EXTRAORDINARY GROWTH

AEUB HEARING INTO SUNCOR‟S PROPOSED VOYAGEUR PROJECT EXTRA-ORDINARY GROWTH Regional Municipality of Wood Buffalo July, 2006 1 EXTRA-ORDINARY GROWTH PRESENTATION OUTLINE 1. Introduction 2. Previous Alberta Experience • New Towns Act • Cold Lake • Wood Buffalo 3. 4. Suncor‟s Voyageur Application Towards a Solution AEUB Hearing – Voyageur Project 2 1. Introduction • IPS prepared and filed a report which evaluated historical extra-ordinary growth, emergency services, health and education. • Today, IPS will focus upon extra-ordinary growth experience in Alberta and Wood Buffalo AEUB Hearing – Voyageur Project 3 2. Previous Alberta Experience New Towns Act • Alberta Act passed 1956 – repealed in 1994. • Interim form of local government with special funding provisions. • Following a rapid growth period, conventional local government structures could assume or resume municipal responsibilities. • Communities that took advantage of the New Towns Act faced rapid growth from oil and gas and forestry developments. AEUB Hearing – Voyageur Project 4 2. Previous Alberta Experience New Towns Act • Examples of existing municipalities who took advantage of the New Towns Act: Drayton Valley (1956) Hinton (1956) Whitecourt (1961) Fort McMurray (1964) Fox Creek (1967) • A board of Administrators – some elected, some appointed • Viewed by some as giving up local autonomy to access extra-ordinary funding to accommodate rapid growth. AEUB Hearing – Voyageur Project 5 2. Previous Alberta Experience Cold Lake • Large in-situ oil sands project proposed by Esso Resources in 1978. • Region was forecasted to grow from 19,800 in 1979 to 35,000 by 1988 (15,200 growth). • The estimated public infrastructure required to accommodate the proposed project was about $150 million. In today‟s $ this is about $340 million (3% inflation). • An additional $400 million investment was required from the private sector for housing and commercial industrial development. In today‟s $ this is about $920 million. AEUB Hearing – Voyageur Project 6 2. Previous Alberta Experience Cold Lake • This advanced planning for housing and infrastructure was undertaken by the Alberta Executive Council, Esso Resources and members of provincial government departments. The management of the process was achieved through the Cold Lake Project Coordinating Committee. • This initiative was undertaken in recognition of the lag time between a decision to proceed and the time it takes to deliver the infrastructure to meet the need. Waiting for a government or corporate board approval is too late. AEUB Hearing – Voyageur Project 7 Master Schedule ( Figure 3) AEUB Hearing – Voyageur Project 8 2. Previous Alberta Experience Cold Lake • Oil prices fell along with rising inflation – mega project was cancelled. • Rather than building a mega project all at once over 8 years, the Cold Lake Project has been phased in over more than 25 years. • Hard lessons were learned during this process – Some pre-investments were made by both private and public sectors in housing and infrastructure prior to the mega project being cancelled. • The fundamental questions that require answering are: – Who needs to share this risk? Taxpayers / shareholders? – And how? AEUB Hearing – Voyageur Project 9 2. Previous Alberta Experience Wood Buffalo • Historically, Wood Buffalo has been settled by Europeans since the fur trade. Aboriginal people have lived here long before that. • Fort McMurray served for many years as the resupply centre for the Canadian Arctic because of its role as the railhead / barging terminus. • Wood Buffalo now hosts the oil sands industry which is now known world-wide as an important source of bitumen and synthetic crude oil. • Great Canadian Oil Sands (now Suncor) built the first oil sands commercial project between 1964 and 1970. AEUB Hearing – Voyageur Project 10 2. Previous Alberta Experience Wood Buffalo • The town of Fort McMurray applied for and was granted New Town Status in 1964. The town grew from a village of 1200 to a modern town of 6500 people in this six (6) year period. The New Town was able to accommodate the major population increase without major financial strain. All major urban development was confined to the lower townsite. • During the “Syncrude Project” (1973 – 1978) the town grew by an additional 15,000 people. Bill 55 created the office of the Northeast Regional Commissioner in 1973. It gave the Commissioner sweeping powers to waive certain requirements under provincial acts. AEUB Hearing – Voyageur Project 11 2. Previous Alberta Experience Wood Buffalo • The town was forced to expand up onto the plateaus and across the Athabasca River. Housing prices rose to 60% higher than provincial averages due to a number of factors such as local inflation (25%), disbursed residential development patterns, and underestimated operational employment. • In spite of the New Town status and the existence of the Northeast Regional Commissioner, the town was