Alberta blasted over rejection of First Nations oil sands refinery proposal
Alberta’s rejection of a proposal for a First Nations-run oil sands refinery has critics up in arms, citing racism and “backroom” dealings. But Alberta Energy says it’s all about business.
The other conclusion critics have drawn is that the province favoured the North West project over AFNEC due to “very close” relationships with the competitors. Liberal MLA Kent Hehr, the opposition energy critic, recently requested an ethics investigation into the decision, claiming that the Alberta Progressive Conservative (PC) party has “suspicious” ties to North West Upgrading.
“I want assurance from the Ethics Commissioner that we didn’t lose $110 billion in net contribution to our GDP, 7,000 jobs and an easy route to new Asian markets for highly profitable refined products because someone did someone else a favour in the back room,” Hehr said in a release.
Regarding Hehr’s concerns, Johnson said Alberta Energy is open to an investigation if deemed necessary.
“If he has evidence of that then he can certainly launch something. But in fact, from our perspective, the decision was made essentially based on the business case,” Johnson said.
Value-added vs. raw exports
Controversy over the AFNEC decision has shone a light on the increasingly common desire for more initiatives supporting value-added processes in the domestic oil and gas industry. A recent poll showed that over 80 per cent of Albertans want the government to do more to increase upgrading and refining operations in the province, instead of exporting precious jobs and resources to other markets.
But for Alberta Energy, that “value-added” component involves complexities and decisions that they typically leave to industry stakeholders.
“The Alberta government’s approach has been largely to let the market decide and to let industry decide on what makes sense to them from a business perspective. There are a number of oil sands companies that have upgraders attached to them, and that makes good business sense to them,” Johnson explained.
“At the same time, we have gone down the road of getting involved with the North West Upgrader, as an incentive to get more upgrading in the province,” he said.
Through Alberta’s bitumen royalty in-kind (BRIK) program, North West Upgrading is set to receive 50,000 barrels per day from the province. Under the same program, the AFNEC proposal would have been poised to receive up to 75 per cent of its bitumen from the government for 30 years.
Horn and his colleagues say this is exactly the type of incentive that’s needed to prevent jobs and economic benefit from being shipped off “down the pipeline”.
“It’s imperative. Just on a 125,000 barrel per day refinery like ours, that’s $110 billion in GDP that’s going to go to the United States or China. So as a Canadian and an Albertan, I think it’s absolutely imperative that there are ways to incentivize these large projects,” Horn said.
“I think it’s very important, from the government’s mandate, to do it. And they are doing it, just not with us at this time.”
According to Johnston, at this point, the government does not intend to negotiate further—even if AFNEC were to come back with additional engineering or project assessments. But Horn says, with a provincial election around the corner, they’ll be appealing to supporters in the Liberal and Wildrose parties, and will continue to work on moving forward with the proposal.
“Both the Wildrose and the Liberals are very interested in moving forward with this project, on the record,” Horn commented.
“I think in the short term, we’re going to see what the outcome of the election is.”