EDMONTON, Feb. 27, 2012 /CNW/ - The Board of Directors of AFNEC,
including representatives of Teedrum Inc. and Grand Chiefs representing
the majority of Alberta First Nations, today welcomes Alberta Energy
Minister Ted Morton to attend the All Chiefs Summit representing all
Alberta First Nations, occurring in Calgary February 28 to March 1.
We ask the Minister to use this opportunity to commit to support a
third-party assessment of the economic viability of AFNEC and its
related risks and benefits for the province and its taxpayers.
Further, we ask Minister Morton to provide a good-faith account of his
refusal of AFNEC, including substantiating his claims that AFNEC is not
economically viable and that it poses a risk to the province and its
taxpayers. As outlined below, explanations provided to date do not
stand up to reason.
While the Minister characterized AFNEC as being in the "very very early
stage," the project concluded a conditional agreement in 2011 after
approximately 30 government meetings and four years of development. It
was accepted by the government as a suitable project to help meet the
Conservative Party's long-standing goal of retaining the full value of
At a meeting with Teedrum and Alberta Grand Chiefs on February 8, 2012 -
following months of unresponsiveness by the government - Minister
Morton provided a generally unsubstantiated refusal of AFNEC. Last
week, the Minister, largely through his spokesperson, provided media a
more thorough explanation of the government's position than was
provided to Teedrum and Alberta's First Nations. It is still
The Minister's claim that AFNEC is not economically viable and a risk to
Alberta tax payers is inconsistent with project negotiations and
government due diligence to date, as well as the conditional agreement
that would govern the next two years of activity, if approved.
On the point of economic viability, various third-party experts have
confirmed AFNEC's viability, including PricewaterhouseCoopers on behalf
of the Government of Canada, state agencies of China, and Engineers
India Limited (EIL), representing the interests of the State Bank of
EIL, among the world's foremost experts in refinery development,
conducted a Class 3 study of AFNEC. Class 3 estimates generally form
the basis of budget authorization, appropriation and funding. They
support long-term engineering, development plans and capital cost
benchmarking. EIL's study confirmed AFNEC's economic viability and
formed part of the basis of past government support for the project.
On the point of tax-payer risk, advancing AFNEC poses no risk to the
Government of Alberta or residents of Alberta. AFNEC requires
formalization of an existing draft conditional agreement established
with the prior Conservative Party leadership. The agreement is six
pages and lists 13 conditions for AFNEC - and not a single requirement
for the province or its tax payers. If approved, the agreement would
result in two years of continued project development and approximately
$200 million invested into the province. AFNEC is willing to proceed
with this investment despite the fact that the agreement contains no
further liabilities from the government at this time.
Longer term, the project holds the potential of significant new revenue
for Alberta, which will directly benefit tax payers. AFNEC has proven
the following projected profitability, including favourable comparisons
to the North West Upgrading (NWU) project previously approved by the
government and offered for comparison by Minister Morton in commentary
to media last week.
Government officials with the Ministry of Energy have determined that
AFNEC would produce significantly higher profitability than NWU.
The minimum net present value (NPV) back to the Government of Alberta
from the AFNEC project was set at $750 million, whereas NWU's NPV was
set at only $250 million.
Financial modeling, mutually agreed between the government and AFNEC
representatives, suggested the AFNEC deal would deliver an NPV of
greater than $2 billion for the province.
The cumulative nominal profit for the Government of Alberta over 30
years was estimated at $19 Billion.
The AFNEC project would be profitable for the 48 First Nations, AFNEC
investors and the Government of Alberta.
Last week, Minister Morton and his spokesperson both said AFNEC received
thorough consideration prior to refusal. However, Minister Morton also
said that he inherited the proposal, wasn't in cabinet when discussions
began, and that he was "not sure what was signed, or not, but it was in
the very very early stage."
The board of AFNEC believes the combination of Minister Morton's
comments suggest the project may not have received a good-faith
assessment. His views not only fly in the face of his party's past
commitments and third-party expertise, they are counter to top-ranking
officials from his own ministry, including the following individuals
who helped confirm the project's economic viability and any potential
provincial liabilities before recommending it to the ministerial
working group less than a year ago.
Michael Ekelund, P.Eng, LLB, MBA, Assistant Deputy of Energy
Peter Watson, P.Eng, former Deputy Minister of Energy
Richard Masson, MBA, CFA, ICD.D, former Executive Director of Energy
Tashfin Hauque, Btech (EE) MBA Manager of Business Issues and
Evaluations for Energy
The board of AFNEC looks forward to Minister Morton's explanation of his
reversal, his claims of tax-payer risk and his uncertainty about
economic viability, and his understanding that refusing AFNEC entails
refusing thousands of jobs, $100 billion in GDP, and a home-grown
project designed to support the long-standing provincial imperative of
SOURCE Alberta First Nations Energy Centre
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