essentially bankrupt following the Syncrude construction. The fact that the Municipality did not receive property taxes from the oil sands plants contributed to the town‟s precarious financial position. Fort McMurray became a City in 1980. AEUB Hearing – Voyageur Project 12 2. Previous Alberta Experience Wood Buffalo • One of the achievements by the Northeast Regional Commissioner was the creation of “A Preliminary Plan for Regional Development in Northeast Alberta” in February of 1978. The purpose of the plan was “to provide a framework for the orderly development of Northeast Alberta”. AEUB Hearing – Voyageur Project 13 2. Previous Alberta Experience Wood Buffalo • “The need for this framework will be created by the exploitation of the resources of this largely uninhabited region which will take place in the interests of Albertans and all Canadians. The nature of the resource development requires the meticulous attention given to the examination of land use alternatives and the determination of the optimal use of land. Even more important, this framework is required to ensure that the interests of the people who reside in Northeast Alberta, now and in the future, are considered and accommodated.” AEUB Hearing – Voyageur Project 14 Map 15 NEARP AEUB Hearing – Voyageur Project 15 3. Suncor‟s Voyageur Application • Taken in isolation, a stand-alone upgrader in an operation state does not exact a large socio-economic impact upon the RMWB. We have heard Suncor state that 300 people (employees and contractors) would be employed and this is estimated to add 1000 people to the area. • Suncor‟s EIA states that the Voyageur Upgrader is proposed to upgrade 235,000 bpd of bitumen, primarily from Suncor‟s Firebag In-situ Oil Sands Project and produce 190,000 bpd of upgraded product. AEUB Hearing – Voyageur Project 16 3. • Suncor‟s Voyageur Application Based upon Suncor‟s EIA and media releases, this is our understanding of the existing and proposed bitumen supply and upgrader capacity to raise production up to 540,000 bpd of upgraded product. Bitumen Source („000 bpd) Mining In-situ Total 289 35 324 294 140 434 351 240 591 330 340 670 Upgrader („000 bpd) Upgrader 1&2 260 350 350 350 Voyageur --127 190 Total 260 350 477 540 YEAR 2006 2008 2010 2012 AEUB Hearing – Voyageur Project 17 3. Suncor‟s Voyageur Application • Suncor, at this hearing, stated that the company had just recently filed with the regulators an application for Firebag 4 to 6. (Page 507, line 25-27, transcripts – EUB Voyageur Project Hearing.) • Therefore, it appears that bitumen supply for the Voyageur Upgrader will all come from yet-to-be approved in-situ and mining projects: 200,000 bpd 35,000 bpd In-situ (Firebag) Mining Total 235,000 bpd of Bitumen AEUB Hearing – Voyageur Project 18 3. Suncor‟s Voyageur Application • You can‟t have a stand-alone upgrader operating without bitumen feedstock – feedstock is yet to be approved by this board and is sourced 95 – 97% from Suncor‟s operations. • The new sources of bitumen and their socioeconomic impact should be included in the Voyageur SEIA as an integral part of the Upgrader project. They were not – therefore, the SEIA is, in our opinion, deficient and understated. AEUB Hearing – Voyageur Project 19 3. Suncor‟s Voyageur Application • Assuming that 100% of the required 235,000 bpd of bitumen supply for Voyageur Upgrader is sourced at yet-to-be proposed and approved oil sands projects in the RMWB, the following range of population impacts could result: COMPONENT RMWB ADDITIONAL POPULATION INSITU Voyageur Upgrader Bitumen Supply TOTAL POP~IMPACT 1350 1700 3050 MINING 1350 5900 7250 AEUB Hearing – Voyageur Project 20 3. Suncor‟s Voyageur Application • Further, over the next two years, the completion of Firebag Stages 2 to 4 will see another 105,000 bpd of bitumen production developed which could add a further 170 people at the Firebag site. This could increase the population of Wood Buffalo by a further 750 people. AEUB Hearing – Voyageur Project 21 4. Potential Solutions Arising out of a Broad Inquiry • Suncor and other oil sands companies work with the infrastructure providers in the RMWB to convince the Alberta government to: 1) Create an Infrastructure Co-ordinator who reports directly to Executive Council. 2) This Infrastructure Co-ordinator chairs a committee of senior civil servants from departments affected which includes representatives from affected municipalities (e.g. RMWB) and industry to recommend extra-ordinary funding for regional infrastructure arising from oil sands development. AEUB Hearing – Voyageur Project 22 4. Potential Solutions Arising out of a Broad Inquiry 3) An extra-ordinary infrastructure fund be created, segregated, and funded, for example, with a fixed percentage from existing royalties collected from the oil sands operations. 4) The scope of the oil sands extra-ordinary infrastructure fund would extend to all oil sands regions in the province. AEUB Hearing – Voyageur Project 23