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A welcome sign lights up the entrence to Chipman Alta. (Jason Franson/Jason Franson)
A welcome sign lights up the entrence to Chipman Alta. (Jason Franson/Jason Franson)

A little town on the oil sands prepares for $100 oil and a new boom Add to ...

Such measured optimism would have been unthinkable in 2007, when the energy surge was in full force. Fort McMurray was on fire, and the talk in Alberta was about potential upgrader projects in the Heartland region, an industrial complex around Fort Saskatchewan, just northeast of Edmonton. There were projections of eight upgraders and 23,000 jobs. The speculation drew outside investors like moths to a flame.

At the time, Mr. Rea was doing reclamation work after a hurricane on the Gulf Coast. While there, he got to know contractors allied with North American Oil Sands, which was planning a Heartland upgrader. On behalf of North American, he came north looking to build housing for thousands of workers. He happened upon Chipman, a town down on its luck but with an infrastructure designed for better times.

Its key asset, besides proximity to the Heartland, was its place on the Vegreville water line - and an underutilized sewage system. For a developer, this was nirvana, and there was also a local mayor who was a tireless booster. Mr. Palmer's pitch was: "Holy shit, Ted, we have an infrastructure here for 2,500 people and we only have 250."

North American's housing plans were shelved, but Mr. Rea remained intrigued. As he pushed his concept of affordable homes for working families and retirees, Mr. Palmer and the other two councillors bought in. Also, local MLA-turned-premier Ed Stelmach helped accelerate some provincial approvals.

The land annexation was approved in March, 2010, but there wasn't much cheering. In the interim, the economy had gone to hell, and is still working its way back. Instead of eight upgraders, only one is certain - the joint venture of North West Upgrading Inc. and Canadian Natural Resources Ltd., a three-phase project in the final negotiation phase with the province.

Neil Shelly, executive director of the Alberta Industrial Heartland Association, says the region will probably get one additional upgrader in the next 15 years, and possibly a couple more petrochemical complexes and some co-generation facilities. It's not like 2007, but it does mean hope for Chipman.

A focus on value added

A lot depends on the economics of upgrading. There is a strong push in the region to stop shipping raw bitumen south to U.S. upgraders and refineries, and perform more value-added activities in the area. North West and CNRL are negotiating a deal with the province to process bitumen collected under royalty-in-kind payments, which along with CNRL's output, would provide feedstock for the new upgrader.

That is the future, insists North West chairman Ian MacGregor, who urges Alberta to act like an owner and reap the rewards from more integrated, value-added projects. The government is already one of Alberta's largest bitumen owners, with the potential to become the biggest. And the Heartland, home to a big petrochemical complex and a Shell Canada upgrader-refinery project, is a natural location.

His vision is not predicated on $100 oil, but on the realities of geopolitics and population growth that dictate the world will need more of Canada's energy. "I think these forces are absolutely relentless," Mr. MacGregor says, adding that the Heartland will thrive because of its access to labour, pipelines and water.

North West will employ 8,000 people during its decade-long construction period and 400 permanent employees. Add another upgrader of similar scale, and there would be even more jobs.

Will Chipman get a piece of that action? Last week, there was concern about the looming exit of Premier Stelmach, a supporter of Chipman's plans who was willing to put provincial money behind rural development.

Whatever the economics, Mr. Rea insists he is the right kind of developer for this climate. He finds kindred spirits in Alberta, which he sees as the future growth engine of Canada. "Like Texas, this is a good environment to do business in. We like the political system here."

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