of the agreement.
Well over a year ago, Teedrum Inc. and AFNEC were invited by the Government of Alberta to engage in government-to-government negotiations on the terms of a Conditional Commitment Agreement - an important component for the project's development. At the time, the Government of Alberta, under the North West Partnership Trade Agreement (NWPTA), assessed that government-to-government negotiations were appropriate and no RFP was required for AFNEC's application under the Bitumen Royalty In-Kind (BRIK) program, given the First Nations co-ownership of the project. In May, 2011, AFNEC and the Government of Alberta concluded their negotiations on a Conditional Commitment Agreement. The agreement was recommended and awaiting final approval through the province's Caucus and Cabinet. This was based on both the government and AFNEC's acknowledgement of the refinery's economic viability and its support of the province's strategic objective to retain value-added production. The project's viability was further supported by analysis conducted internally by ministry officials, as well as by third-party industry and financial experts.
The Conditional Commitment Agreement demonstrated the economics and appropriate risk and return thresholds for each party, including milestone obligations demonstrating future feasibility prior to finalizing processing contracts. A similar agreement structure was approved between the Government of Alberta and the North West Redwater Upgrader project. The government's support would enable Teedrum Inc. to continue AFNEC's project development, and support discussions and strategic partnerships with capital markets, federal governments and financial institutions in Canada and abroad.
On February 8, 2012, Teedrum Inc. and the Grand Treaty Chiefs, representing the majority of Alberta First Nations, were told by Minister of Energy, Ted Morton, that the deal would no longer receive government endorsement. The minister provided limited explanation, other than alluding in part to the project's economic viability.
The government's decision contradicts a recent poll conducted by ThinkHQ Public Affairs showing 81 per cent of Albertans supporting government taking steps to increase the amount of oil sands upgrading and refining done in the province.
Construction of AFNEC was anticipated to be started in 2014 and completed in 2017. The multi-billion-dollar project was in keeping with the government's planned economic growth related to bitumen upgrading.
"This project fits the federal and provincial interest in making the most of our natural resources," said Ken Horn, President of Teedrum Inc. "Building a refinery builds an economy. It creates jobs, supports social initiatives benefitting Alberta tax-payers, and attracts international investment to the province. In this case, it would also allow the First Nations to become active participants in a major oil sands project and all of the related benefits."
The Conditional Commitment Agreement was established collaboratively with the government, creating a stepping stone to enable a project with tangible economic and social benefits to move forward. In the short term, it had no monetary risk for the government. In the long term, it would provide the potential of increased incremental benefits for each royalty barrel and a natural hedge against the volatility of bitumen prices noted in the government's own recent budget.
AFNEC has been focused on First Nations' involvement and alignment in the petroleum industry with a significant equity position in the ownership of the refinery. Through their equity participation and comprehensive human resources plan, AFNEC will generate long-term meaningful social and economic benefits for First Nations people in Alberta.
"Our AFNEC project showed the positive and productive intersection of First Nations, provincial, federal and industry interests," said Chief Rose Laboucan, Driftpile First Nation. "This enterprise was designed to provide First Nations participation in the province's largest industry, and create a world-class business model for First Nations by engaging in the resources sector. We, the First Nations, view this great project as a hand up not a hand out."For further information: