Alberta taxpayers could be on hook for $26B oil refinery

Alberta taxpayers could be on hook for $26B oil refinery

The debate over upgrading bitumen in Alberta has long been fraught with hard-nosed economics facing off against the political desire to add value to raw bitumen — selling it for a higher price, while still creating good jobs in the province.

Before the 2008 crash, there were multiple private sector proposals for upgraders around Edmonton, but the economics fell apart as oil prices dropped.

Only one of those plans went ahead, the North West Sturgeon Upgrader, backed by the provincial government and Canadian Natural Resources. It's expensive, long-delayed and Ted Morton, a former Tory cabinet minister who had a role in the decision, says taxpayers are on the hook for the project that is going to have a hard time making any money once it opens in 2017.

In a nine-page report written for the University of Calgary's School of Public Policy, Morton describes a project that morphed from something he described as elegant to a very expensive potential boondoggle.

The story began in 2007 when the province decided to allow oil sands producers to pay their royalties in kind — meaning they could give the provincial government bitumen instead of cash.

The province would then sell the bitumen to one of the upgraders being proposed in Alberta and get the cash. This would essentially guarantee a 30-year supply of bitumen to the upgraders, something they needed to make the economic case for their projects.

"Basically what it said was anybody who wants to build a standalone, merchant upgrader, the Government of Alberta will guarantee a 30-year of supply of bitumen," said Morton.

"Initially that looked like it was going to work, but the 2008 recession hit, almost everything was cancelled and it was after that the deal was changed."

Morton suggests that as the economics deteriorated, the provincial forged ahead, reluctant to give up a political commitment and threw its weight behind the one remaining upgrader project — the North West Sturgeon Upgrader.

"It became obvious that the initial incentive of just guaranteeing the 30-year of supply of bitumen would not be sufficient. And so the deal was sweetened," said Morton.

As the years moved on and the construction costs increased, Morton says the deal continued to be sweetened to the point where taxpayers are now essentially on the hook for $63 per barrel in processing costs, over the 30-year life of the program. That's a number that is clearly not economic at the current level of energy prices.

Morton says that commitment to processing fees is effectively a provincial loan guarantee for much of the cost of the project and the story of the North West Upgrader is a cautionary tale for government.

"The North West Upgrader is just the most recent example of a long line of failed government initiatives in Alberta of diversification," said Morton.

"And it fits the larger pattern. Typically government don't have as much expertise as their private sector partners, as result, they tend to get out negotiated. Governments tend to take most of the risk, put up most of the money and if there are any profits, get little of that."

source: Alberta taxpayers could be on hook for $26B oil refinery - Calgary - CBC News
#2  Top Rated Post
On the hook for a moneymaker?
Quote: Originally Posted by petros View Post

On the hook for a moneymaker?

Anything that builds up the Alberta economy is good for me... Alberta is truly the economic engine of Canada.
The Prairies.
(9 cubes)15 tonne of road mix asphalt is worth about $1,000. Raw tar sands can be laid out like asphalt and even in easier ways. Taking the sand out of the grease shipped south is a bonus. The sand in road mix is the type that keeps traction high in all weather. A quick 'trim' in the fall will set it up for winter driving. If this current use is the only one that can be dreamed up the 'taxpayers' probably deserve some sort of refund.

The bigger question is how do you vacate eastern Canada of people that are housebound due to weather issues and get them into the vacant canyons of the Rockies that are frost free year round due to hotter than normal magma flowing under that heat sink. The N/S canyons are from increases in water flow and that will be the way people travel as going east would be to go snow skiing in Sask. If the Atlantic area is under ice and the west is under a heat wave then some[place in between the two is going to be a green area where the seasons mean the length of the day changes as far as 'sunshine' but the ground temp stays pretty even until you are near the tops of the mountains.and then you get snow that falls into the green valleys below.
Last edited by MHz; Apr 17th, 2015 at 04:13 PM..
Not even close to the same stuff.
BTW, if you could get a contract to supply the 'fiber' that is needed down south where the sand is getting rain but most of it is in runoff form. In theory strip mining the swampy areas would be the smart thing to do before the glaciers take over.
Should it go the other way it will dry out and then catch fire that burns for 10,000 years straight.

Quote: Originally Posted by petros View Post

Not even close to the same stuff.

The rock-trucks don't seem to be sinking out of sight. It would take a big grader but that is all you would need to reshape the road every year.. Shipping would be the hard part as it would arrive in one lump. The jiggling makes it settle so even a 720deg rollover would see the material stay in the box. Warm weather and rolling it over a few times is all it would take. I used to drink in the Peter Pond with guys from the plant when super-test was still gravel. Sharp sand suitable for low-speed gringing wheels. Synthetic crude means the oil has some extra carbon in the form of 'soot' (bucky balls). Shall I go on?

Similar Threads

Europe's Largest Oil Refinery On Fire
by Locutus | Mar 5th, 2014
Kitimat Refinery
by Mowich | Apr 12th, 2013