Oil SANDSFever THE ENVIRONMENTAL IMPLICATIONS OF CANADA’S OIL SANDS RUSH

BY DAN WOYNILLOWICZ CHRIS SEVERSON-BAKER • MARLO RAYNOLDS November 2005 Oil Sands Fever The Environmental Implications of Canada’s Oil Sands Rush

Dan Woynillowicz

Chris Severson-Baker • Marlo Raynolds

November 2005

THE PEMBINA INSTITUTE OIL SANDS FEVER i Oil Sands Fever ii About The Pembina Institute

The Pembina Institute creates Illustrations: Chris Severson-Baker, sustainable energy solutions through Dan Woynillowicz, research, education, advocacy and J&W Communications consulting. It promotes environmental, and as credited social and economic sustainability in the Photography: David Dodge, public interest by developing practical Chris Evans, Melinda Mara solutions for communities, individuals, and Dan Woynillowicz governments and businesses. The Pembina Institute provides policy Cover Photo: Syncrude extraction plant research leadership and education on Photo by Melinda Mara © 2005 climate change, energy issues, green The Washington Post and Suncor economics, energy efficiency and truck photo by Suncor Energy Inc. conservation, renewable energy and Back Cover: Both satellite photos used environmental governance. More with permission of TerraServer.com information about the Pembina Institute ©2005 The Pembina Institute is available at www.pembina.org or by ISBN 0-921719-83-3 contacting info @pembina.org. 1st Edition v1.4-06-01-31 Oil Sands Fever: The environmental The Pembina Institute implications of Canada’s oil sands rush Box 7558 1st Edition, published Nov. 2005 Drayton Valley, Alberta T7A 1S7 Printed in Canada Phone: 780.542.6272 Editor: Margaret Chandler E-mail: piad @pembina.org Production Manager: David Dodge Additional copies of this publication Design and Layout: may be downloaded from our website J&W Communications www.pembina.org.

ii OIL SANDS FEVER THE PEMBINA INSTITUTE Oil Sands Fever iii About the Authors Dan Woynillowicz Dan Woynillowicz health and environmental impacts of is a Senior Policy conventional oil and gas and the oil Analyst with the sands. Chris is a Pembina Institute Pembina Institute. spokesperson and has represented the Dan joined the Institute in numerous regulatory reviews Pembina Institute of large-scale energy development in 2001 as an projects and in several multi-stakeholder environmental initiatives focused on energy and policy analyst the environment. Chris is on the board in the Energy of the Cumulative Environmental Watch Program. Management Association (CEMA) Since 2003, he has led the Institute’s for the Athabasca Oil Sands region and engagement in the review of proposed is an Officer at Large on the CEMA oil sands projects and in the numerous Management Committee. He holds a multi-stakeholder initiatives involved in BSc in Environmental and Conservation regional environmental management Sciences (University of Alberta). and monitoring in the Athabasca oil sands. Dan acts as a spokesperson for the Institute and has presented expert Marlo Raynolds testimony regarding the environmental Dr. Marlo Raynolds is the Executive impacts of oil sands development before Director of the Pembina Institute. both provincial and federal regulatory Marlo has worked with the Pembina review panels. He holds a BSc in Institute since 1995 in the development Environmental Science (University and practical application of triple- of Calgary) and is pursuing an MA bottom-line decision-making tools, in Environment and Management energy systems and strategies for (Royal Roads University). sustainability. Marlo has worked with a wide range of clients including PHOTOS: DAVID DODGE, Chris Severson-Baker many large Canadian energy companies. THE PEMBINA INSTITUTE Marlo Raynolds holds a a BSc in Chris Severson- Systems Design Engineering (University Baker is Director of Waterloo), a Masters in Management of the Pembina and Leadership for the Voluntary Sector Institute’s Energy (University of McGill) and a PhD in Watch program. Mechanical Engineering (University Chris joined the of Alberta). He is also an Adjunct Pembina Institute Assistant Professor of Sustainable in 1996. His focus Development at the Haskayne School has been on of Business, University of Calgary. reducing the

