ALF V1

Instead of getting behind ill-conceived "ABC plan," western premiers should use their clout to call for a national pension summit and to discourage Harper and Ignatieff from reaching watered-down deal on EI

DAWSON CITY, YK – Canadians desperately need pension reform, but a new proposal for a government-sponsored supplemental pension plan being floated by the Alberta and B.C. governments may actually make a bad situation worse.

That was the message delivered today by the president of the Alberta Federation of Labour (AFL) and other regional labour leaders as they followed the western premiers and territorial leaders to their annual policy summit, being held this year in Dawson City, Yukon.

"As a result of the global recession and the collapse in equity markets, it has become painfully obvious that our existing patchwork system is not up to the task of providing adequate retirement income for most Canadians," says Gil McGowan.

"But the answer isn't to introduce a meager supplemental program that employers can simply opt out of and which shifts all the risks onto the shoulders of individual Canadians. What we need is a cohesive system that makes a guarantee to Canadians that they won't face the prospect of living in poverty in their old age."

To back up the AFL's argument that the Alberta-B.C. proposal is not the right way to address the unfolding crisis in retirement income, McGowan unveiled an analysis prepared for the Federation by PBI Actuarial, a Vancouver actuarial firm specializing in pension management (click here for analysis and accompanying charts).

The analysis shows that – even when added to existing benefits provided by CPP and OAS – the proposed ABC plan would generate as little as 14 per cent of pre-retirement income for individuals enrolled in the plan – far short of the recommended threshold of 70 per cent.

The ABC plan also gets low marks because it allows employers to opt out and it wouldn't require all employers to match contributions made by individual employees.

Perhaps the biggest drawback, PBI argues, is that the ABC plan would be a defined contribution plan as opposed to a defined benefit plan – meaning that people covered by the plan would run the risk of having their retirement nest egg substantially reduced if they have the misfortune of retiring during an economic downturn (like the one we are currently struggling through).

"The bottom line is that is the ABC plan is at best an awkward band-aid solution," says McGowan. "In fact, we're concerned that the Alberta-B.C. proposal will distract from real reform and provide false hope to the growing number of Canadians who face the very real prospect of living in poverty after they retire."

So instead of getting behind an ill-conceived ABC plan, McGowan and his counterparts from other labour federations called on the western premiers and territorial leaders to use their clout to call for a national pension summit at which all stakeholders could debate fundamental pension reforms – like the dramatic expansion of the existing Canada Pension Plan (CPP). A growing chorus from labour, business and academia now see the CPP – which provides a defined benefit – as the best and easiest vehicle for reform.

McGowan and other labour federation leaders also said the western premiers and territorial leaders should actively and aggressively discourage Prime Minister Stephen Harper and federal Official Opposition Leader Michael Ignatieff from reaching a "watered-down deal" on employment insurance.

"Workers in western Canada are being unfairly discriminated against by arbitrary rules that make it much harder for them to qualify for the EI benefits they've paid for. But it's not clear that the new pact between the federal Conservatives and Liberals will do anything to address this fundamental inequity," says McGowan.

"If the western premiers are really serious about helping their citizens weather this recession they need to make sure that Harper and Ignatieff aren't allowed to wiggle off the hook by stalling and offering half-measures. An amazing consensus has emerged in Canada calling for one national standard for eligibility and increased benefits for workers who lose their jobs. The western premiers should make it clear they simply won't settle for half a loaf."

NOTE: McGowan and the leaders of other western provincial and territorial labour federations are in Dawson City with the premiers. They will hold a media availability this morning at 9:30 a.m. at the Yukon Order of Pioneers (YOOP) Hall, located at the corner of King Street and Second Avenue.

-30-

For more information call:

Gil McGowan, AFL president @ (780) 218-9888 (cell)

For full copies of the PBI analysis of the proposed ABC pension plan, visit the Alberta Federation of Labour website at www.afl.org .

EDMONTON - Albertans desperately need a mandatory pension program to ensure they don't retire into poverty, but a supplementary pension plan being considered by the Alberta and British Columbia governments is a step backwards, says the Alberta Federation of Labour.

AFL president Gil McGowan says the supplementary plan proposed by the two provinces is flawed because it's not mandatory and — even when added to Canadian Pension Plan and Old Age Security benefits — still wouldn't provide workers sufficient money for retirement.

"It's clear we need some fundamental reforms, but based on the analysis that we've commissioned, it's clear to us the Alberta-B.C. model simply won't do the job," McGowan said Thursday from Dawson City, Yukon where the western premiers are meeting this week.

"If our provincial leaders are serious about introducing new policy that extends pension coverage to a greater percentage of the Alberta population, they can't introduce a system that's not mandatory."
Employers that don't have pension plans now aren't likely to sign up if they still don't have to, he said.

The AFL says only 40 per cent of Canadians have workplace pension plans, but the percentage is much lower in Alberta. It says only 18 per cent of Albertans working in the private sector have pension plans.

The situation has prompted the Alberta government to work with B.C. on a supplementary pension plan for workers with no company pensions and last November the two provinces released a report of a joint expert panel that recommends how a joint plan should operate.

"More and more people ... are starting to realize that if major policy changes aren't initiated, significant numbers of Canadians — probably millions of them — will face the very real prospect of poverty in their old age," said McGowan.

But the AFL insists the Alberta-B.C. plans is "at best an awkward Band-Aid solution."

McGowan says an actuarial consulting firm hired by the AFL found that a person earning $50,000 who retired at age 65 would likely receive only about half the pension income considered necessary for a comfortable retirement. He said the plan could generate as little as 14 per cent of what a person earned before retiring — far below the recommended threshold of 70 per cent.

That's because the plan also doesn't require employers to match employee contributions, he noted.

McGowan said the proposed plan also gets low marks because it is a defined contribution plan rather than a defined benefit plan, meaning that if the stock market collapsed after the worker retired, the benefits would be reduced.

"From our perspective, the current recession has not only diminished the nest eggs most people set aside for retirement, but it shone a light on the patchwork system that we've created in the country," he said.
McGowan said the biggest problem with the supplemental plan is it diverts attention away from the real issue — the fact the Canadian Pension Plan is inadequate and requires major reform to ensure working Canadians can retire with dignity.

The AFL released the report at the western premier's conference to discourage other provinces from signing on to the plan rather than pressing for changes to the national pension plan, McGowan said.
"Our provincial and federal leaders have to start thinking very seriously about making big changes on the pension front as opposed to half measures like the proposed Alberta-B.C. plan," he said.

Alberta Finance officials say the province is not committed to any one plan and it is keeping its options open.

"This is just one of the proposals that they are taking into consideration," said Alberta Finance spokeswoman Jennifer Guzzwell. "We're not exactly sure what the plan will look like and whether it will be mandatory or not."

She said finance ministers from B.C., Alberta, Ontario, Nova Scotia and Manitoba have scheduled a meeting in July to discuss the possibility of a national supplementary pension plan.

Alberta Finance spokesman Bart Johnson added the province has no plans to proceed immediately with the Alberta-B.C. proposal.
"We would prefer to meet with other provinces and see what we can come up with," he said.

McGowan applauded the Alberta and B.C. premiers for considering "long overdue pension reform" and said a national summit on the issue is a great place to begin.

"We're confident that if that kind of meeting is held and all the information is put on the table, Canadians will agree with us that expanding the CPP is the best way forward."

Edmonton Journal, Thurs Jun 18 2009
Byline: Darcy Henton

Municipal elections in Alberta may become more transparent with the passage of a provincial bill which restricts the amount of money candidates at the local level will be allowed to raise and who they can raise it from, but not everyone is happy with the changes.

Bill 203, which passed third reading on May 23, limits campaign donations from any one organization to $5000 per candidate, defines the types of organizations that can donate and requires candidates to disclose all donors who contribute more than $500. It also requires that campaign surpluses must be carried forward to the next election, and if not used for re-election be put toward the municipality or a registered charity.

"We're not asking municipal candidates to do anything not required of us provincially," according to Jeff Johnson, the Conservative MLA for Athabasca-Redwater, who sponsored the bill.

While the bill in itself is a step forward for transparency—as many city councilors, union representatives and opposition parties have stated—union representatives are worried the limitation on organizational contributions might show a bias in favour of corporate donations.

"It would be a lot easier for businesses to get around the $5000 limit," explains Gil McGowan, the president of the Alberta Federation of Labour.

"A union such as CUPE which represents a number of civic service workers would be limited to a $5000 contribution, even though they represent a number of different locals. A business could donate through several different corporate entities according to the definitions laid out."

McGowan says he's worried about the impact a business advantage may have on the next race for the mayor's seat.

"Mayoral elections are big-time political events that require significant budgets and so the legislation will have a big impact on the way mayoral campaigns are run," he argues. "If the rules aren't tightened up to the business and corporate sector, this bill may do the opposite of what it purports to want to do; we may inadvertently end up making it easier for businesses to influence government."

McGowan suggests the provincial government might actually have a specific interest in restricting contributions from unions and non-profit organizations.

"Traditionally, progressive groups have been a lot more successful electing candidates municipally and this bill may work to support more conservative candidates municipally," he suggests.
Speaking to the bill during debate in the legislature, NDP MLA Rachel Notley shared some of McGowan's concerns.

"You are putting rules in place, which I believe have merit, but then applying them differently to two different groups," Notley said, adding that the new rules will make it difficult for unions when it comes to deciding which candidate's campaign to support. "To suggest that local is part of the same local with a completely different employer somewhere else in the province where they've never discussed the merits of that particular candidate they can't coordinate whether it's better to give to Candidate A in Edmonton or Candidate B in Calgary, that is, I think, an onerous position to put these locals into."

Municipal candidates do not often receive individual donations upwards of $5000, but mayoral races in Calgary and Edmonton can be competitive contests running up high bills. Edmonton Mayor Stephen Mandel, for example, had a dozen donors over the $5000 limit in the last election.

But Johnson believes the bill won't have a major impact on municipal races given how rare large-sum donations are.

"We looked at the number and size of donations received and very few candidates were receiving donations above $5000," he says. "What it does do is clarify donations to the public and prevent undue influence."

But Larry Booi, the chair of Public Interest Alberta's Democracy Taskforce, which has for years called for campaign finance reform, says if the province is serious about preventing such influence it should start in its own backyard.

"It's hypocrisy," Booi says. "We're saying if it's a good idea to ensure democracy at a municipal level and in third party donations and advertising, why not clean up your own act? There was a lot of concern with the way the last Conservative leadership contest was run with very little in the way of accountability and restrictions on leadership donations. Look at the federal rules, which limit donations to leadership campaigns at $1100. It establishes that parties are not democracy-free zones, there are laws to ensure transparency and the public good."

Although the provincial rules for contributions to individual campaigns are the same as those approved in Bill 203, Booi maintains the province failed to recognize an opportunity to limit themselves.

"The big problems were not here. If this were a part of a comprehensive approach to make campaign finance more democratic you'd probably have people finding these things reasonable, but when you're telling unions they're restricted but you don't put any rules on yourself and in your own leadership contest and party then it looks like hypocrisy."

Vue Week, Thurs Jun 4 2009
Byline: Samantha Power

CALGARY - It used to be a foregone conclusion that the gigantic shovel-and-dumptruck operations in the oilsands would go hand-in-hand with an upgrader - a multibillion dollar facility to turn the sticky bitumen squeezed from the sand into lighter oil that refineries can handle more easily.

But some companies - most recently Imperial Oil Ltd. (TSX:IMO) - have opted to go without building one of those expensive complexes.

And the head of Alberta's labour group warns the move away from the oilsands' traditional business model means the province's already grim employment picture won't brighten when the economy bounces back.
Among other options Imperial is looking at is sending production from its recently approved Kearl project to refineries in the United States, which can been retrofitted to handle heavier crude.

The Alberta Federation of Labour has been urging intervention from the Alberta government to stamp out what is sees as a disturbing trend.
"The same general economic conditions that convinced Imperial to go with an extraction-only project will likely convince other developers to do the same," said AFL president Gil McGowan in an interview.

"Frankly that should be a big concern for Albertans because what it will mean is that literally thousands of high-paying jobs in upgrading and refining will be shipped down the pipeline to the American Midwest and Gulf Coast."

A report in March by the AFL showed that there are at least 10 major refinery expansion projects underway in the United States, which will have the combined capacity to upgrade 2.8 million barrels of oilsands crude per day - about the total output expected by 2020.

Currently about two-thirds of the current 1.2 million barrels or so produced each day is upgraded in Alberta, but that is not likely to last long, McGowan said.

"We're afraid that if the Alberta government especially doesn't intervene the proportion of bitumen upgraded in the province will actually flip within the next 15 years, and that we'll see as little as a third upgraded here," McGowan said.

The two oldest and largest oilsands players - Suncor Energy Inc. (TSX:SU) and Syncrude Canada Ltd. - both have upgraders on site.

The facilities each employ about 4,000 full-time permanent workers, according to the AFL. Thousands more are hired on a temporary basis each year for regular maintenance work.

"When it comes to the oilsands, the real money and the real jobs are in both upgrading and refining," said McGowan.

Building the upgraders also spurs an enormous amount of short-term construction work in Alberta.

Canadian Natural Resources Ltd.'s (TSX:CNQ) Horizon oilsands project, which includes an on-site upgrader, employed about 7,000 workers during peak construction. By contrast Kearl is estimated to create about 2,000 short-term jobs, McGowan said.

The Alberta government recognizes that the oilsands are seeing a change, said Alberta Energy spokesman Bob McManus.

"Not all projects will be integrated facilities," he said. "Where it used to be - a la Suncor, Syncrude - that a project consisted of a mine, an upgrader and a pipeline to the refinery, now it might consist of a mine and a pipeline to a merchant upgrader."

The province, which currently takes its bitumen royalties in cash, is proposing to start collecting what's called bitumen royalties in-kind. The government would boost the local industry by re-selling the bitumen to upgraders in the province, McManus explained.

Alberta Energy has also been looking at ways to make the province's main industry more competitive with other jurisdictions - "everything from the regulatory lay of the land to the tax regimes," McManus said.

Greg Stringham, vice-president for markets and fiscal policy for the Canadian Association of Petroleum Producers, said Alberta companies are looking at upgrading their bitumen in the United States because there is a lot more spare capacity there than at home.

With heavy oil imports from Venezuela and Mexico drying up, refiners along the Gulf Coast and in the Midwest are hungry for feedstock.

"Alberta is set to compete with upgrading capacity that's empty there and ready to take crude without any construction, versus building an upgrader here in Alberta. And that's really tough to compete against," Stringham said.

But Stringham said that situation will be short-lived. Once the spare U.S. capacity fills up again it will make economic sense to build upgraders in Alberta.

"You can integrate it with your refinery or integrate it with the upstream extraction plant so that you're using the steam, getting the efficiencies on electricity, utilities and water usage. Then you can help mitigate much of that cost."

Pictou County News, Fri May 29 2009

Entrenching Exploitation: Canada's Shameful Record on TFWs

• In its latest report on the working and living conditions of Temporary Foreign Workers, the AFL's Foreign Worker Advocate reports that things are getting worse, not better. Called "Entrenching Exploitation" the report recounts how, without public debate, the Canadian and Alberta governments are quietly creating a European-style guest worker program, which threatens to create a permanent exploited underclass of foreign workers who work in Canada for years without receiving the rights that come with citizenship. Read Entrenching Exploitation...

