UCP increases max amount it’ll allow itself to lend to oil refinery

Last year, Sonya Savage, minister of energy, and Travis Toews, president of the Alberta Treasury Board and the minister of finance, recommended to the lieutenant governor that Toews be authorized to do the following:

• Make advances to or purchase securities of the Alberta Petroleum Marketing Commission
• Raise money for these advances or securities purchases through issuing and selling
  • Notes
  • Bonds
  • Debentures
  • Interest-bearing treasury bills
  • Non-interest-bearing treasury bills
• Approves the terms and conditions of any securities he issues

The lieutenant government approved the recommendation.

This order was specifically related to the financing of the North West Redwater Sturgeon Refinery and limited Toews’ financing the refinery to a maximum of $1.25 billion (even if indirectly through the commission).

Just 5 months later, the government increased that maximum to $1.5 billion. And now this past week, they increased the maximum once gain, this time raising it by an extra $300 million.

The refinery is located about 45 kilometres northeast of Edmonton, in Sturgeon County, and is operated by North West Redwater Partnership, a 50/50 partnership between North West Refining and Canadian Natural Upgrading, a subsidiary of Canadian Natural Resources.

Although the facility had been processing synthetic crude oil into diesel since November 2017, it only became fully operational later this year after additional work and testing had been completed on their gasifier. Today, it also processes bitumen feedstock, 75% of which will come come from the Alberta Petroleum Marketing Commission.

The facility was supposed to be up and running in 2016, but it faced 4 years of constant delays.

According to the Alberta Energy’s 2019–2020 annual report, APMC has borrowed nearly $800 million from the Alberta Treasury Board for the refinery.

APMC has borrowed $439 million from Treasury Board to lend to the refinery, with the commission obtaining 25 per cent voting interest in the NWRP Executive Committee while the loan is outstanding. In addition, APMC has borrowed $342 million from Treasury Board to pay for pre-Commercial Operations Debt Tolls to NWRP.

As of this past September, the Alberta government has paid around $466 million since 2018 just to service the debts it has incurred related to the refinery, averaging about $27 million a month throught the APMC.

And as of this month, the Alberta government now has to pay an additional $21 million a month to start paying down the principal on the loans it owes related to this refinery.

That’s nearly $50 million. A month.

According to the above-mentioned annual report, the processing agreement between the APMC and the NWRP had a net present value of -$2.52 billion last summer. (Yes, that’s a negative sign.)

Based on the analysis as at the authorization date of these financial statements, APMC determined the agreement has a negative $2.52 billion net present value, most significantly influenced by two variables, pricing and on-stream factor. The net present value is a snapshot in time and will change with commodity prices.

It might be a while before they start paying us back.

But they have some time. After all, the contracts the PCs signed over the last decade hast tied down subsequent governments for 30 years, including the UCP.

Speaking of the PC, here’s some interesting information.

Ian MacGregor, CEO and chair of North West Refining, is a member of the North West Redwater Partnership executive leadership committee, as well as its management committee. He has been involved in most aspects of the Sturgeon refinery’s design, corporate structure, financing, and construction.

Another area that MacGregor has been involved in is provincial politics, donating thousands of dollars to political parties over the last several years. He donated $1000 to the Calgary-Bow PC constituency association in 2007, $500 to the PC Party in 2008, as well as $2000 to Leah Lawrence’s PC campaign that same year. In 2012, he donated $1000 to Alana DeLong’s PC campaign and $500 to Cecilia Low’s PC campaign. He contributed $1000 to Byron Nelson’s PC campaign in 2015, and then later that year, donated $5,000 to the Alberta NDP during the provincial byelection. He also donated $450 to the NDP in 2018. In 2019, he donated $5,000, split between the Alberta Party, NDP, and the UCP, including a $1,000 campaign contribution to the Alberta Party.

That’s over $16,000 to 4 major parties since 2007.

Canadian Natural Resources is also no stranger to political donations, donating nearly $125,000 to political parties, candidates, and constituency associations between 2004 and 2015. Parties included the PC Party, Wildrose, and the Alberta Liberals. Candidates have included such names as Derek Fildebrandt and Jeff Callaway. Constituency associations included Athabasca-Sturgeon-Redwater, where the refinery is located, various Calgary ridings, and Grande Prairie-Wapiti, the home riding of Travis Toews.