June 2006 Edition

Mikisew manpower and investment in oil and gas

Oilsands growth now beyond regulator’s ability to assess impacts

Alberta’s new premier fleshes out plan for oilsands royalty review

Proposed pipelines take land off treaty table

Panel oks #12.8 billion oilsands expansion

Mikisew Cree First Nation (MCFN) inhabits the western shores of Lake Athabasca in Fort Chipewyan, AB, a long-standing community in the northeast of the province. Being that it was established in 1788, the place remains oddly remote, tiny, but developing nicely, and torn between staying isolated or joining the outside world with a road to Fort McMurray.

Fort 'Chip' was once a North West Company and Rupert's Land trading post, and is today the gateway to Wood Buffalo National Park and other magnificent tourism opportunities. Even without the benefit of a road, MCFN moved successfully into both the travel and energy sectors of Alberta. Under the management of Aqeel Ahmad, MCFN created Mikisew Energy Services Group (MESG) and developed companies that staff more than 400 people, often recruiting from within the nation.

Aqeel said, "MCFN governance runs a portfolio-based system that oversees separate sectors of the economy," from the Mikisew community perspective. A series of corporate entities came into being, like 2000 Plus Ltd., Mikisew Maintenance Ltd. (MML), and MSD to make up MESG. MML and 2000 Plus Ltd. have been involved in the oil and gas industry for the past nine years in Fort McMurray creating hundreds of jobs in the oil and gas industry.

The MESG area of operation has been in the tar sands, and these companies perform jobs with millions of hours of work with all classes and levels of machine and technology. The MESG companies have operations at Syncrude, Albian, Trans Alta, and Suncor. MCFN business plans took MESG companies into rich core areas where members could develop extensive knowledge and experience in energy plants of all types and complexities.

They deliver manpower to administration as well. Aqeel said, "MESG has employed well over 600 employees. Last year MESG put in approximately 806,130 man hours in those project areas." MESG companies will expand, and more may appear. "We are actively searching for new ways outside Fort McMurray, and within Edmonton, to provide employment and training opportunities for Mikisew and other First Nation or Aboriginal people."

He said, "These companies have building capacity even with current obligations in very interesting areas of the oil and gas economy," and they are on the lookout for new opportunities. Aaron Kaskamin is a site manager for MM Limited Partnership. "We are a union company. In order to get employment, employees have to be members of local unions," said Aaron. "We work with local labour and trades unions to get Mikisew members into the local union whenever it is possible."

Kaskamin is joined by Mikisew managers found in operations across the board. April-Eve Wiberg works for Air Mikisew, and Edmonton-based Mikisew Slings and Safety Ltd., two more companies owned by MESG. April-Eve said, "What happens now is that other long-awaited opportunities ensue, and we have to learn how to take advantage of them." She said that Air Mikisew started about 10 years ago when MCFN bought Contact Air.

"The goal was to ensure never again would the community of Fort Chipewyan be at the mercy of a southern-based, for-profit airline. Too much was at risk." Also, owning an airline raised the possibility of a money-making venture for MCFN. "We have 11 airplanes, and 21 pilots operating within a fiercely competitive industry," said April-Eve.

"Our entire operation is strategically targeted at running an airline." Air Mikisew staff function with specific and high level training and accreditation in Fort McMurray. "We can always improve, and this is our goal, though overall I think our Fort Chip client base and MCFN leadership are pleased with the company's performance.

"We're flying full most of the time, our freight program is stretched to keep up, therefore I'd suggest these are signs of things going fairly well. We're proud of being named Fort McMurray's Business of the Year in 2005, a fairly exciting accomplishment in light of the incredible amount of business operating and gravitating around Fort McMurray."

Air Mikisew flies scheduled flights out of Edmonton City Centre Airport to both Fort McMurray and Fort Chipewyan. April-Eve added that even though the season is 'off' for now, Northern Mikisew Sport Fishing owns Alberta's top-rated group of fly-in fishing lodges.

