Ottawa fast tracks Kearl mine permit
Decision to green-light Imperial oil sands project for a second time now sits with cabinet
DAVID EBNER AND BRIAN LAGHI
Globe and Mail
May 19, 2008
CALGARY, OTTAWA — — Work on an $8-billion oil sands mine that was delayed by the loss of a key federal water permit is now likely to get under way within weeks because Ottawa sees the file as "important" and is putting it on a fast track.
The potential for a quick resurrection of Imperial Oil Ltd.'s [IMO-T] Kearl mine comes after the project was dealt a blow last week, when Federal Court did not reinstate a key development permit that the federal government had said was void.
The lost permit stemmed from a separate Federal Court judgment in early March, that found the regulatory approval of Kearl to be partially incomplete on the issue of greenhouse gases.
The entwined court cases were widely seen as signs that oil sands development will be increasingly tough, with longer and more detailed regulatory processes, a greater likelihood of legal challenges and ever-higher costs. Now, however, Kearl could be back in business as early as June 5, with Ottawa poised to allow Imperial to proceed on site-preparation work blocked by the court.
As Ottawa moves quickly to reapprove Kearl, Imperial could be soon draining the boggy muskeg north of Fort McMurray to make way for its oil sands mine, as previously planned for this summer.
The decision to green-light Kearl for a second time now sits with Prime Minister Stephen Harper's cabinet, said Phil Jenkins, spokesman for the federal Department of Fisheries and Oceans. A political source in Ottawa didn't deny the Kearl question was moving through the rooms of Parliament Hill quickly.
The source added that it is considered by the government of Mr. Harper as "an important file."
At stake for Imperial are hundreds of millions of dollars. The company has already spent more than $200-million on Kearl and argued during its unsuccessful court case that the voided permit could delay the project by a year or more.
Imperial is "encouraged" by the speedy progress in Ottawa.
"Sooner is better," said Gordon Wong, an spokesman for Imperial, Canada's largest and oldest oil company, which is majority owned by Exxon Mobil Corp. [XOM-N], the world's largest public oil company.
Kearl was originally approved last year, but the decision was challenged in court by environmental groups led by Sierra Club. The group questioned several points, emphasizing greenhouse gas emissions and saying the Kearl operation would emit the equivalent of 800,000 cars.
In early March, when a Federal Court judgment said the approval was partly incomplete on the issue of greenhouse gases, the regulatory review panel was ordered to do some more work.
The federal government then told Imperial a key permit issued by DFO in February was void. Imperial immediately took Ottawa to Federal Court, but lost its bid last Wednesday, with Mr. Justice Douglas Campbell saying the government was correct to void the permit while the overall approval was in limbo.
But even after Imperial's court losses, Ottawa appears ready to help Kearl stay on schedule, with production of 100,000 barrels a day of bitumen planned for 2011.
In court, Imperial argued it wasn't at fault for the incomplete regulatory approval, saying it was being unfairly hurt by mistakes made by a joint Ottawa-Alberta review panel.
And on May 6, just before Imperial went to court, the review panel submitted the greenhouse gas information requested by the original Federal Court judgment, handing Ottawa a nine-page addendum on "air quality," including three pages on greenhouse gases.
Sierra Club criticized the effort, saying the panel failed to live up to its court-ordered obligation. However, DFO has already reviewed the additional information on greenhouse gases - barely needing a single week to do so - and submitted it to cabinet for final approval. That final approval could occur any day.
As of June 5, based on a timeline under the Canadian Environmental Assessment Act, Ottawa can reissue the voided water permit so Imperial can restart site preparation work at Kearl, once cabinet okays the project as a whole.
Imperial doesn't have to reapply for the permit that was voided because the original application is still valid, Mr. Jenkins of DFO said.
Imperial's Mr. Wong said the company sees that the process on Parliament Hill is moving along, based on how fast Ottawa reconvened the review panel to work on the required additional information and how quickly it was filed.
Even though Kearl looks like it may soon proceed, the court decisions and their implication for industry set "a negative tone for future oil sands projects and represent a harbinger of increased environmental scrutiny," according to Calgary brokerage Tristone Capital Inc.
Underlying the whole debate over Kearl is how to mitigate greenhouse gases. Mr. Harper's government, as well as the Alberta government, supports "intensity-based" reductions, meaning that per-barrel emissions must be cut. However, under such a system, greenhouse gas emissions will soar as oil sands production triples in the next decade even as the per-barrel output is somewhat reduced.
For Imperial, Kearl is just one of two extended regulatory affairs. The company is the lead proponent of the $16-billion Mackenzie Valley natural gas project and pipeline, which has suffered numerous setbacks.
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