Alberta deals OSUM a blow with test decision
NORVAL SCOTT
September 6, 2007
CALGARY -- Alberta Premier Ed Stelmach bowed to public pressure late Tuesday and stopped companies from testing for oil beneath water bodies in the province, a decision that was welcomed by environmental protesters but could threaten the future of OSUM Oil Sands Corp.'s crude project at Marie Lake.
Privately held OSUM had secured approval from provincial regulators to test for oil contained underneath the lake, which is 300 kilometres northeast of Edmonton, and plans to develop a crude project there. But Mr. Stelmach overturned that decision, calling the technology that OSUM plans to use to extract crude as "unproven" ... "I have decided that seismic testing on Marie Lake will not proceed," he told reporters in Edmonton late Tuesday.
That's a setback for Calgary-based OSUM, which is essentially being prevented by Alberta from pursuing a crude project on land leased to it for that very purpose. OSUM bought the Marie Lake lease last fall for about $3-million in a Crown land sale held by the provincial government's Department of Alberta Energy.
The company had hoped to extract 30,000 barrels of crude a day from under the lake via shaft-and-tunnel technology, accessing the oil via wells drilled from below the crude reservoir, rather than from above.
Last month, Alberta Sustainable Resources Minister Ted Morton approved OSUM's plans to test for crude at the site, albeit with strict environmental and safety conditions. But local residents object to the plans, alleging Alberta Energy failed to consider whether Marie Lake is suitable for development. The residents say seismic testing could damage the lake's fish stocks and ecosystem. They also registered concern about the potential impact of the oil project itself, which has yet to receive regulatory approval.
OSUM, which recently raised $56-million to pursue development of Marie Lake and other projects, says seismic testing has occurred on many lakes in Alberta without incident, and notes that its shaft-and-tunnel plan was developed in the Alberta government's underground test facility near Fort McMurray in the 1970s and 1980s. It also says the tunnel system has a smaller environmental footprint than traditional oil sands extraction methods, requiring fewer wells and less steam production.
But after protests last week at his riding office, the Premier overturned the regulator's decision on testing. No company will be allowed to test under any Albertan water body until ministers complete a policy for bitumen extraction in such regions, said Alberta Energy spokesman Jason Chance. He couldn't estimate how long before a policy is in place.
Mr. Chance did say Mr. Stelmach's decision was made specifically in response to concerns over the shaft-and-tunnel technology, rather than the seismic testing, but wouldn't comment on why the testing has been prevented from taking place if it wasn't a concern.
OSUM CEO Richard Todd said he learned of the Premier's decision only late Tuesday, when told by journalists, He said the company has not received a formal written indication of why the seismic application for Marie Lake has been suspended.
"We're a responsible corporate citizen who has had their regulatory approval overturned. My question is, is Mr. Stelmach really open for business to responsible Albertan companies or not?" he said in an interview. He said OSUM aims to pursue "every alternative to recover the costs of this knee-jerk action."
He added the company is treating the suspension not as a cancellation but as a delay, and looks forward to demonstrating the benefits of its technology to the provincial government and regulators.
