FORT SASKATCHEWN — Evoking the spirit of pioneers, outgoing Premier Ed Stelmach said Albertans know success comes from having the courage to take risks, and the $5-billion North West upgrader/refinery announced Wednesday is just the latest “bold step” in that direction.

“I have always said, shipping bitumen out of the province is comparable to selling the topsoil on a farm. This is fulfilling a commitment I made in 2006 to the province during the leadership (race),” he said at the ceremony.

Stelmach added he is keen on ensuring Alberta is a world leader in carbon dioxide reduction, which is why the government announced a $2-billion program two years ago, and has agreed to fund four innovative projects.

“So today we take another bold step in the area of value added with this historic agreement with North West and Canadian Natural for a project that will use carbon-capture technology from Day 1.”

With the U.S. and the European Union embarking on their own programs, Stelmach sees risks ahead if the province fails to be a leader.

“For the next generation, the risk is that Albertans could be forced into Kyoto-style protocols that target the producers rather than sharing the burden with consumers. We should be leading the way to find solutions before others impose their solutions,” he said.

While Stelmach did not describe the new Bitumen Royalty In Kind (BRIK) program — which made the North West project possible — as his legacy, Ian MacGregor did.

The North West chairman said BRIK will be the source of prosperity for the next few generations, and is in the same league as decisions made by Ernest Manning in the 1950s that help found the Alberta Gas Trunk Line, and by Peter Lougheed in the 1970s that encouraged ethane to stay in Alberta as the foundation for our petrochemical industry.

“Thirty years from now there is probably going to be some other guy up here showing examples from the past of how political leadership and vision make Alberta a wonderful place, and he’ll have three examples of premiers who had that vision, and one of them is with us today,” MacGregor said.

Under the 30-year agreement, the province will pay to have 37,500 barrels a day of its own

bitumen (collected as royalties from oilsands projects) refined into low-sulphur diesel fuel in the first phase of the new plant. Project partner Canadian Natural Resources Ltd. will provide another 12,500 bpd.

The province expects to earn $700 million more from sales of diesel than it would selling the raw bitumen into the market.

Using a gasification process, North West will be able to remove much of the carbon dioxide from the process, making diesel with the lowest carbon footprint in the world. The CO2 will be shipped via the new Alberta Carbon Trunk Line being developed by Enhance Energy to depleted oilfields in central Alberta where it will be used to increase production.

North West will now immediately start detailed engineering, and with its site already cleared and key equipment received, it expects to begin major construction in 2012 with the plant operating by mid-2014.

dcooper@edmontonjournal.com

BY THE NUMBERS

Cost: $5 billion for each of the three planned phases. Only first phase has been approved so far.

Who pays: North West, a private Calgary-based company, has already spent $400 million on the site, equipment and engineering. Joint partner Canadian Natural Resources Ltd. will contribute $400 million and the rest will be raised from investors. The balance will be bank-financed debt.

How it works: The province will supply 37,500 barrels per day of bitumen to the plant, and CNRL will add 12,500 bpd. The actual inflow will be 77,000 barrels of diluted bitumen. The plant will produce 36,000 bpd of ultra-low-sulphur diesel, 18,000 bpd of naphtha and 14,000 bpd of diluent. Smaller amounts of butane and vacuum gas oil will also be produced in the process.

What about carbon dioxide?: Using its gasification technology, the plant will recover 1.27 million tonnes per year of CO2, which will be compressed and shipped in the Alberta Carbon Trunk Line to depleted oilfields in central Alberta, where it will be used to force out additional oil. This will give North West diesel the lowest carbon footprint of any diesel fuel.

The economics: Alberta expects to earn an extra $200 million to $700 million over the 30-year term of the deal by selling diesel rather than raw bitumen. The upgrader will charge tolls to both the province and CNRL for the processing in the same way pipeline companies charge oil producers to handle their production.

Jobs: About 8,000 in total, including 2,500 in on-site construction, an estimated 600 in engineering, and plenty of other work in off-site modularization yards and with equipment-fabrication firms.

Related pipeline project: Enhance Energy’s Alberta Carbon Trunk Line will receive CO2 from both North West and the Agrium fertilizer plant. That project will receive $495 million over 15 years from the province; an agreement was announced Wednesday. Some 2,000 construction jobs will be created in building compressors at North West and Agrium, as well the pipeline itself.

Start date: North West will be operating by mid-2014. Enhance should be filling with Agrium CO2 by late 2013, and ready for the North West CO2 when that plant opens.