LEM: The Recession Edition

• What do a "dead cat bounce" and sheep on drugs have in common? Both are part of the insightful economic analysis to be found in the Spring 2009 issue of "Labour Economic Monitor." The latest issue looks at the recent Alberta budget and the effects of the recession on wages and earnings. All explained with entertaining prose and colourful graphs. Check out the latest economic data ...

New Safety Rules Coming

• On July 1, an extensive series of amendments to the Alberta Occupational Health and Safety Code come into force. The changes will likely affect every workplace in one way or another. Some of the major changes include: revamping fall protection standards, updating chemical hazard exposure limits, tougher working alone rules, and new section related to health care workers. To help workers become acquainted with the new provisions, the AFL has produced a document summarizing the changes.  Find out about the OHS Code Amendments ...

Solidarity in Hard Times

• The latest issue of Union Magazine is out and it takes a good look at the challenges to maintaining solidarity in this era of globalization and aggressive union tactics. It explores new forms of solidarity and examines ways workers can stick together in tough times. And remember, if you want Union sent directly to your mailbox or email inbox, be sure to sign up for a free subscription. Read the latest issue of Union ...

Urgent Action

---

Keep Jobs in Canada Petition

• The Telecommunications Workers Union (TWU) has launched a cross-Canada campaign to raise awareness about the growing problem of unemployment in Canada and to demand governments do something to keep jobs in Canada. They are touring a National Unemployment Clock across Canada, which will be in Alberta May 24-26. They have also set up an online petition where Canadians can add their voices to the growing numbers demanding action to save Canadian jobs. Do your part to save Canadian jobs ...

Events

---

Public Interest Alberta's 5th Anniversary Celebration
Friday, June 5, 2009

Grand Ballroom
Chateau Louis Conference Centre
11727 Kingsway, Edmonton

This evening will give us an opportunity to come together to socialize and reflect on the important work we have undertaken over the past five years. We will also be presenting our annual Public Interest Award to this year's recipients.

Tickets - Individual $65.00 / Table of 8 - $500.00

6:00 pm - Cocktails
7:00 pm - Dinner
8:00 pm - Celebration & Entertainment

http://www.pialberta.org/events

Did you know ...

---

Top Six Source Countries for temporary foreign workers in Alberta (2007):

1. Philippines
2. United States
3. United Kingdom
4. Mexico
5. Australia
6. India

Though some herald the job creation resulting from Imperial Oil's decision to go ahead with its Kearl project, the Alberta Federation of Labour warns the long-term benefits will be shipped south to the U.S. job market.

"Looking at the Stelmach government's unwillingness to stake more aggressive action to oilsands jobs in the province, it's hard not to conclude that they're simply afraid to stand up to big energy companies," said federation president Gil McGowan yesterday. "It's clear to everyone who has been paying attention that more and more oilsands jobs are being shipped down the pipeline, even the premier himself admits that it's a problem but so far he hasn't been willing to come to the table with any real plan to turn things around."

And that, he adds, is a big concern for Albertans, especially during an economic downturn when jobs are continuing to disappear.

What makes this potential job loss more irksome for McGowan is that the number of people applying for employment insurance in the Fort McMurray area has tripled compared with this time last year.

In Alberta, the number of regular EI beneficiaries climbed by 32.1% to 42,200 in March, marking the fastest monthly increase for the province since comparable data are available, according to Statistics Canada. For March, some 720 people in Wood Buffalo applied for EI, compared with 240 in March 2008. Provincewide in Alberta, the drop in employment in recent months has mostly hit construction, trade, manufacturing and professional, scientific and technical services.

Pius Rolheiser, Imperial Oil spokesman, doesn't share McGowan's job loss concern, saying Imperial has a different view.

