Oil sands industry fights back
It’s quite unique in the world
As withering criticism of the oil sands continues unabated, the industry is fighting back, armed with its own set of facts and highlighting the strides made in tackling the environmental issues that have sullied its reputation.
Criticism of Canada’s oil sands is not a new phenomenon, but the industry is at a key stage of its development with about one million barrels per day of production under construction, according to IHS CERA data. Companies are mulling new projects in the hopes of nearly doubling oil sands production within a decade, while decisions on major pipeline projects are in the offing.
Meanwhile, the European Union is determined to “reduce its emissions through policies to stop the development of highly greenhouse-gas-intensive unconventional fossil fuels such as tar sands,” according to an official press document. An EU decision against the oil sands could be a stigma that’s tough to shake off.
The criticism has come from all quarters. Neil Maxwell, interim commissioner of Canada’s Environment and Sustainable Development (CESD), said in a report published Nov. 5: “Despite efforts over decades and progress in some areas, the government has not met key legislative responsibilities, deadlines and commitments to protect nature and advance sustainable development.”
Nearly two-thirds of Canadians surveyed by Ipsos Reid Public Affairs recently, believe the oil sands industry could do a better job of protecting the environment.
Simon Dyer, policy director at the Pembina Institute, says that the industry and government have not been able to demonstrate how they can “square the circle” of meeting their Copenhagen commitments and expanding oil sands production.
Pembina published a report on Wednesday, arguing that an emphasis on the Canadian oil sands was a carbon and revenue “gamble” that could hurt the country’s long-term competitiveness.
The industry has shrugged off the criticism and remains committed to raise Canadian oil sands production to 5.2 million bpd by 2030 from its current level of 1.8 million bpd. Recently, Suncor Energy Inc. and its joint venture partners Total E&P Canada Ltd. and Teck Resources Ltd. announced plans to build Fort Hills, a $13.5-billion bitumen mining project with a capacity of 180,000 barrels per day starting from 2017. Royal Dutch Shell Plc also said it will proceed with an 80,000-bpd Carmon Creek oil sands project.
And in a rare bit of good news for pipelines, British Columbia and Alberta governments agreed to work together to facilitate the construction of the $6.5-billion Northern Gateway pipeline being proposed by Enbridge Inc.
But behind the industry’s poker face is the nervous realization that it needs to secure a social licence to proceed with its plans. At the heart of the industry’s argument is that it has taken huge steps in curbing its carbon footprint and that it’s being unfairly targeted whereas other oil exporters have not attracted the same level of scrutiny.
Reynold Tetzlaff, energy leader at management consultant PWC, says Canadian oil companies are deploying innovative technology to cut production costs, which in turn is helping reduce emissions.
“It’s a win-win. It is quite unique in the world, how much these large oil sands companies get along and work together for the overall improvement of the industry,” referring to initiatives such as Canada’s Oil Sands Innovation Alliance — an industry group that pools the industry’s environmental initiatives.
PWC’s latest report on oil sands innovation illustrates how improvements in energy efficiency led to a 26% reduction in emissions intensity industry-wide between 1990 and 2010.
The report quotes industry executives saying the “parity with conventional oil” for many types of oil sands projects is on the horizon. Companies such as Suncor have reduced their gross freshwater withdrawal from the Athabasca River by 52% since 2004; Cenovus Energy Inc.’s Wedgewell technology has lower steam requirements, which translates to lower water and fuel consumption as well as a reduction in steam-generator emissions intensity.
“Several companies are working on non-aqueous in situ extraction methods, which would eliminate water almost entirely from in situ operations,” PWC said.
An annual industry survey by the Canadian Association of Petroleum Producers published Nov. 5, highlighted the industry’s progress on a number of fronts, but greenhouse gas emissions — both absolute and per barrel of production — increased in 2012 primarily because of rising oil sands production.
Meanwhile, emissions from air pollutants nitrogen dioxide and sulphur dioxide, both absolute and per barrel of production, declined last year, “due to shifts in production mix and implementation of new technologies,” the report noted.
Jackie Forrest, director of global oil at energy consultant IHS CERA, says that while some of the environmental challenges are a concern, they remain manageable.
“The revised federal environmental assessment rules have faced some criticism for being potentially less rigorous,” Ms. Forrest said. “This is in part because the new rules impose time limits and reduce public participation, but also because they are expected to result in fewer federal reviews owing to possible substitution with provincial processes.
“However, the impacts of the new process will become clearer over time, as reviews of the first tranche of projects subject to the new guidelines run their course.”
An IHS report published this month argues that while oil sands are among the more GHG-intensive crudes, they are not the most intensive “nor are they as high carbon as many commonly cited estimates.”
On a wells-to-wheels basis, GHG emissions from oil sands are 4% to 23% higher than emissions from the average crude consumed in the United States, with Canadian GHG emissions similar to those from competing Venezuelan crude.
Canadian oil sands is “disadvantaged” compared with other supply sources as the industry has made more data available compared with other producers such as Saudi Arabia, Nigeria, Iraq, Brazil and Venezuela, the IHS report contends.
That’s also the argument of a report commissioned by the Natural Resources Ministry on the European Union’s Fuel Quality Directive — which labels the oil sands as dirtier than other crude it imports. Ottawa believes the FQD implementation measures are “unscientific and discriminatory.”
The report contends that the FQD does not factor in emissions in countries such as Venezuela, Nigeria and Russia, which burn and release natural gas during extraction.
The IHS study also dispels the notion that oil sands could corrode pipelines due to their high total acid number (TAN) and sulphur content.
“The properties of oil sands crudes have been found to be within the range of other crudes transported by pipeline in North America,” the report noted.
In addition, land that is expected to be disturbed by mining is half the size of Houston, IHS says, and not the size of Florida as has some times been claimed by those opposing the development.
Industry estimates also show oil sands mining occupies 760 square kilometres of land, slightly larger than Calgary, and around 0.02% of Canada’s boreal forest.
But Pembina’s Mr. Dyer contends that in situ development will lead to more land disturbance, “when you actually aggregate the pipelines and wellheads and roads and the amount of leases you have there.”
The federal government is expected to announce new regulations, while Alberta introduced the Lower Athabasca Regional Plan (LARP) last year, aimed at creating limits and thresholds to manage the environmental impact of each project.
It may not be enough to appease many who expect more from the industry and government.
“If Canada and the oil sands industry is not willing to demonstrate how the level of production is consistent with the Copenhagen targets, it indicates they are not realistic,” Mr. Dyer said.