Unprecedented Lease Cancelation

This is unprecedented.

The Stelmach PC's are going against legislation and decades of precedent in dealing with industry. They are deciding new rules on the fly without consultation or legislation. The OSUM precedent is extremely disturbing and damaging to property rights.

I'm amazed that this important story is recieving virtually no media attention. In most jurisdictions this would be the leading news. I follow the petroleum industry carefully and didn't hear about it until almost a week after the seizure.

In addition to the media being missing in action on this story, where are CAPP, SEPAC, CHOA, etc?


Alberta Nixes Tunneling Under Marie Lake By Lynda Harrison

Nickle's Daily Oil Bulletin, October 11 2007

A Calgary-based company that had considered extracting oilsands from beneath a lake in Northern Alberta has had its lease cancelled by the provincial government.

"The proposed bitumen tunneling project and all the issues raised about that specific project were re-examined, and taking into account all the circumstances related to the development under Marie Lake, the energy minister decided that the exploration and development of the oilsands resources was not in the public interest at this time," said Jason Chance, energy ministry spokesperson.

OSUM Oil Sands Corp. (OSUM) had expressed interest in using a vertical shaft and digging horizontal tunnels and wells 500 metres below Marie Lake, plus building a pipeline and processing plant at the surface, to access an estimated 252 million bbls of recoverable reserves (DOB, Aug. 8, 2007).

The company, which picked up the lease on nine sections of land in late 2006, had planned to do a seismic test underneath the lake, about 30 kilometres northwest of Cold Lake, but never got that far.

"We did nothing, which is a bit of the issue," said Andrew Squires, OSUM's vice-president of engineering. "Under the legislation the only way permission can be revoked is if you actually do something. So having everything revoked, your lease revoked upon not doing anything, almost falls under confiscation."

Management is now looking at legal ramifications, said Squires.

A local group called the Marie Lake Air and Watershed Society, representing about 120 landowners and recreational users of the lake, presented to the Alberta Legislature in June a 1,200-signature petition opposing any development there. Before that, Ted Morton, the minister of Alberta Sustainable Resource Development, had refused to grant a permit, calling for OSUM to revise its plans and consult with members of the community. He later approved the permit but that's as far as OSUM got, said Squires.

"There's no way you should be able to, on hearsay, cancel a project. We've never talked to them about it so where he gets any idea that it's unsafe or it's new technology, we're just baffled."

Squires said the technology to use an underground approach was developed and recommended by the Alberta government itself, so long ago that the patents the government held on it have run out. OSUM's seismic plan called for survey vessels to generate three-dimensional seismic of the bitumen deposit with a month of marine seismic echo-sounding including 19,000 shots by 207-decibel underwater cannons.

OSUM had planned to spend about $750 million to eventually produce 30,000 to 40,000 bbls a day.

Squires said the company never submitted any official development plan to the government nor did the government seek any information from OSUM.

"We had talked about an underground approach but that was just one tool in our tool chest," said Squires. "We felt that would be the most appropriate development scenario, given the concerns of the cottagers and the general public around the area because it has the most minimal cumulative impact visually. It's not what we were proposing; it was just one of the scenarios that could be done."

He said OSUM had raised $100 million based on the value of the resource and it had done extensive work to come to the conclusion that it is an extremely valuable piece of land.

The ministry's Jason Chance said OSUM has 60 days to apply for re-instatement of the lease and that the company is entitled to compensation for what it paid for the lease.

According to Nickle's Energy Group records, Canadian Coastal Resources Ltd. paid $3.61 million, or $1,484.38 per hectare, for nine sections of land in the Marie Lake area in November 2006.

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Marie Lake Residents Pleased by Ruling

(Blogger - more correctly should the title replace "Ruling" with "Robbing". Robbing is when something is taken from someone else in against their will with no legal authority)

http://www.canada.com/edmontonjournal/news/story.html?id=e5330e23
-d130-40af-a070-7da47a8bf15a&k=51839

David Finlayson, Edmonton Journal Published: Monday, October 08

EDMONTON - Residents near Marie Lake are surprised but ecstatic the province has cancelled a contentious lease that would have allowed bitumen recovery from beneath the water.

Full-time residents and recreational users of the lake 300 kilometres northeast of Edmonton have been fighting the government and Oil Sands Underground Mining Corp. since it disclosed plans earlier this year to do seismic testing on the lake, including firing loud air guns from 10 survey boats and blasting dynamite on shore."Everyone here is totally delighted, but a bit surprised," said Bob Heigh, owner of Shelter Bay Resort, the lake's only campground.

The government is going against its own legislation in cancelling the lease, and Heigh expects the law will be changed so residents at other lakes don't have to go through the same battles.

"They say you can't fight city hall, but we've proved that maybe you can. We were determined to make sure OSUM didn't get on the lake, and we believe we have saved a lake with cystal clear water and beautiful beaches.

"The fight wasn't so much with Calgary-based OSUM but with the government's "lunacy" in allowing the project to go ahead on one of the most beautiful lakes in the province, Heigh said.

(Blogger - By this reasoning, if the lake is so beautiful, shouldn't the province turn it into a Provincial Park and nature reserve so it can be enjoyed by all Albertans? As compensation, the existing lakefront land holders can be given the value that the property was purchased from the Crown for. Basically the same treatment that OSUM got. Would that be fair?)

Alberta Sustainable Resource Development Minister Ted Morton approved OSUM's seismic plans in the summer, but Premier Ed Stelmach early last month cancelled the testing after strong lobbying by lake residents and environmental groups.

The Canadian Press reported Friday that OSUM's 25-square-kilometre oilsands lease had also been cancelled, and the company will be compensated for what it spent up to the formal termination Sept. 21.

Alberta Energy spokesman Bob McManus told Canadian Press the government had decided exploration and development of the lease are not in the public interest.

Even Denis Ducharme, Tory MLA for Bonnyville-Cold Lake, was critical of rookie minister Morton for approving the seismic testing, which residents claimed would harm fish and other aquatic life.

Morton said he had no choice but to follow the law.

(Blogger - What a novel concept, following the law! Stelmach apparently didn't think that was necessary.)

Don Savard, whose family has owned property on the lake since the 1930s, said residents were giving thanks on the weekend for the government's change of heart."It's very significant. We're certainly seeing a different Mr. Stelmach. He's started making decisions and it looks as if Albertans are getting their government back."

(Blogger - at least the wealthy Albertans who live on lakes are "getting their government back". The Albertans who have just had their property rights violated by the lease cancellation probably don't feel that way.)

Savard said there are many other areas that can be explored for oil and gas without attacking the province's lakes.

(Blogger - "there are many other lakes that can be enjoyed by holiday makers and wealthy retirees without attacking small entrepreneurial oil companies")

He also expects new legislation to be introduced that protects all Alberta lakes from industrial intrusion. OSUM thinks the bitumen deposit about 400 metres beneath the lake floor could contain up to two billion barrels of oil.

The company has 60 days to argue for reinstatement of the lease before the termination becomes permanent.

mailto:permanent.dfinlayson@thejournal.canwest.com

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The OSUM team are very credible people, not some bunch of fish-killing-yahoos. Here is an indication of the magnitude of the resource they had legally captured and which has been expropriated without legislative authority.

OSUM Oil Sands breaks into one billion barrel club

http://updates.spe.org/index.php/2007/06/21/osum-oil-sands-breaks-into-one-billion-barrel-club/