Alberta Premier Jason Kenney has done many things in government that would come as a great surprise to the Jasons Kenney of the past, but perhaps none so much as the decision to purchase a 50 per cent interest in the Sturgeon Refinery.
According to Energy Minister Sonya Savage, the near-billion-dollar deal was the best we could hope for as taxpayers, seeing as it would limit ongoing losses to the public purse from the deal on the refinery, located 45 kilometres northeast of Edmonton. She pegged the savings at $2 billion.
One can only imagine what a Jason Kenney of the past would have said about a minister telling Albertans they should be pleased the government had limited taxpayer losses on a contract to perhaps less than a billion dollars and that we should understand that better was not possible.
The saga of the Sturgeon Refinery is one where Jason Kenney’s best instincts could have served the province well. Instead, governments over the past decade saddled us with a Bitumen Boondoggle that, until this week’s deal, was expected to be a net loss to Alberta taxpayers of more than $2.5 billion.
How did we get here? For years, a broad coalition has pushed for more processing of bitumen in the province — so-called value-added — apparently at any price.
Under Premier Ed Stelmach, Alberta’s government announced a scheme to accept bitumen in lieu of cash as royalty payments and to contract for processing of this bitumen within Alberta. The government subsequently secured an agreement with the North West Redwater Partnership (NWRP) about which they were hardly honest with Albertans or even with themselves.
To this day, members of Stelmach’s cabinet insist that the deal didn’t include taxpayer cash or loan guarantees.
Such an assertion is hogwash. Alberta’s government had pledged to do much more than providing the refinery with bitumen. The government would guarantee a 10 per cent rate of return on the expected $5 billion capital costs of the refinery and cover operating costs through tolls paid for bitumen processing.
The deal was a massive bet on two things: like any refinery, it was a bet on the spread between the value of refined products and the market value of bitumen, but in this case it was also a bet on the government’s ability to stick to measures in the original agreement meant to protect taxpayers from more costs.
A younger Jason Kenney would have told us that such a bet on government resolve wasn’t wise. And he would have been right.
Despite the fact that the public-private partnership was supposed to leave capital cost risk with the NWRP, when costs ballooned and the refinery was repeatedly delayed, the government inexplicably agreed to increase the payments we’d make to process bitumen to cover the now-higher capital costs.
But, that’s not all. In addition to signing all of us up to pay for NWRP’s failures, the government agreed to loan the partnership, a private entity, hundreds of millions of dollars so that they could meet their obligations and remain in a position to profit from the deal they’d just renegotiated.
The processing costs under the new contract — more than $70 per barrel to process bitumen into diesel — will almost certainly lose money on almost every barrel processed.
And, this week, Jason Kenney’s government agreed to extend that contract for 10 more years, except that now we’ll be paying part of those tolls to ourselves, having paid $825 million to the original partners for an ownership stake in the refinery.
The deal, at least as far as I can tell from the opaque disclosures, will see the government pay $425 million to NWRP, buying them out of the project, and would pay the other project proponent, Canadian Natural Resources, $400 million. In return, the Alberta Petroleum Marketing Corporation (APMC), a Crown corporation, becomes a 50 per cent owner of the refinery, which will now be operated by Canadian Natural. In addition to these details, we’re told that refinancing and other optimizations will reduce the net losses to Albertans over the life of the deal by $2 billion.
I think I’ll wait to see the fine print before counting on those savings.
If Jason Kenney were still the leader of the Opposition or an agitator for the Canadian Taxpayers Federation, he’d be thundering from the pulpit for transparency, and that’s what we need today. He’d also be demanding to know how we got to this place. He should, immediately, make sure that Albertans have the information the younger version of himself would rightly have demanded.
Albertans need to see more complete due diligence on this deal. A cryptic media briefing and a mix of financial metrics with no context simply isn’t good enough. After 10 years of billion-dollar losses from supposedly risk-free contracts, “trust us” just isn’t going to cut it.
Next, we need an inquiry to learn how we got to this point, who profited from this and other similar deals, and why decisions were made that put Alberta’s government in a position to lose so much money.
Alberta Premier Jason Kenney on June 18. Will the Jason Kenney of today put an end to deals like the Sturgeon Refinery that cost Albertans billions of dollars, Andrew Leach asks. (Jason Franson/Canadian Press)
We just spent nearly a billion dollars to buy private entities out of a contract that, having been renegotiated by our government, placed us billions of dollars in the hole. And the government of the day loaned one of those entities hundreds of millions of dollars to ensure they remained in a position to collect this payday.
This should never have happened and should never happen again.
But deals like this have kept happening. The provincial investment in the ill-fated Keystone XL pipeline and the securing and subsequent divestiture of contracts to move crude by rail will each cost Albertans billions of dollars as well. And we also know next to nothing about why and how these losses added up.
The Jasons Kenney of the past would want more answers than we’ve been given so far, and a clear plan to make sure these deals are the last of this kind in Alberta.
Will the Jason Kenney of today stand up and make it so?
- Posted on:
- July 12, 2021
- 5 minute read, 1048 words
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