"I don't think we're exporting any jobs," he said this morning. "We are, in fact, creating hundreds of long-term jobs, not to mention the thousands of short-term jobs."

When all three phases of Kearl are operating, Rolheiser predicts the permanent direct workforce to number upwards of 1,000 people, not to mention the spinoff indirect employment. It's long been Imperial's position that economic efficiency and market forces should be the critical factors in determining where upgrading capacity is built, he said.

"We've never believed it's realistic to decide where upgrading capacity should be built, ignoring economic efficiency in the market," said Rolheiser.

He acknowledged Imperial's Strathcona refinery, the company's largest, is geared towards lighter sweet crude, and has limited conversion capacity making it inappropriate for the Kearl heavier crude.

While no upgrader is related to Phase 1 of Kearl, Rolheiser noted decisions on upgrading of future phases have yet to be made.

McGowan says it's easy enough for companies to say "let the market decide," but it's clear that the market is deciding to send Alberta jobs down the pipeline to places like the American midwest and Gulf Coast.

"So the question I have is, when is the Stelmach government going to step up and realize that decisions being made by these big energy companies are not being made in the best interests of Albertans?" he said. McGowan added it's time for some serious government intervention and if the Conservatives can't get their heads around that, then Albertans are going to have to start looking for some other party that can.

"It was one thing to be dismissive of concerns about shipping jobs down the pipeline when the economy was booming, but now that the economy has fallen into recession, and more and more people are losing their jobs, it's completely unacceptable for us to ignore this problem yet our governments at both the provincial and federal levels continue to give us nothing but lip service."

McGowan admits he's afraid the Kearl project is a sign of things to come and "frankly it's a troubling sign. If we continue going down the road that Kearl is leading us, what we're looking at in the future are oilsands projects that are primarily about extraction as opposed to upgrading and refining. And that's really troubling because upgrading and refining are where the real jobs are."

Gordon Wong, also an Imperial spokesman said yesterday Kearl will create thousands of jobs during the construction phases with "multiple hundreds of well-paying jobs" for operations post-construction. He added phase one of the project is a significant size.

"Our application number was about 3,000 but I have seen 4,000," he said. "It would depend on the various stages, so it is in the thousands in terms of peak construction operational number .. is between (500) and 700."

With a mine life of an estimated 40 years for phase one, Wong noted "these aren't one or two years of construction then they're gone forever. These will be there for 40 years."

Fort McMurray Today, Thurs May 28 2009
Byline: Carol Christian

EDMONTON - The Alberta Federation of Labour is worried Imperial's $8-billion Kearl Lake oilsands project will send most of the bitumen - and good jobs - to the U.S. once the construction is complete.

"Kearl Lake will create a couple of thousand short- to medium-term construction jobs, and in the current economic climate, that's a welcome thing," AFL president Gil McGowan said in a release.

"But over the longer term, this project is deeply troubling because it's focused exclusively on the extraction and export of raw bitumen. The real money - and the real jobs - in this business are in upgrading and refining. Unfortunately Kearl will be sending all of those benefits down the pipeline to Exxon refineries in the U.S. Midwest and Gulf Coast," he said.

McGowan points to a study released by the AFL in March entitled "Lost Down the Pipeline," which shows that energy companies are expanding U.S.-based bitumen refining capacity at a furious pace. In the report, the AFL identifies 10 refineries in eight American states that are currently being retooled to process bitumen from Alberta. Once completed, these refineries will have the combined capacity to handle 2.8 million barrels per day - more than double the total current output from the oilsands.

Under provincial regulations, Alberta's 25 per cent royalty under BRIK (the Bitumen Royalty In Kind program) can be collected in bitumen and resold to local upgraders. But the balance can be exported.

Kearl will produce 110,000 barrels a day when it opens in 2012, and between 300,000 and 345,000 barrels a day when all three phases are in operation.

Up to 3,000 people will be employed during construction, with more than 1,000 permanent jobs created.

