TrueNorth Energy Corp. wants to start construction of its $3.3-billion Fort Hills oilsands project near Fort McMurray early next year, after winning conditional approval from the Alberta Energy and Utilities Board (EUB).
The EUB concluded the development was in the public interest. But environmental groups hope one or more of the board’s 15 attached conditions, to reduce environmental and social impacts, will prove costly enough to derail the open-pit oilsands mine.
Peter Kinnear, TrueNorth’s director of government and regulatory affairs, says that while none of the conditions came as a surprise, no decision has been made to proceed.
“There’s a lot of enthusiasm for the project. But we still have to get past some important economic tests,” Kinnear said.
In September, TrueNorth – a unit of privately held Koch Industries Inc. of Wichita, Kan. – and its partner, UTS Energy Corp. of Calgary, cut capital spending on the Fort Hills project by 75 per cent in the fourth quarter.
The partners cited concerns over possible conditions imposed on the project, as well as uncertainty over having to reduce greenhouse gas emissions under the Kyoto climate change accord.
As originally envisioned, Fort Hills would start producing 95,000 barrels of bitumen a day in 2005, with heavy crude shipped via pipeline to Koch’s refinery in Minnesota. The project’s initial budget has climbed to $3.3 billion from $2.5 billion.
TrueNorth, which owns 78 per cent of the project, is seeking at least one more partner – preferably with oilsands plant design expertise – to help reduce the financial risk, Kinnear said.
But Gail MacCrimmon of the Pembina Institute, an Alberta-based environmental policy research group, says the conditions attached to the EUB approval may prove too expensive for Fort Hills to proceed.
Those conditions include requiring the developers to come up with a new plan to manage salt-contaminated water underlying some of the mining area.
The EUB rejected the developers’ proposal to dispose of this water by pumping it underground into a fresh-water aquifer.
The EUB also said it might yet be necessary to install a liner beneath the mine’s entire eight-square-kilometre waste tailings pond. The concern is over potential seepage of contaminated tailings water into groundwater and into the adjacent ecologically sensitive McClelland Lake peat wetlands, called a fen.
“I think the greatest hope of saving that fen, and of this (project) not proceeding, is financial,” MacCrimmon said.
The partners still require an operating permit and water- and land-use approvals from Alberta Environment, as well as endorsement by federal Fisheries and Oceans.
Kinnear says TrueNorth expects to obtain those approvals by the end of this year.
