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Arrested Development: Why Strathcona County loves its hydrocarbon projects

Arrested Development: Why Strathcona County loves its hydrocarbon projects
Business
EDMONTON Strathcona County, a short drive east of Edmonton in the heart of Canadas largest hydrocarbon processing region, has embraced large industry since the early days of Albertas oil boom. Its here that Imperial Oil Ltd. in 1948 installed Albertas first refinery bought as scrap metal for $1 million from Whitehorse, Yukon, where it operated during the war to process oil from the Leduc oil gusher.

As the oil and gas industry grew, more companies moved in to feed off the bounty and each other. Refineries and upgraders, petrochemical and fertilizer plants, pipelines and railways transformed the areas flat agricultural landscape and that of nearby communities known as Albertas Industrial Heartland into a hub of towering steel structures, belching plumes, roaring trucks and trains.

Strathcona County now boasts Albertas three refineries: Imperial Oils Strathcona, Suncor Energy Inc.s Edmonton Refinery and Royal Dutch Shell PLCs Scotford. Up to 40 per cent of Canadas oil moves on pipelines through here and the county houses nearly 100,000 people, many of them employed locally, as well as 11,000 small businesses. The broader Industrial Heartland region, meanwhile, is home to more than 40 large plants.

Many other Canadian communities are resisting development, but Strathcona County is proud of its industrial roots and would love to have more. Industry has meant jobs, high incomes and tiptop community infrastructure. Rather than block development to avoid risks, Strathcona County works with industry to do it responsibly and manage impacts. Residents and industry are so inter-connected, activism gets no traction.

Lately, the county advocated for the Northern Gateway oil pipeline which would have started on its lands that was rejected by Ottawa last month, and against the government-imposed moratorium on tankers off the West Coast.

It also wants to attract more industry that turns Albertas hydrocarbon resources into high-value products, a goal shared by the provinces left-leaning NDP government.

The provincial government on Dec. 5 announced royalty tax credits for a new $1.85 billion facility by Inter Pipeline Ltd. that will process propane into propylene. The government also announced royalty tax credits for a project that will cost up to $4.2 billion by Pembina Pipeline Corp. and Petrochemical Industries Co. to build a propylene and polypropylene facility in nearby Sturgeon County. Meanwhile, Shells refinery just completed a major growth project that will increase hydrocracker production capacity by 20 per cent.

Strathcona Countys efforts havent been without setbacks. At one point, a handful of upgraders were planned near the North Saskatchewan River, but many were cancelled because of changing industry conditions in the aftermath of the global financial downturn.

In an interview in its modern town hall, linked to a gigantic library and graced by striking aboriginal art, Mayor Roxanne Carr said that decades of experience partnering with industry, and having good policies to deal with impacts, top-notch services and high wages have made for good relations with industry. There has not been any organized opposition to hold it back, she said.

We attract people from all over Canada to live and work here, the first-term mayor said on a frigid fall morning. With industry we have been able to provide the highest standard of life and quality of life to our residents. We grew beyond a mere bedroom community into having a huge job engine within our own borders.

The area is bustling with activity despite the recession hammering the rest of the province, thanks in part to the construction of the $8.5-billion North West Refinery in Sturgeon County.

Click here for a searchable database of stalled and cancelled resource projects in Canada.

Strathcona Countys unemployment rate is estimated at 5.3 per cent for 2016, compared to the province-wide rate of 7.8 per cent (Calgarys unemployment has soared above 10 per cent), and average annual income is more than $82,000, compared to $66,000 for Alberta.

Thanks to industry taxes, Strathcona County can keep residential taxes low (it boasts that its tax revenue is 64 per cent non-residential and 36 per cent residential, compared to 10 and 90 per cent, respectively, in many other centres in Alberta). Residential taxes will be even lower in 2017. Its council has just approved a 2.15 per cent cut in the residential tax rate.

Carr credits steps taken decades ago by municipal leaders of Strathcona County, Fort Saskatchewan, Lamont County and Sturgeon County. They designed the right conditions to attract and partner with industry, such as forming consistent policies and playing up the areas good transportation links, large land base and eager workforce.

Cooperation with industry led to many initiatives to ensure the community enjoys clean air and is able to respond if there are incidents. Meanwhile, the county has continued to nurture farming and the environment around it.

It takes a period of time to build that trust relationship and understanding of each others position, Carr said. A lot of people from across Canada have come to visit us in Strathcona County. And they go: Arent you scared of industry? No. Industry are our partners and add to our quality of place here. Their taxes have helped pay for it.

