Alberta takes back oil sands leases

At its third attempt in seven years to balance development and the environment in the oil sands, the Alberta government has designated 5 million acres to establish six conservation areas within a fringe region of its sprawling Athabasca formation.

The announcement also sets in motion negotiations to compensate 13 energy companies for the loss of their leases, leaving the Canadian Association of Petroleum Producers uneasy about whether those companies will be short-changed.

The government said it will return the C$30 million paid for the leases along with any money spent on developing the properties.

But David Pryce, CAPP’s vice president of operations, said the “compensation issue is a complex one” that could involve claims for potential lost profits.

He said the challenge is posed by companies that have booked value on their properties “in anticipation they would develop their resource.”

Pryce suggested solutions might also involve trading leases within the designated areas for rights outside the zones.

Otherwise, he said the plan for the Lower Athabasca region is a “significant step that recognizes the importance of the oil sands as an economic driver while assuring environmentally responsible development.”

He said the province has “done a pretty good job” of striking a balance between protecting habitat and preserving the value of resources, along with providing clarity and predictability.

Environment and Sustainable Resource Development Minister Diana said the final costs government will only be determined through negotiations, but noted that the affected companies have known for many years about the prospect of having their leases cancelled.

She indicated compensation will be based on what was paid for the leases, interest and development expenditures.

Existing conventional oil and natural gas tenures will continue to be honored in the conservation zones, while there is still the possibility of oil sands deposits being accessed from outside the boundaries through horizontal drilling.

Major companies with oil sands and petroleum rights in the areas include Athabasca Oil, Canadian Natural Resources, Cenovus Energy, Devon Energy, Imperial Oil, Statoil Canada and Sunshine Oilsands.

The Lower Athabasca Regional Plan, which followed two previous failed proposals in 2005 and 2011, takes effect Sept. 1.

It is the first of seven regions in Alberta targeted for a land-use plan designed to share industrial, conservation and recreation activities as the government tries to deflect mounting criticism of oil sans development.

“Alberta’s last period of hyper-growth (in the oil sands) clearly demonstrated the need for responsible long-term use planning,” McQueen said.

“In a new time of strong growth, the need to plan for areas that contain our main economic driver is abundantly clear,” she said.

—Gary Park