Somewhere in the bowels of the Alberta legislature, an unreleased document still warm from the printer carries Bill Newell's fondest hopes.

Everything about Alberta’s oilsands is huge – including the pricetag to keep it all going. Housing, health care, infrastructure… who’s responsibility is it? Some say oilsands development has become a speeding car with no brakes.

The manager of the municipality that includes boomtown Fort McMurray is past hoping the province's energy regulator will help his community deal with the price of oilsands mega-development.

Instead, he prays the report of the Oilsands Ministerial Strategy Committee will offer solutions to problems ranging from a deteriorating environment to the lack of housing for thousands of new workers.

In 2006, Alberta's Energy and Utilities Board (EUB) held weeks of public hearings on three megaprojects totalling nearly $27 billion in oilsands development.

But after the December 21st decision on Albian Sands Energy's (TSX:SHC) $7-billion Muskeg River project contained more recommendations for the provincial government than it did for the proponent, some say the effects of that kind of concentrated growth have ballooned beyond what the board is able to deal with.

Oilsands development, they say, has become a speeding car with a gas pedal and no brakes.

“The (board) is saying that it can't – or won't – make the call,” said Chris Severson-Baker of the Pembina Institute, an environmental think-tank.

The board received a record 60,125 applications, twice the number received five years ago.

While most were for small projects, three were for some of the largest the province has ever seen: along with Albian Sands, there was Suncor Energy's (TSX:SU) $12.8-billion Voyageur expansion and Imperial Oil's (TSX:IMO) $7-billion Kearl proposal.

And at the hearings, the board heard evidence the like of which it had never heard before.

Fort McMurray Mayor Melissa Blake said her city simply couldn't house the thousands of new workers needed for such projects or promise them a community that was safe and functional.

The head of medical staff for the local health region said it has only half the number of doctors it needs and about one-third of what it will need by 2011.

Aboriginal groups worried that one mega-project after another would eventually drain the Athabasca River to the point of fisheries collapse.

Such broad social concerns are new to the board, said spokesman Davis Sheremata.

“Not only have the hearings been long and complex, the scope of them has been pretty vast as well.”

But when the board issued its decision on Voyageur in November, hopes that it might address broader concerns by slowing down development or forcing industry to help pay for some of the services its employees will require were dashed.

“The board appreciates that continued oilsands development has the potential to further strain public infrastructure and public service delivery,” said the decision.

“The board believes that the responsible government agencies are aware of and are responding to a number of the socioeconomic impacts.”

“(The board) sort of dodged that public interest question. (It) recognized that there were all kinds of problems, but then pointed to other agencies to solve them.”

“With growth pressures expected to continue, public-sector service providers in the region… have stated that the region will not be able to provide the needed services to support the anticipated pace of growth without substantial additional support from the government of Alberta,” the ruling said.

“The (panel) does not believe that the EUB has the mandate to resolve the socioeconomic issues raised in this proceeding; rather it believes that responsibility rests with appropriate government bodies that are in a position to provide direct assistance in these matters.”

“I'm not aware of anything fundamentally changing to address the concerns of the municipality at this stage,'' he said – although he added that the board did ask questions on how long a development pause might be required during the Kearl hearing.

“I still hold out hope for the Imperial decision,'' he said, pointing out that panel also had involvement from the federal environmental regulator.

Andre Plourde, an energy economist at the University of Alberta, said the board doesn't have the mandate to stop or even slow down development.

“The government has been buying time for a while, knowing there will be a transition,” said Plourde, referring to the replacement of former premier Ralph Klein by new Progressive Conservative Leader Ed Stelmach.

“What (the board) should be paying attention to is something that the government will have to decide. (The board) is looking for some direction.”

So far, said Severson-Baker, government has been part of the problem, racing the development engine through favourable royalty regimes and land sales.

