Monday, July 28, 2014
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Update: Oilsands project faces months of delay

Athabasca stock crashes in wake of court decision on oilsands facility

BY DAN HEALING, CALGARY HERALD

CALGARY — The Dover oilsands project in northern Alberta could face a year or more of uncertainty due to an appeal court challenge of its approval, says the lawyer for a native band opposing the facility.

Edmonton lawyer Karen Buss, who is working for the Fort McKay First Nation, said the exercise could have wide-ranging implications for the entire industry.

On Friday, a justice of the Alberta Court of Appeal gave the First Nation leave to appeal the Alberta Energy Regulator’s Aug. 6 approval of the 250,000-barrel-per-day thermal oilsands project.

“There is a live issue respecting the regulator’s interpretation of its power to decide constitutional issues,” wrote Justice Frans Slatter in the court decision posted online. “The issue is of general importance, and leave to appeal is justified.”

Buss said her clients will now file the appeal. She said the three-judge panel likely won’t start hearing it for six months, given its busy schedule, but it would likely deliver a ruling fairly quickly thereafter.

She added it’s unlikely the panel would simply overturn the AER decision, if it finds in favour of the First Nation, but it could order the regulator to start its process over with direction to consider treaty rights issues identified by the band.

“That means their approval wouldn’t be any good, it would be suspended,” she said. “That’s what Brion (Energy Corp.) wouldn’t like, because that would put them back another year.

“It has implications for all the oilsands projects.”

The Dover project is operated by Brion, a joint venture between Calgary-based Athabasca Oil Corp., with 40 per cent of Dover, and Chinese oil giant PetroChina, which owns 60 per cent.

Athabasca spokesman Andre De Leebeeck told the Herald the project can still win final provincial approval — it needs endorsement by cabinet and then final environmental approval in addition to the AER decision — despite the appeal court ruling.

“We’re told by senior (Alberta) ministry officials that the regulatory process is independent of the appeals process so, according to that, there should not be an impact on the timing of the regulatory approvals,” he said.

AER spokesman Bob Curran said that interpretation is correct and province won’t delay its ruling based on the appeal court news.

Final provincial approval is important because that is the trigger on a put/call option for PetroChina to buy Athabasca’s stake for $1.3 billion, confirmed De Leebeeck.

In a note to investors Friday, RBC Dominion Securities analyst Mark Friesen said the news is “significantly negative” for Athabasca.

“While this decision begins an appeals process that may technically run in parallel to the remaining official regulatory approval process, the fact that the right to challenge the constitutional argument was granted by the court of appeal significantly increases the risk of regulatory approval delay, in our view,” he wrote.

“We see this announcement as significantly increasing the timing risk of the company receiving the put option proceeds before year-end, thereby jeopardizing the company’s winter drilling program.”

Athabasca shares fell as much as $1.49 to $5.47, a 52-week low, before being halted on Friday morning. They strengthened after trading resumed at 1:15 p.m. Toronto time and closed at $6.27, off 69 cents or nearly 10 per cent.

In its August decision, the AER rejected the Fort McKay First Nation’s request for a 20-kilometre no-development zone on part of the oilsands leases near its traditional lands at Moose Lake, ruling that Dover’s development would have “little if any impact” on neighbouring lands.

The AER said preventing development there would exclude 1.2 billion to 1.4 billion barrels of bitumen from being produced.

Dover is to use steam-assisted gravity drainage technology and is proposed to grow through multiple phases. The first 50,000-bpd phase would cost about $2.5 billion to build, it said in its AER application.

Athabasca has an $800-million 2013 capital spending budget. It is building a 12,000-bpd thermal oilsands project called Hangingstone in northeastern Alberta while also developing its extensive conventional oil and gas acreage in northwestern Alberta.

The company is actively seeking a joint venture partner to help develop its Alberta Duvernay play.

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