Kearl is 70 kilometres north of Fort McMurray.

Edmonton Journal, Wed May 27 2009
Byline: Dave Cooper

The provincial government is content to see oilpatch jobs shipped to the U.S., charges the president of the Alberta Federation of Labour.

Gil McGowan made that charge yesterday in the wake of the announcement that Imperial Oil will go ahead to build the $8-billion Kearl Lake oilsands project near Fort McMurray.

"Kearl Lake will create a couple of thousand short-to medium-term construction jobs - and in the current economic climate, that's a welcome thing," said McGowan.

"But over the longer term, this project is deeply troubling because it's focused exclusively on the extraction and export of raw bitumen.

"The real money - and the real jobs - in this business are in upgrading and refining.

"Unfortunately Kearl will be sending all of those benefits down the pipeline to Exxon refineries in the U.S. Midwest and Gulf Coast."

NDP Leader Brian Mason also raised the issue yesterday in the Alberta legislature, calling on Premier Ed Stelmach to require Kearl Lake's operators to refine raw bitumen here.

Stelmach said refining most of the bitumen here is desirable in the long-term but "this will take time to get there in terms of adding value to it."

Stelmach said the oil company's own president said he'd like to see that plant's bitumen upgraded here or at other refineries in Canada.

Edmonton Sun, Wed May 27 2009
Byline: Kerry Diotte

Imperial Oil Ltd.'s (IMO-T42.09-0.14-0.33%) approval of a major new $8-billion project is sparking optimism for a revival in the oil sands after months of project delays due to low crude prices and high costs.

By the time it starts pumping bitumen in 2012, the first phase of the Kearl oil sands mine, which was approved Monday by Imperial's board, will produce 110,000 barrels a day. It's a project that chief executive officer Bruce March has called "the biggest single investment our company has ever made in a pretty volatile market period."

Yet even before that investment is fully made, Kearl is already providing a spark of confidence in a province that has spent the past six months watching its primary industry stage a full-scale retreat.

Among construction leaders, financial analysts and even competitors, the decision to build Kearl comes as an important symbol that despite continued low crude prices, tight financial markets and the threat of costly new greenhouse gas regulations, the oil sands remain viable.

"Are the oil sands back?" said Robin Mann, CEO of Calgary-based AJM Petroleum Consultants.

"Not yet. But I think we're just on the cusp."

The decision by Imperial, which is 70-per-cent owned by Exxon Mobil Corp., serves as a notice that some of the industry's most successful minds continue to believe in the viability of the oil sands, which contain the Earth's second-largest oil reserves but face an increasingly difficult slate of problems.

"The death of the oil sands has been greatly exaggerated," said Brad Bellows, spokesman at Suncor Energy Inc. (SU-T35.25-0.42-1.18%) Industry observers are looking to Suncor as the next sign that the oil sands truly are resuming growth plans.

Suncor has said it expects to revive some of its own stalled projects - it has already partly built its Voyageur upgrader and the third phase of its Firebag in situ project - but is waiting to complete its proposed merger with Petro-Canada before making any further decision.

"It's a matter of when, not if," Mr. Bellows said.

The hefty cost of developing the oil sands makes them ripe for consolidation by the world's major energy producers but, with the exception of Total SA, the threat of costly environmental regulations - especially in the United States - has made these companies leery of pursuing further acquisitions, Calgary investment bankers say.

Watching Imperial move forward is a signal that those issues should be manageable, said Will Roach, CEO of UTS Energy Corp., which owns 20 per cent of Fort Hills, another proposed oil sands mine.

"The fundamental message is that a big company that's pretty well connected in the U.S. is committing to a project of this nature because it believes it will give them financial returns," Mr. Roach said in an interview.

"Exxon has a huge portfolio of opportunities and this ranks highly among them. I think that's good news for the oil sands."

The decision is a bet that crude will rebound to above $80 (U.S.) a barrel, the price analysts say Kearl will need to turn a 10-per-cent after-tax profit.