“It just doesn't work to have Alberta Energy pouring on the gas and not having another agency empowered to put on the brakes if necessary,” he said.

Stelmach's signals have been mixed. He's promised to review Alberta's energy royalty regime and to put affordable housing at the top of his agenda.

But at his first news conference after winning the leadership, he pooh-poohed the notion that government should regulate development.

Newell said a full public inquiry is needed to discuss the cumulative impacts of the oilsands industry, which now has over $100 billion worth of projects either approved or planned.

“They didn't believe it was within their mandate to call an inquiry,” he says.

Hence, his hopeful glance toward the legislature and the ministerial report, now being circulated to members of Stelmach's newly appointed cabinet.

“We expect that industry should pay their share of the imposition on the quality of life of our inhabitants,” said Newell.

“We're getting to the point – especially in the oilsands but probably elsewhere in Alberta as well – where we can't really can't afford to have the EUB dodging that decision. If they're not prepared to make that decision, then their parent agency, Alberta Energy, needs to be more directly involved.”

Some facts on oilsands development and its anticipated impact on northern Alberta:

Oilsands spending, scheduled or proposed – $12.5 billion in 2007; $57 billion over the next five years; $94 billion by 2015.

Influx – 3,950 workers required for Suncor's Voyageur project alone; 27,000 people moved into Alberta in the second quarter of 2006; Fort McMurray population doubled to 75,000 in last nine years.

Cost of living – $40,000 considered minimum ``working poor'' income in Fort McMurray, says president of Wood Buffalo Housing and Development Corp.

Vacancy rate less than one per cent in Fort McMurray for third consecutive year.

Rents – Forecast to jump 20 per cent in 2007 in Grande Prairie; 25 per cent in Fort McMurray.

“Shadow” population – 11,779 people live in work camps, campgrounds or hotels near Fort McMurray, says 2005 survey.

Health gap – Fort McMurray needs twice as many doctors as current 44; will need three times as many within five years.

Services gap – infrastructure to accommodate growth, including new water treatment plant, police station, recreation centre and fire hall.

Setting up full public hearings on Alberta's oilsands royalty regime will be one of the first jobs of his new downsized cabinet, premier-designate Ed Stelmach said December 13th.

Stelmach said that he will appoint a panel of people unconnected with government to travel the province and gather opinions and information.

He said that one of the most common concerns he heard during his campaign for the Tory leadership was that Albertans aren't getting enough money for their resources.

“Once cabinet is named, we will bring these issues to the first cabinet and we will put a structure in place,'' said Stelmach, who was sworn in as premier on December 14th.

“To do this in the most open and transparent manner, these (panelists) will be people that are not members of government.”

Stelmach suggested the panelists could include economists, oil and gas experts or people with knowledge on how Alberta can maximize value-added processing of oilsands resources.

“We want a cross-section of people that can bring us the best information, put it on the table in a very open and transparent manner so Albertans can trust that information. That's why it's removed from government.”

The panel will report to Alberta's finance minister and will also consider what other taxes are paid by companies, he said.

“I just want to make sure that at the end of the day, Albertans, as owners of the resources, feel comfortable that they're getting the right return.”

Many question whether the oil industry is paying its fair share of taxes and provincial royalties to help the province pay for higher social and infrastructure costs linked to the energy boom.

Alberta's current oilsands regime encourages investment by allowing companies to pay just one per cent in royalties until all construction costs are paid back. After costs are recovered, royalties jump to 25 per cent.

However, the regime was designed years ago before the current boom in oil prices and many argue that the province should receive a share of that windfall. There are also concerns about companies shipping raw product out of Alberta for processing.

EnCana Corp. (TSX:ECA) recently announced a deal that would see oilsands crude shipped out of the province for refining in the United States.

Greg Stringham of the Canadian Association of Petroleum Producers said the industry welcomes the hearings as a chance to get its message out.

