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The two companies had submitted a proposal to the Alberta government for a second phase roughly a year ago, to expand the refinery’s heavy oil-processing capacity to 100,00 bpd. North West Refining already has regulator approvals in place for the second phase and a potential third phase, but there is currently no timeline for construction to start.

That proposal is now being withdrawn until the partners can demonstrate the initial phase of the refinery is working as expected. The Sturgeon Refinery has started producing diesel from light oil but construction is not yet complete on the parts of the project that would allow it to refine heavy oil into diesel.

“We think it’s the right thing to do,” North West Refining president and CEO Ian MacGregor told the Financial Post on Friday, adding that he expected construction of the first phase to finish by the summer.

“The proposal is about a year old and a lot has changed since it went in,” MacGregor said, adding the discount Canadian heavy oil faces relative to U.S. light oil has changed dramatically and the proposal for the second phased needs to be updated.

Alberta’s NDP government has previously said it wants to see final costs for the first phase before considering an expansion.

“We share the spirit of North West Refining’s goals and commend them for recognizing the changing landscape since putting forward its initial proposal for Phase 2 of the Sturgeon Refinery,” Energy Minister Marg McCuaig-Boyd said in an emailed statement. She added the province would make decisions on new investment in “energy diversification initiatives” in the best interests of Albertans.