Carr said industry is just as eager as the municipality to avoid negative impacts on air, water and land, since many of its employees are also residents. For example, monitoring stations have been established to ensure air quality is measured and addressed if necessary.

Communities that reject natural resource development are giving up opportunities, Carr said.

When you have a less diversified economy, you dont have opportunity for your young people, she said. They leave your town and your area. We are able to offer our workforce a highly diversified number of career paths to go on.

In turn, Strathcona County has become a place where big industry prefers to invest.

World-class companies prefer to deal with a municipality that has experience in heavy industry and has a track record of not changing rules and regulations after they make their investments, said Gerald Gabinet, the countys director of economic development and tourism.

One of those companies is Shell, the Anglo/Dutch oil major whose cluster in the municipality isso large that its as big as downtown Calgary. In 1984, it built a refinery that processes crude from its oilsands operation in Fort McMurray. The same year, built a petrochemical facility that takes a byproduct from the refining process to make styrene.

In 2000, it added another chemical plant to make anti-freeze and plastic bottles. Three years later, it opened an upgrader to process bitumen into oil, which was expanded in 2011.

The latest project is the Quest carbon-capture-and-storage unit, opened last year to capture greenhouse gas emissions from the upgrader, transform it into a liquid, pump it 65 kilometres away by pipeline and then two kilometres underground into a saline aquifer.

Arent you scared of industry? No. Industry are our partners and add to our quality of place here. Their taxes have helped pay for it

The global demonstration project, which received provincial and federal government aid, has established Alberta as a pioneer in an emerging technology to capture greenhouse gases from large plants.

Since 2014, we have had over 50 tour delegations come through governments, academics, NGOs, technical people, form Asia, Europe, the Americas and it hasnt slowed down, said Stephen Velthuizen, external relations manager for Shell at the Scotford site, as the complex is known.

Shell employs 1,300 full-time employees and thousands more contract workers in the complex. It spends hundreds of millions of dollars on goods and services and hundreds of thousands on community investment, Velthuizen said.

The multinational picked Strathcona County for the multi-billion-dollar complex because the community had the necessary infrastructure already in place, has a large skilled workforce nearby, and there are synergies between its facilities and those of other operators that enable efficiencies and waste reduction.

The oil company also knows it wont have residences sprouting in its backyard because of the areas favourable land use planning.

The nice thing about Strathcona County and actually all the communities in the Heartland region is they are willing to come to the table and we can have discussions about mutually beneficial solutions, Velthuizen said. We all have different drives and motivations, but, in the end, we are all aligned that we are all better off building a better community.

So far, we get along pretty good, Hofer said.

One of its closest community partners is a 100-member Hutterite colony so close to the site that it leases some of Shells lands for farming and livestock grazing. Colony manager George Hofer said Shells arrival has meant more traffic, but relations are good and air quality has not changed. When issues emerge, the two sides get together to sort them out.

Across the North Saskatchewan River in Sturgeon County, construction of the North West refinery is at its peak. Cranes stand tall over the complex, which is on track to upgrade bitumen into diesel by the end of next year.

Partners North West Refining and Canadian Natural Resources Ltd. picked the area because of its proximity to pipelines from major oil producing areas, existing infrastructure, and a large talented workforce that could return home in the evening, eliminating the need for work camps, said Doug Bertsch, North Wests regulatory and stakeholder affairs vice-president.

North West is one of the few mega-projects still underway in the province. It employs 7,000 workers on site and another 3,000 in local fabrication shops.

When it was envisioned a dozen years ago, proponents started from a blank sheet of paper to incorporate technologies that would meet the highest environmental expectations. Carbon would be captured and redeployed for enhanced oil recovery, most water would be recycled, power use would be kept to a minimum and sulphur recovery would be maximized.

We are doing it the right way, and weve had a very high level of acceptance, Bertsch said while showing off the construction site, as the last major module of the refinery was placed on its foundation. Indeed, he said, there has not been any opposition at all to the project.

The Alberta government helped the first North American refinery built in a generation get off the ground by guaranteeing $300 million of debt and committing to provide feedstock collected as a royalty-in-kind from oil producers. The refinery will meet diesel demand in Western Canada, where there are often shortages despite its oil bounty.

Two expansion phases have received regulatory approval, but there has not been a decision yet on whether to build them. If they go ahead, the refinerys output would increase 150,000 b/d, providing the area with yet another jobs gusher and another success story to build on.
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