(The following article by David Finlayson and Kelly Cryderman was posted on the Edmonton Journal website on March 30.)
FORT McMURRAY, Alberta — An arm’s-length government corporation would run the $1.8-billion oilsands transportation project, which could be under construction as early as next year.
The Athabasca Oilsands Transportation Corp. hopes to attract private cash through bond issues to add to $300 million the province may kick in.
“We have $300 million so far, and the corporation will go to the markets and issue bonds to raise money,” said Paul Giannelia, a principal in a new company set up by the government to push the project forward.
Giannelia, who was project manager on the Confederation Bridge between New Brunswick and P.E.I. and helped raise the more than $1 billion in financing, was among a group of stakeholders in Fort McMurray on Monday to announce a $2.5-million feasibility study on the ambitious project.
Giannelia said he expects the study to confirm the viability of the plan.
AOTC chairman Jim Gray said an efficient rail line will reduce oilsands companies’ transportation costs, and also cut living costs in the Fort McMurray area.
“It will ensure the future viability of current and future oilsands plants.”
It could also create a new economy by shipping oilsands byproducts, such as sulphur and coke, to North American markets, said Gray, a co-founder of Canadian Hunter Exploration Ltd., which was sold in 2001 for $3.4 billion.
But to attract private investors, the project must be economically viable and sustainable over the long term, he said.
Premier Ralph Klein said Monday his government has yet to decide what involvement it will have in the project.
Klein said he will have to be convinced the cost to government would lead to savings on upgrading highways, and the railway would take pressure off the highways and make them safer.
“While we’ll still do some work on those highways, maybe the extent to which we will have to upgrade them might not be as great if a lot of the heavy traffic, truck traffic, moving equipment and so on, is taken off those highways and put on rail,” Klein said. “I like the idea.”
It’s government policy, he said, to participate in infrastructure projects to accommodate major resource developments.
At the same time, Klein said he doesn’t know where reports came from that his government is willing to invest $300 million in the project. All his government has committed to so far is $1.25 million, half the cost of a feasibility study, he said.
Gray said the interim group is now waiting for industry to commit a similar amount to pay for the study.
“All they have committed at this point is to a feasibility study,” Gray said of the province’s possible involvement.
“One of the business models that we have is that the Alberta government would make an investment, it’s not a cost, it’s an investment, of as much as $200 to $300 million in the project, and they would get a return on that investment, and at the end of 30 years they would own the whole thing lock stock and barrel, with no debt,” Gray said Monday in an interview.
Liberal Leader Kevin Taft said it seems like a journey back to the days of premier Don Getty, when the Conservative government was known for investing in commercial projects and bailing out failed private projects.
The railroad may well be a good idea, Taft said, but the companies who will use it — not taxpayers — should pay for it.
The plan, hatched last June at a dinner meeting attended by government officials and oilsands and railway companies, includes upgrading the existing road and rail connection between Edmonton and Fort McMurray, and building a new rail line 50 kilometres north to the oilsands.
Highway 63 to Fort McMurray will be straightened in places and more passing lanes added.
The feasibility study, funded jointly by the provincial government and the oilsands companies, will be completed in four months.
Construction could begin as early as 2005, with the whole project completed by 2008.
Gray said a new railway will allow oilsands companies to do more pre-fabricated construction, which would cut their costs at a time when large overruns on expansion projects are the norm.
About 500 trucks a day currently use Highway 63. That number is expected to double in the next several years, Gray said, “and that’s simply not sustainable.”
Economic Development Minister Mark Norris said the goal is to produce a long-term regional transportation plan, including road links and bridges.
“We know growth in this region will continue at an unprecedented rate. We have to analyse the bottlenecks and look for solutions.”