Alberta seeks input on bitumen royalties
By Jason Fekete, Calgary Herald
July 21, 2009
CALGARY - The Stelmach government is expected to ask energy producers today for their interest in a new provincial bitumen royalty-in-kind policy, as the premier faces mounting criticism for failing to keep his promise to stem the flow of oilsands to the United States.
The government's request for comment from industry comes as construction ramps up on Enbridge's $3.7-billion Alberta Clipper pipeline that will ship upwards of 800,000 barrels of oilsands per day to the U. S. -- and potentially thousands of jobs with it.
The call for feedback, a prelude to a formal request for proposal later this year, is an initial step in a process that will allow companies to bid for a stake in a new government program designed to boost oilsands upgrading in Alberta.
"We'll have more details (today) on what we're going to do with bitumen royalty-in-kind," Alberta Energy spokesman Jerry Bellikka said Monday.
A funding arrangement was announced Monday that will see Calgary-based Enbridge Inc. pay two-thirds of the $1.2-billion American segment of the 1,600-kilometre pipeline, a key artery for moving morebitumen from Alberta's lucrative oilsands to U. S. upgraders and refineries.
When the pipeline is completed in about a year, it will initially send up to 450,000 barrels of bitumen a day to Superior, Wis., with the potential to reach 800,000 barrels a day.
The product will then be rerouted from Wisconsin to refineries in Illinois and on to the main storage hub in Cushing, Okla.
The Clipper pipeline is one of several projects announced in the past couple of years that will see bitumen upgraded or refined in the United States, sending potentially billions of investment dollars and thousands of value-added jobs down the pipeline.
"The jobs and investment don't have to be in the United States. They can be here in Alberta," said NDP Leader Brian Mason. "This is a very tragic development as far as the long-term Alberta economy goes."
Mason argues Premier Ed Stelmach "broke his promise" to Albertans to keep more jobs and bitumen in the province.
The NDP leader said the government could spur more upgrading and refining capacity in Alberta by adopting conditions in oilsands lease agreements with the private sector that demand a larger share of the resource be processed in the province.
A recent report from the province's Energy Resources Conservation Board shows 59 per cent of oilsands production was upgraded in the province last year and predicts that, unless new strategies are adopted to upgrade more at home, the number will grow to only 61 per cent in 2018.
Stelmach has previously said the portion of bitumen processed in Alberta will rise to 72 per cent by 2016.
The Tory government, however, is hoping its new upgrading strategy--which establishes a bitumen royalty-in-kind program--will increase upgrading of oilsands production in Alberta to about 67 per cent.
"Basically, what you're going to end up with is a mixture of export and upgrading," Bellikka said. "We would certainly like to see more value-added in Alberta."
Asked if the bitumen policy could demand oilsands developers upgrade more in Alberta, he said: "Stay tuned."
The Canadian segment of the Enbridge pipeline--which runs from the hub of Hardisty, through Saskatchewan and Manitoba to the U. S. border -- has a price tag around $2.4 billion and has been under construction since last summer. The U. S. portion is expected to cost about $1.2 billion, with construction expected to begin in the next few months.
Gil McGowan, president of the Alberta Federation of Labour, said the royalty-in-kind policy is a small step toward keeping investment and jobs in the province, and doesn't compensate for years of government inaction on the issue.
Rather, by failing to stop pipelines to the U. S. such as the Alberta Clipper, the province is "throwing in the towel" when it comes to keeping upgrading and refining jobs in Alberta, he said.
"During times like this, we simply can't be cavalier and dismissive about high-paying jobs going to other jurisdictions," McGowan said. "The silence from the Stelmach government on this issue continues to be deafening."
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