Located 70 kilometres northeast of Fort McMurray, Kearl has long been contemplated by Imperial, which produced its first $5-billion to $8-billion cost estimate for the project in 2004.

Imperial expects Kearl to eventually produce 345,000 barrels a day, but has not released cost estimates for full construction of the project, which is expected to last a half-century as the company mines out 4.6 billion barrels of recoverable bitumen.

The company initially expected to make a decision on building Kearl last year, but delayed in an effort to bring its costs down.

Construction of the first phase will employ up to 5,000 people - a shot in the arm for a province whose construction work force has fallen from 160,000 to about 120,000.

Still, Alberta Federation of Labour president Gil McGowan said Kearl is a mixed blessing. Without an upgrader on site, the project is designed to ship unprocessed bitumen out of province, a fact that could bring future harm, Mr. McGowan said.

"In the long term, it will actually be part of the problem rather than part of the solution because it will contribute to shipping more processing jobs down the pipeline from Alberta to refineries primarily in the American Gulf Coast," he said.

Globe and Mail, Tues May 26 2009
Byline: Nathan VanderKlippe

CALGARY - Holding off on approving construction on the Kearl oilsands mine until Alberta´s overheated market cooled off saved Imperial Oil Ltd. (TSX:IMO) as much as $1 billion, the company´s chief utive said Tuesday.

Imperial´s board could have endorsed Kearl six to nine months ago, when labour and construction costs were significantly higher, Bruce March told investors and analysts in Toronto.

Instead, it made its decision to go ahead with the $8-billion project on Monday, after spending an extra few months reviewing costs.

"I think if you went back to about year earlier, kind of early summer last year, you´d probably be looking at somewhere between a half to a billion more investment," March said.

"We didn´t get too mesmerized with the high price environment and we didn´t get too overwhelmed with rushing the project through like others did to try to take advantage of this environment."

Kearl is expected to begin producing 110,000 barrels of bitumen a day in late 2012, eventually ramping up to as much as 300,000.

Unlike other major oilsands players like Syncrude Canada Ltd. and Suncor Energy Inc. (TSX:SU), the project does not include an upgrader to process the tar-like bitumen into easier-to-handle synthetic crude.

March told investors Imperial would first look to feed the bitumen into its own facilities, particularly its two refineries in Ontario, that can be converted to handle the heavy crude.

It could also sell the bitumen to upgraders in Alberta as well as the U.S. Midwest and Gulf Coast.

That possibility raised alarm bells with Alberta Federation of Labour president Gil McGowan, who said he worries Kearl will ship upgrading and refining jobs to the United States, where bitumen refining capacity is growing at a "furious pace."

"We´ll get the environmental consequences and the penny-on-the-dollar royalties, while the Americans will get the long-term jobs and revenue that come with value-added production," McGowan said in a statement Tuesday.

Inter Pipeline Fund (TSX:IPL.UN) said Tuesday it reached an agreement to transport up to 60,000 barrels of diluent from the Edmonton area to the Kearl site.

Imperial signed a 25-year ship-or-pay contract with Inter Pipeline for committed capacity on a 12-inch pipeline in late 2012, when Kearl is slated to start up.

Inter Pipeline currently ships diluent, which is mixed with bitumen to make it thin enough to flow through pipelines, along that pipeline to the Athabasca Oil Sands Project, owned by Shell Canada Ltd., Chevron Canada and Marathon Oil Canada Corp.

The pipeline will be idled in 2010 after a new 42-inch pipeline which is currently under construction goes into service for Athabasca Oil Sands Project.

Inter Pipeline plans to invest $135 million over the next three years to connect the existing 12-inch pipeline to Kearl and points around Edmonton.

Inter Pipeline shares were off six cents to $8.40 Tuesday on the Toronto Stock Exchange. Imperial shares were up more than four per cent to $44.10.

Oil Week, Tues May 26 2009