It's a big step for Alberta, and a tale of success for Sturgeon County.
Last Wednesday, Sturgeon County's Economic Development Board fall business breakfast celebrated the sanctioning of a $5.7-billion Phase One bitumen refinery in Sturgeon County.
The North West Redwater Partnership Refinery will be built and operated by North West Upgrading and Canadian Natural Resources (CNRL).
The refinery was in the works for almost 10 years. Construction was supposed to start in 2008 but plans were stalled by that year's global recession.
At the breakfast, Doug Bertsch, vice-president of regulatory affairs for North West, announced that the first phase of construction will now start in 2013 and is expected to finish by 2016.
Once completed, the refinery will process about 50,000 barrels of bitumen a day into diesel and other products.
While many companies look to extract bitumen, few of them end up refining it to a finished product.
Bertsch said Alberta's economy would profit from producing diesel instead of sending it to refineries in the United States.
"You can argue that it's cheaper to refine there but consider the transportation cost and the benefit of taxes," he said.
"Sending products away, those taxes, benefits and jobs are gone to that location, eventually forever … . You can only send bitumen to regions that have upgraders or refineries while you can send diesel everywhere."
He added that the U.S. market is expected to grow as an exporter of oil and could become a serious competitor to Canada.
Diesel is a developing market, it's easier to export and it has a less significant impact on the environment in case of a leak, he said.
The refinery can fill the need for diesel in Alberta, while selling its product across the globe.
"It allows Alberta access to greater markets. Some of the (Asian) Eastern Tigers use diesel primarily. Gasoline is less of a commodity to them," he said.
"India and China are outstanding examples, and Alberta looks to head those markets."
Following the first phase of construction, Bertsch said North West plans to extend the existing facility with two more phases, eventually transforming another 100,000 barrels of bitumen per day.
For the first phase of 50,000 barrels, the refinery will receive 37,500 barrels from the Alberta government. Canadian Natural Resources will supply 12,500 barrels.
The government's supply comes from the province's bitumen royalty-in-kind program, giving the province the option to take its royalty share of bitumen in kind rather than in cash.
This means the government pays North West a processing fee to refine the bitumen and receives revenue from the diesel in return, which is expected to sell at a higher price on the market than the bitumen.
The agreement between North West and Alberta is in place for 30 years.
Bertsch said the project also promises environmental benefits.
Any carbon dioxide (CO2) produced by the refinery will be piped about 200 kilometres south to an oilfield near Red Deer. There it will be injected underground and used to recover oil.
Bertsch said the process will reduce CO2 emissions by about two thirds and make the refinery the first of its kind in environmental standards.
Industry
North West is not the first heavy industry looking to settle in Sturgeon County.
A number of light and medium industrial developments are located in Sturgeon Industrial Park, near the southern boundary of the county's portion of the Industrial Heartland.
The industrial heartland in the north of the park has a number of heavy industry developments already built or proposed, such as Williams, a natural gas pipeline and transportation business, or Magnum Cementing Services, an oilfield servicing company.
Kyle Reiling, manager of Sturgeon County Economic Development, said industries such as North West not only bring economic development but an integrated approach to existing businesses.
"We see servicing companies that supply services for the heavy industry … and what brought North West in the first place was that land was available, there was an existing infrastructure, and council was very willing to work with them," he said.
"There's really strong rail and strong pipeline infrastructure in that area."
The county is now looking at road improvements.
Reiling said the intersection of highways 15, 37 and 825, known to be a difficult traffic block, will be "straightened out." Highway 825 may even become a four-lane highway.
And Williams and North West are working with Alberta Transportation to build a high-load corridor, relocating or burying power lines to allow for a nine-metre-wide roadway to move large modules to their facilities.
He added that North West would grow communities such as Morinville, Gibbons, Bon Accord, St. Albert and Fort Saskatchewan.
North West hopes to draw workers from the area, instead of setting up a base for temporary foreign workers.
"It may affect the job market in Fort McMurray because now you have that transient workforce. They will choose to work here and be right next to their family," he said.
David Pattison worked in economic development before taking on the role of councillor for the Town of Morinville.
North West plans to employ about 3,000 to 5,000 workers for the construction phase of the refinery. Pattison said these numbers would most likely double for employees working in adjacent service industries.
He added that workers from the refinery who settled in nearby communities bring spouses who need employment, and businesses to shop in.
"And one of the key things (North West) wants to do is to work with the school division so students know that if they look at labouring jobs they have these opportunities, and management and career paths," he said.
Pattison said Morinville has already worked with developers on providing different housing options to accommodate residential growth.
The town is also looking to create the position of an economic development officer to assist in future planning initiatives.
"We are not a community so different from others. It is a competitive environment in which we live and we need to find ways to attract residents and work with the development industry so that we have housing and recreational services," he said.
"Hopefully we'll be able to attract some businesses as well and that's the non-residential component. That's where you see your assessment growth."
Heartland
Neil Shelly, executive director of Alberta's Industrial Heartland Association, a non-profit association of municipalities dedicated toward sustainable eco-industrial development, said the Alberta government could have earned about $500 million in royalties had the refinery been built a year earlier.
For the longest time, Shelly said the Alberta Heartland was a place where little happened on the business front, and people wondered if it was the right place to invest.
"This is the first major project we've seen in the area and the value of the project is enormous," he said.
"It restores the confidence in investing in the region."
Shelly said new sources of energy would push money into the local economy and government spending, lower base taxes, build infrastructure and support research and development.
The money would also aid the government's spending on social programs.
Shelly said about 14 major industrial investments were currently underway in the region, which in turn create synergies and products that could be shared by companies in light, medium and heavy industries.
Shelly expects North West won't be the last refinery to settle in the area.
"There is enough room to accommodate seven potential upgraders and North West is the first of these to proceed," he said.
"We had studies done on impacts, water availability, water quality… and we can handle more development in the area. It can be done in an environmentally responsible way."
Reiling said the impact on the region's tax base is expected to be dramatic, but the county was positioning itself for growth in the long run.
"(North West) are looking at finishing construction in 2016 and then they need to be operational before the county sees any taxes. We still have to bring in the infrastructure, look at water lines … but eventually we will see tax returns of over $10 million," he said.
"In the meantime it's good that we see this light and medium industrial growth. That adds a nice balance."
