No water, no oil: How the parched western provinces could hamper the oilpatch

Persistent and severe drought conditions across Western Canada could have a devastating effect on the oil and natural gas sector, which has drilling operations in some of the driest areas, according to a new report by Deloitte.

Limited water supply could have significant effects on the production of oil and gas, the report warns, and the timing couldn't be worse for the industry as many companies are wanting to in‐ crease production and drilling with new export pipelines and facilities near‐ ing completion.

The past several years have been parched in parts of Western Canada, but there is extra concern this year be‐ cause of the below average snowpack in the mountains.

"It's not going to be as simple to just pipe fresh wa‐ ter in. You may need to move it and truck it to different lo‐ cations," said Andrew Botter‐ ill, an energy analyst with De‐ loitte Canada, in an interview with CBC News.

In B.C., the provincial en‐ ergy regulator has warned snowpack levels were only 72 per cent of the historical av‐ erage.

Trucking in water and re‐ cycling water will both result in more "expensive and com‐ plicated" operations for com‐ panies, he said.

Many communities are al‐ ready on high alert about a devastating drought and pos‐ sible impacts on drinking wa‐ ter and availability for indus‐ tries, such as agriculture.

It's the fourth year of drought conditions and regu‐ lators have warned industry about potential water restric‐ tions this summer. The amount of water used to pro‐ duce oil and gas can vary, with drilling activity in some regions using up to 10 times more water compared to oth‐ er areas, depending on geo‐ logical factors, according to the Alberta Energy Regulator.

The regulator is already restricting how much water oilsands and other energy projects can withdraw from part of the Athabasca River and other rivers in the province. Some communities have also banned the oil‐ patch from using municipal water.

"The allocation of water is going to be an increasingly important issue," said federal natural resources minister Jonathan Wilkinson. "The long-term impacts of climate change mean that this is going to be a continuing chal‐ lenge that we are going to have to engage."

Water is used for drilling and for fracking - a common technique where a high-pres‐ sure mixture of water, sand and chemicals are injected into an underground rock formation to create cracks and access oil and natural gas. Using recycled water can impact the effectiveness of drilling, which can increase costs.

Currently, oil prices re‐ main above average com‐ pared to the last decade, but natural gas prices are de‐ pressed. That's why drought conditions could have a bigger impact on production of natural gas.

"When you combine the fact that there may be areas where water is scarce togeth‐ er with the fact that gas prices are low, the appropri‐ ate thing to do is to not force the issue and try to deliver more production with a high‐ er cost," said Mike Belenkie, CEO of Advantage Energy, a mid-sized company produc‐ ing mainly natural gas.

Belenkie has kept a close watch on precipitation levels throughout the winter, not only because of the water shortage but the increased risk of wildfires, too.

"The bigger concern really is about fires," he said. "It was an awful year for forest fires last year and it doesn't look like it's going to be any better this year."

More than 100 fires are still burning in B.C. and Alber‐ ta after unusually dry condi‐ tions in both provinces. Last year, approximately 15 mil‐ lion hectares burned across the country, over seven times the historic national annual average.

For the first time in two decades, the Alberta govern‐ ment has opened watersharing negotiations among licence-holders, including the energy and agricultural sec‐ tors, with the aim of reducing water use.

"Oil and natural gas com‐ panies are actively increasing use of alternative water sources such as low-quality groundwater, municipal wastewater, and recycled produced water to reduce fresh water needs," said Richard Wong, vice president of regulatory and operations with the Canadian Associa‐ tion of Petroleum Producers, in an emailed statement.

The industry group is working with the Alberta gov‐ ernment to consider "lowrisk inter-basin water trans‐ fers to alleviate pressure on water-stressed areas," said Wong.

At the COP28 UN climate summit last year, countries around the world agreed to transition away from fossil fuels in order to limit global warming.

Climate change will pro‐ foundly affect the country's water supply as summers grow hotter and winters shorter, experts say. While precipitation is predicted to increase overall, so will the duration and severity of droughts.