Market News

 September 27, 2006
Developing a Shared Vision for Oil Sands development

 Alberta, Canada (GLOBE-Net) -- A multi-stakeholder committee of representatives from all levels of government, the petroleum industry, First Nations, and environmental organizations has been formed to develop a 'vision' for the future of the oil sands, and has begun public consultation meetings across Alberta. Reconciling government, corporate and societal views on oil sands development will prove to be a challenge, but the need for such a consensus has never been greater.

Everything about the oil sands is massive. An estimated 175 billion barrels of recoverable crude reserves - placing Canada second in the world behind Saudi Arabia - are held within 140,200 square kilometres of land, an area larger than the state of Florida. 1.1 million barrels of bitumen are produced daily, and that figure is expected to nearly triple by 2016. Industry has announced approximately $87 billion of investment in oil sands projects from 1996 through to 2016.

The rapid pace of development has created an industrial juggernaut that affecting both the environment and the quality of life in nearby communities. The boom times will continue, which is why the province, the federal government, and other stakeholders are seeking to establish common ground on how to manage the future of the oil sands.

So far, the Oil Sands Multi-stakeholder Committee (MSC) has held three public hearings, with four more planned before October 4th. Following these sessions, "a vision for oil sands development and principles to assist in guiding future policy directions" will be formed to direct new legislation or voluntary industry action plans.

Suncor Energy was among the industry presenters at the September 19th session in Fort McMurray, outlining the company's environmental progress and urging a positive view of the resource, which represents a tremendous long-term asset for the province and for Canada.

The oil sands are a "world-class resource that presents us all with tremendous opportunities -- and responsibilities," said Executive VP of Oil Sands Steve Williams. Realizing the economic potential of the sands must be done "in a way that supports our communities and social fabric... and that also carefully manages the impacts on our shared environment," he added.

Fred Payne, Regulatory Advisor for Syncrude, echoed those thoughts, noting that "we all want to maintain the economic growth that generates such widespread benefits, but we do not want to leave people behind in the process, nor do we want our shared environment to suffer."

Also presenting was Dan Woynillowicz of the Pembina Institute, a research organization that is urging a moratorium on new projects until a plan to manage oil sand development is in place. A provincial plan must include measures to manage water usage, land impacts, social concerns and greenhouse gas emissions, says the think-tank.

Environmental Issues

All speakers agreed that the large scale fossil fuel extraction taking place presents significant environmental challenges for both Alberta and for Canada.

For the province, huge areas of land that are churned up during surface mining must be reclaimed and returned to as natural a state as possible. Oil sands recoverable from surface mining span over 3,000 square kilometers of boreal forest, one of Canada's most valued ecosystems.

Many companies have extensive land reclamation programs in place. Suncor reports that around nine percent of disturbed land (858 hectares) has been reclaimed, and over three million trees have been planted. The company will spend $25 million on reclamation and plans to restore approximately 3,500 hectares by 2015.

The Pembina Institute notes that no oil sands land has yet been certified as fully reclaimed by the province of Alberta. Suncor points out that certification means that land ownership reverts back to the Crown, which neither government nor industry desires while surrounding areas are still active industrially. When mining shuts down in larger areas, it argues, certification can proceed.

The Athabasca River, which supplies the industry with process water and Alberta communities with drinking water, is being increasingly stressed by oil sands extractions. Industry is currently permitted to withdraw 349 million cubic metres of water per year, more than double what the City of Calgary takes from the Bow River for domestic needs.

According to the Mikisew Cree First Nation and the Pembina Institute, a draft water management plan circulated by Alberta Environment and the federal Department of Fisheries and Oceans (DFO) is inadequate. The plan defines water flow zones using a traffic light: green means users operate normally, yellow means voluntary withdrawals or possible mandated incremental reductions, red means mandatory reductions, and black has yet to be defined. In the 'red' zone, "impacts on aquatic ecosystem are expected and increased duration and frequency may threaten ecological sustainability."

The Athabasca Chipewyan, who live downstream from the industry's center, have withdrawn from a collaborative environmental group in protest of increased water withdrawals. Both aboriginal groups that live downstream of the region now officially oppose the pace of development and its effect on the river.

Suncor and others have examined their water usage across all operations to identify potential savings. Suncor has been able to reduce water withdrawals per unit of output by more than 40 percent between 2000 and 2004, but total water usage has risen as a result of increased output. Syncrude has installed treatment plants for potable water at its sites.

The Pembina Institute's Dr. Mary Griffiths asserts that only 10 percent of water drawn from the river is returned. Tailings ponds full of contaminated water from the refining process now cover over 50 square kilometres of land, and it will take decades to reclaim any of that water. It is estimated that Suncor and Syncrude alone will produce one billion cubic metres of tailings by 2020. There have been extensive but so far unsuccessful efforts to reduce or eliminate the production of tailings from extraction methods.

The industry has also caused substantial social changes in the region. Growth has been so rapid in Northern Alberta that communities are struggling to keep pace with demands for infrastructure such as schools, roads, and water treatment facilities. The Mayor of Fort McMurray, the epicentre of the boom, estimates that the city with an ever-increasing population estimated at 80,000 will need $800 million worth of infrastructure in the next five years alone.