Stringham said about half the oilsands developments have paid off their costs and are now paying 25 per cent royalties. He added that while oil prices have ballooned, so have construction costs.
He said the industry isn't surprised at the announced hearings, but he hoped they won't take too long.

Stelmach said his government will focus on integrity and transparency, managing growth and improving quality of life in a stronger and more secure Alberta.

The fate of northern British Columbia First Nations traditional territories was discussed recently in a series of workshops in communities along the proposed Gateway pipeline route. This proposed pipeline would cross dozens of First Nations territories in British Columbia, most of whom do not yet have treaties signed with federal and provincial governments.

“After attending [this] workshop, we learned a lot about the toxic effects of oil and gas development,” said Alphonse Gagnon, a Hereditary Chief of the Wet’suwet’en First Nation, and whose traditional name is Chief KlomKhun. “If it all goes ahead – seismic blasting, well drilling, roads, pipelines and other infrastructure – we could forever lose the ability to exercise our constitutionally guaranteed Aboriginal rights,” added Chief KlomKhun.

First Nations who do not have treaties signed with federal and provincial governments stand to lose potential treaty settlement lands by proposed pipelines. Similar projects such as the Mackenzie Valley Pipeline have been put on hold until treaties are settled. “First Nations hold Aboriginal title to lands along the proposed pipeline routes, so we are seeking the highest level of involvement in the decision making on these projects,” said Catherine Lessard, Vice Tribal Chief of the Carrier Sekani Tribal Council. “The Gateway project is proceeding at pace that prevents our meaningful involvement,” Ms. Lessard added.

At least six large-scale pipeline and energy projects are proposed within the next five years. If pipeline infrastructure is in place, it will be easier to open up areas such as the Nechako and Bowser Basins in central British Columbia. The pipeline routes affect dozens of First Nations communities and could negatively impact British Columbia’s fisheries, disturb wildlife habitat and contribute to global climate change.

“The importance of unity cannot be underestimated,” said Chief Klom-Khun. “The fish farm crisis has taught us that we need to come together to protect our salmon; we feel the same about pipeline development,” he added.

Albian Sands Energy's $12.8-billion oilsands expansion at its Muskeg River mine in northern Alberta has been approved.

But a decision released by a federal-provincial review panel December 21st places 16 environmental and technical conditions on the project related to tailings and reclamation.

The panel also refused Albian's request to relocate 5 1/2 kilometres of Highway 63, the main road into the area, in the Athabasca River Valley. Albian was also denied an additional 60-metre-wide corridor east of the highway to accommodate pipelines and a 240-kilovolt grid connection to the proposed plant site.

Albian is a joint venture between Shell Canada (TSX:SHC), Western Oil Sands (TSX:WTO) and Chevron Canada (NYSE:CVX) and operates the mining portion of the Athabasca Oil Sands Project, about 70 kilometres north of Fort McMurray.

The project will see Albian's Muskeg River oilsands mine expanded and integrated with Shell's Jackpine mine. A bitumen extraction plant will also be constructed at the site.

Public hearings last September were warned by municipal, health and Aboriginal leaders that there were to many social and environmental uncertainties around the project, but proponents said they could successfully manage any risk to land and water.

Chief Roxanne Marcel of the Mikisew Cree told the Alberta Energy and Utilities Board that her band of about 2,700 people – roughly half of whom still live in the region – feared that reclamation plans could leave little more than poisoned lakes and a landscape forever unable to support diverse wildlife.

Politicians and health officials with the Municipality of Wood Buffalo, which includes Fort McMurray, said the area's services are already strained by Alberta's oil boom and more roads, schools, health-care and housing are needed to accommodate future growth.

This decision makes 21 recommendations to the Alberta government to provide local authorities with necessary resources to manage the anticipated level of sustained growth in the region, including affordable housing.

The decision also said further study is needed to assess the balance between bitumen recovery and protection of the river valley ecosystem.