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The Canadian Press - ONLINE EDITION

Alberta band drops lawsuit over oilsands project: company

CALGARY - An oilsands developer involved in a contested project in northern Alberta says an aboriginal band has agreed to drop its lawsuit.

Athabasca Oil Corp. (TSX:ATH) says the Fort McKay First Nation has agreed to remove its objections to regulatory approval of the Dover Commercial project northwest of Fort McMurray.

Last October, the band won the right to challenge the go-ahead that had been granted the Dover project despite the Alberta Energy Regulator's decision not to hear arguments based on aboriginal rights.

The band argued before the Alberta Court of Appeal that not being allowed to make its case before the regulator was a violation of those rights as enshrined in the Constitution.

The court agreed the question needed to be resolved.

"There is a live issue respecting the regulator's interpretation of its power to decide constitutional rights," Justice Frans Slatter wrote in the Appeal Court ruling.

Alvaro Pinto, the band's director of sustainability, said the company has agreed to environmental protections for an area the band was most concerned about.

"We got significant environmental protection commitments from the company," he said. "That's the most important aspect of the agreement."

Pinto said the agreement included a financial component as well as promises of business opportunities.

Band lawyer Karin Buss said the constitutional arguments will resurface.

"I expect the issue will be raised again in another context," she said. "This is a big issue for all the First Nations in the oilsands area."

She said the regulator received a letter last fall from the provincial energy minister instructing it to consider treaty and aboriginal rights in its hearings.

"In a way, we've kind of won our appeal already," she said.

She said the underlying issue is whether aboriginal rights limit the ability of governments to take up land.

The proposed five-phase Dover project would eventually produce 250,000 barrels a day using steam-assisted gravity drainage. It would be operated by Brion, a joint venture between Calgary-based Athabasca and Phoenix Energy Holdings Ltd., a Canadian unit of state-owned PetroChina.

The First Nation wanted a 20-kilometre buffer zone around the project, but the Alberta Energy Regulator denied the request and approved the Dover project last August.

The government is implementing a new office separate from the Alberta Energy Regulator to deal with aboriginal consultation questions. First Nations are critical. They say dealing with such issues through bureaucracy weakens their constitutional rights.

Athabasca's stock jumped about 11.5 per cent on the news. It's share closed at $8.74 on the Toronto Stock Exchange on Friday — 90 cents higher than Thursday's close.

Athabasca and PetroChina announced a deal in 2009 that would see the Chinese company own 60 per cent of the Canadian firm's McKay River and Dover oilsands projects.

The deal included a provision that allows PetroChina to snap up Athabasca's 40 per cent interest in each project after it has obtained regulatory approval.

PetroChina exercised that right in early 2012 for McKay River, buying Athabasca's stake for $680 million, making it the first oilsands project to be fully controlled by the Chinese.

But a similar purchase hasn't been able to take place for the Dover project and that has delayed Athabasca from getting a much-needed cash infusion of $1.32 billion.

Dejardins Securities analyst Justin Bouchard suggested the band's decision to drop its objections "lifts a major roadblock and significantly derisks the outcome in the regulatory process" for the Dover project.

Bouchard also said the move "gives greater visibility to Athabasca receiving the $1.32 billion."

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