The boom has led to a severe housing shortage, with vacancy rates sitting near zero. According to the local chamber of commerce, the average cost of a house in Fort McMurray is now greater than in Toronto, with mobile homes selling for over $250,000.

With the social, environmental, and economic impacts of the boom perhaps reaching a 'tipping point', stakeholders are now addressing issues that demand urgent action from all sides.

Progress in efficiency, increases in quantity

Through concerted efforts to become more efficient and reduce environmental impacts, companies such as Suncor have dramatically improved processes and put resource management plans in place that are having an effect on the industry as a whole.

Similar to their progress with water management, Suncor reports that emissions intensity of greenhouse gases, sulphur dioxide, and nitrous oxide have decreased steadily since 2000, meaning that each unit of bitumen output now comes at with a lesser environmental impact.

Syncrude is another company that is investing in emissions reduction technology, currently engineering a major retrofit of two fluid cokers with flue gas scrubbing technology that is expected to reduce total emissions of sulphur compounds by 60 per cent from current levels and particulate matter by half, even as crude oil production increases by about 45 per cent.

An issue that Suncor, Syncrude and the entire industry must deal with, however, is that total greenhouse gas emissions and environmental impacts are on the rise due to increased production levels. Even with the application of advanced technologies and environmental management plans, many companies are increasing their overall impact on the air, land, and water resources that surround their operations.

While most companies recognize the need to address these challenges, few are willing to slow growth or change an investment climate that has helped their businesses to prosper. At the September 19th public consultation, most presentations indicated that the industry opposes further environmental regulations. "Only one, Suncor, spoke positively about getting more serious about greenhouse-gas emissions through a carbon cap and trade system," reported the Globe and Mail.

In fact, Suncor was the first Canadian energy company to analyse the business impacts of Kyoto Protocol compliance for Canada, projecting a cost of $0.20 and $0.27 per barrel of oil that would not have a material impact on business.

Other companies are making progress -- Syncrude projects that development of emissions technologies will result in an annual average emissions reduction of 1.7 percent per barrel of output between 1988 and 2012.

Even so, the oil sands are the single largest source of the increase in Canada's greenhouse gas emissions, responsible for at least 39 Mt of the predicted 270 Megatonnes by which Canada will overshoot its emissions reduction target under the Kyoto Protocol; with new investments, the actual proportion attributable to the oil sands is likely even greater.

Developing a solution

The question, therefore, is how to manage the oil sands for all stakeholders -- community, government, and industry. When it comes to environmental impacts that everyone feels, such as increased smog, degraded water quality and climate change, diverse interests often coincide.

Oil sands companies point to technology improvements that have made development less harmful, such as improved water recycling, emissions scrubbing, and waste heat capture. By making further advances, oil sands extraction can continue to deliver economic benefits while minimizing environmental impacts.

Innovation is one component of a three-part plan for sustainable development from Suncor. Along with collaboration and planning, it is an area in which much progress can be made, said Steve Williams. As well, cleaner energy technologies such as wind, solar, and biofuels are a part of what his company calls the 'parallel path' to energy development.

Suncor, Syncrude, and other firms collaborated with the Alberta Chamber of Resources, Natural Resources Canada, and the Alberta Energy Research Institute to develop the Oil Sands Technology Roadmap (PDF), which identifies a number of technology areas in which the industry can make progress. Becoming more energy and water-efficient, expanding carbon capture and sequestration, and using alternative fuels such as hydrogen are some of the paths forward, but the plan doesn't offer specific timelines or detailed instructions.

Collaboration is also important, and brining stakeholders together for the public consultation process is a good step. Multi-stakeholder initiatives such as the Clean Air Strategic Alliance (CASA) and partnerships with First Nations groups have helped to make sure that social and environmental issues are addressed in constructive ways. Operating with a 'silo' approach can only lead to negative outcomes.

See article: Corporations and NGOs: working together

The final component of Suncor's plan as outlined for the consultation panel is planning: "There is no question -- we all have to do a better job of anticipating and managing the consequences of growth," said Williams. That is truly what the consultation process is all about, and long and short-term plans with clear targets and objectives need to be established by all sides.

The question is how to set those targets and go about achieving them. Industry would seem to prefer voluntary initiatives, and has been making progress so far. But would a regulatory impetus, in the form of emissions reduction requirements, rules for water use, and constraints on land disturbance, provide a framework that encourages innovation without hindering development too much? What about a cap on greenhouse gas emissions accompanied by a 'carbon trading' system?

Such regulations could be designed to make the industry a world leader in efficient hydrocarbon production, developing technologies that can be exported to other petroleum producers around the world. Expanding the Technology Roadmap to include specific timelines for deployment and resulting environmental improvements could help catalyze government and industry spending on research and development.

Suncor's Williams spoke to the consultation panel of 'a new social contract where corporations earn the right to develop the resource by the responsibility they demonstrate'. One part of demonstrating that responsibility is coming to the table and listening to various stakeholders, which is taking place now with the consultation process.

The next steps will be to participate in a planning process that takes the interests of all Albertans and Canadians into account, and to develop the valuable resource of the oil sands in a responsible manner that benefits everyone. It is an issue which the entire country, and the rest of the world, will be watching closely.

For more on the consultation process, click here (PDF)