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First Nation to continue fighting Athabasca Oil's Dover project

Worker on an Athabasca Oil rig

Athabasca Oil

The Fort McKay First Nation in northern Alberta has made big economic gains from the multibillion-dollar oil sands projects that surround it, but the way Chief Jim Boucher sees it, Athabasca Oil Corp.'s Dover development will leave the community too boxed in by industry.

Dover, proposed by Athabasca and PetroChina Co. Ltd., won a conditional green light on Tuesday from the Alberta Energy Regulator, which rejected Fort McKay's contention that it needs a large buffer zone separating traditional lands from the steam-driven bitumen extraction.

Mr. Boucher said his community plans to fight on, even as Athabasca investors welcomed the approval.

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The nod sets in motion a process expected to result in PetroChina buying out its partner's 40-per-cent stake for $1.3-billion. Athabasca shares jumped more than 10 per cent to close at $8.12 on the Toronto Stock Exchange.

The deal was signed before the federal government brought in restrictions last year on foreign state-owned companies acquiring control of oil sands project.

PetroChina now has 30 days to decide to excercise an option to acquire the Athabasca interest, and hand the Canadian company the hefty proceeds. The process was delayed by Fort McKay's intervention in the regulatory review, which triggered a hearing last spring during which the First Nation called for a 20-kilometre buffer zone.

Mr. Boucher said he will now urge the Alberta government to sit down for talks to examine whether the 600-plus member community's constitutional right to be consulted on resource development is being compromised.

"We need to think about what will be left for our children and our grandchildren. With that in mind, we've indicated to the government on a number of occasions that we need to find protection zones for our community and for the people in this region, so we have a place to go," Mr. Boucher said in an interview.

"Right now, with all this development occurring around us, eventually we will lose a large tract of our territory … approximately around 60 per cent."

Fort McKay has benefited from oil sands development through its Fort McKay Group of Companies, which provides a host of services, such as fuel supply and hauling, vehicle fleet maintenance and lands and leasing. However, it has balanced that with provisions for environmental protection, he said.

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"We still have concerns with respect to proximity to our sacred lands, and then we need to find a way to deal with this issue. We have found ways to deal with other issues with other companies and we have arrived at agreements with these companies," Mr. Boucher said.

Addressing Fort McKay's concerns in its decision, the panel ruled excluding reserves as part of a buffer zone would be economically detrimental to the province and municipality and not in the public interest.

It said the jointly owned operating company, known as Brion Energy, must meet 10 conditions regarding emissions control, leak detection and other environmental measures.

Athabasca Oil chief executive Sveinung Svarte said he did not want to speculate on Fort McKay's next move. But he said it is important that the project development begins following the additional regulatory scrutiny.

"Any further delay is against the interest of both the parties, both us and PetroChina, and we can only do such field work once you have the approval of the government, of AER and Alberta Environment," Mr. Svarte said. "These are the approvals that trigger the put/call [option] under the agreement with PetroChina, so we should be able to go ahead even if there were appeal attempts."

Athabasca investors have anticiapted the proceeds from the sale being used to fund the company's other operations, including the Hangingstone oil sands project and development of the company's Duvernay liquids-rich shale gas reserves.

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About the Author
Mergers and Acquisitions Reporter

Jeffrey Jones is a veteran journalist specializing in mergers, acquisitions and private equity for The Globe and Mail’s Report on Business. Before joining The Globe and Mail in 2013, he was a senior reporter for Reuters, writing news, features and analysis on energy deals, pipelines, politics and general topics. More


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