Oilsands developers returning leases in shift of fortunes

Low oil prices, exit of foreign majors reduces speculative demand for land

CALGARY In another sign the bloom is off the boom for the oilsands, the industry has returned almost one million hectares of northern Alberta exploration leases to the province over the past two years — abandoning an area far bigger than P.E.I.

The total area covered by oilsands leases remained constant at about nine million hectares between 2011 and 2014. But it fell to 8.5 million hectares in 2015 and 8.1 million in 2016, following the crash in world oil prices from over US$100 to under $60 per barrel in 2014.

Most of the returned acreage either represents expired or surrendered leases, according to Alberta Energy, which provided the statistics at the request of The Canadian Press.

Observers were surprised by the size of the lease returns, which they attributed to industry costcutting and disinterest in spending to develop new prospects when

there’s no money to build projects already on the books.

“It costs money to maintain these lands,” said Brad Hayes, president of Petrel Robertson Consulting in Calgary.

“You can’t convince shareholders to continue to put that money out if there’s no prospect for success.”

Alberta’s oilsands have been getting little respect lately, thanks to the exit of large foreign companies, the province’s hard cap on oilsands emissions, increasing carbon taxes and the stumbling price of crude oil.

Its troubles have been welcomed by environmentalists who point out the industry’s outsized impact on air, land and water pollution.

“This is good news. It’s a sign that investment dollars are shifting out of carbon-intensive energy,” said Keith Stewart, senior energy strategist with Greenpeace Canada.

Energy companies are often very secretive when buying Crown leases, usually acting anonymously

through a land broker, and they are almost as secretive when giving up a lease position.

Canadian Natural Resources reported in disclosure documents that its holdings of oilsands leases fell by 46,000 hectares between 2014 and 2016.

But when asked why, spokeswoman Julie Wood said in an email, “We can’t comment on specific dispositions to the Crown or third parties.”

Financial considerations, however, were cited in 2015 when junior oilsands company SilverWillow Energy Corp. announced it had returned three leases to the government to avoid $50,000 per year in fees — leases that cost about $2 million to buy at Crown auction in 2011 and were estimated to contain more than 80 million barrels of recoverable bitumen.

A few months later, the cashstrapped company, whose stock was worth $90 million in 2012, agreed to sell itself for $1.7 million to another Calgary firm.