With no room to grow, Canadian town evicts oil sands companies
The Canadian town of Fort McMurray, population 76,000, is the聽听辞蹿 Alberta鈥檚 oil sands largesse--but the town is bursting at its seams with nowhere to expand because the land surrounding it is owned by oil companies.
The government鈥檚 answer to this is to聽聽on 22,000 hectares of land surrounding Fort McMurray鈥攅ffective immediately.
In an agreement announced on 26 July, the government promised lease-holders fair reimbursement, with the municipality purchasing the land from the province over the next five to 15 years.
This acreage is more than twice the size of Fort McMurray today, and the idea is to make the town two-thirds the size of Calgary. (Related Article:聽)
For Fort McMurray鈥攚hose population is expected to double by 2030 thanks to the very oil sands industry is must now evict鈥攊t is a necessity. The town needs more housing and infrastructure, but has nowhere to put it.聽
鈥淭his lack of land has tied our hands when it comes to planning future development, but it鈥檚 also led to all sorts of challenges from sparse housing options, limited commercial retail entities and a non-existent space for social profit groups: churches, community halls, store fronts, just to name a few,鈥澛�Mayor Melissa Blake聽聽on 26 July, when the decision was announced.聽鈥淭oday that all changes.鈥�
Oil sands companies have mixed feelings about the deal. Though the purchase of their leases will be based on fair market prices, some are not convinced they鈥檒l be compensated for all the money they鈥檝e spent developing oil sands here鈥攋ust to lose their leases.
The most affected will be Value Creation Inc., which holds leases on the largest swathe of territory slated for Fort McMurray鈥檚 urban development. According to the Edmonton Journal, the company had planned to develop oil sands reserves here and then return the land to the Fort McMurray authorities鈥攁long with newly laid roads鈥攊n 10 years. But Fort McMurray can鈥檛 wait.
Value Creation says the decision, at least, removes any uncertainty about what is going to happen with these leases. Company advisor Rick Orman noting that the government had been stringing it along for four years while the company continued to spend money on development. Orman also questioned the need to expand Fort McMurray to such an extent, calling it 鈥溾��. (Related Article:聽)
Alberta Oilsands Inc. (), however, is less wary. While it鈥檚 invested $50 million developing its Clearwater assets here since 2007, it鈥檚 getting all its money back, plus interest, and some potentially sweet replacement property thrown into the deal.
AOS CEO Binh Vu told Oilprice.com:聽"While we are disappointed at not being able to move to production at Clearwater, with the malaise in the junior markets AOS is trading today at a market capitalization of only half of what the government remuneration will be based on our expenses at Clearwater and interest--so it will be a real boon for current shareholders and investors."
Do companies having their leases cancelled have anything to worry about and should their shareholders be concerned? We don鈥檛 think so 鈥� we copied the below from the Mines and Mineral Act which clearly states how companies will be compensated:
聽(Alberta Regulation 317/2003) establishes the compensation payable by the Crown for cancelled agreements. Compensation includes at least the following:
1.聽 Cost of acquiring the lease including annual license fees and application fees;
2.聽 Wasted exploration and development expenditures;
3.聽 Reclamation costs;
4.聽 Interest of approximately 5 per cent (calculated as Alberta Treasury Branch prime plus 1 per cent).
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