THE PEMBINA INSTITUTE OIL SANDS FEVER iii Oil Sands Fever iv Acknowledgements

Information about various companies perspectives during the planning and projects is provided in this report. stages of this report This use of specific examples does not • Karin Buss, Karen Campbell, suggest that these companies, projects Matt Price, Rick Schneider and or processes are unique in terms of the Blair Whenham and others for their problem arising or the solution being insightful feedback and comments employed. The authors would like to acknowledge a number of organizations The contents of this report are entirely and individuals who have assisted in the responsibility of the Pembina the production of this report: Institute and do not necessarily reflect the views of those acknowledged • The Oak Foundation above. We have made every effort to • The Hewlett Foundation ensure the accuracy of the information • Staff of the Pembina Institute who contained in this report at the time of helped in the research, writing and writing. However, the authors advise review of this document that they cannot guarantee that the information provided is complete or • Mark Anielski, Karin Buss, accurate, and any person relying on Peter Dickey and Rob Macintosh this publication does so at his or her for their contribution of ideas and own risk.

iv OIL SANDS FEVER THE PEMBINA INSTITUTE Oil Sands Fever v Table of Contents

Foreword ...... vii

1 Canada’s Oil Sands Rush ...... 1 1.1 Location and Scale ...... 1 1.2 A Brief History ...... 2 1.3 Tar Sands Makeover ...... 3 1.4 Global Attention ...... 4 1.5 New Goals and Speculation ...... 5 1.5.1 Oil Sands Domination ...... 5 1.5.2 Rising Oil Prices ...... 6 1.6 The Impacts of Irresponsible Demand ...... 8 1.7 The Untold Story ...... 9

2 From Tar to Tank ...... 11 2.1 Making Oil from Tar ...... 11 2.2 Fuel for the Oil Sands ...... 15 2.3 Transportation to Refineries ...... 17

3 Climate Change Consequences ...... 19 3.1 Escalating Greenhouse Gas Emissions ...... 19 3.2 A Matter of Emissions Intensity ...... 21 3.3 Canada’s Climate Contradiction ...... 22 3.4 Taking Meaningful Action ...... 25

4 Environmental Impacts ...... 27 4.1 Cumulative Environmental Impacts ...... 27 4.2 Troubled Waters ...... 28 4.2.1 The Athabasca River ...... 29 4.2.2 A Tailings Legacy ...... 30 4.2.3 Freshwater Aquifers ...... 32 4.2.4 Waste from Water Treatment ...... 33 4.2.5 Troubling Trends in Water Use ...... 33

THE PEMBINA INSTITUTE OIL SANDS FEVER v Oil Sands Fever vi Table of Contents

4.3 Transformed Lands ...... 36 4.3.1 The Boreal Forest ...... 36 4.3.2 Surface Mining and Reclamation ...... 37 4.3.3 Fragmented Forests ...... 40 4.3.4 A Growing “Footprint” ...... 41 4.4 Polluted Air ...... 44 4.4.1 A Pollution Capital ...... 44 4.4.2 The Impacts of Increasing Air Pollution ...... 47 4.4.3 Future Trends in Air Pollution ...... 49 4.4.4 Acid Rain ...... 51 4.5 Managing Cumulative Environmental Impacts ...... 53 4.5.1 Regulating and Managing the Oil Sands ...... 53 4.5.2 Creating a Plan ...... 53 4.5.3 Implementing the Plan ...... 54 4.5.4 Slipping Timelines ...... 54 4.6 Protecting the Environment ...... 57

5 Governments’ Helping Hand ...... 59 5.1 Rent Collection ...... 60 5.1.1 Government as Steward ...... 60 5.1.2 Fair Compensation? ...... 60 5.1.3 Alberta’s Favourable Royalty Regime ...... 61 5.1.4 Federal Tax Breaks ...... 62 5.2 A New Fiscal Regime ...... 63

6 A Time for Stewardship and Leadership ...... 65 6.1 Responsible Use ...... 65 6.2 Protecting the Climate ...... 66 6.3 Protecting the Regional Environment ...... 66 6.4 Establishing an Equitable Fiscal Regime ...... 67

vi OIL SANDS FEVER THE PEMBINA INSTITUTE Oil Sands Fever vii Foreword

Until recently the oil sands were a vast Until now the story of Canada’s oil sands has but largely inaccessible resource. In the last only been partially told. Tales about the vast 15 years this has changed dramatically. After economic potential of development have advancements in technology significantly been told and re-told by the oil industry, improved the economics of oil sands government, energy analysts and the media, production, government and industry but there has been a dearth of information implemented an ambitious strategy in 1995 about the environmental consequences. to increase production. Central to this Oil Sands Fever: The environmental strategy were commitments by both federal implications of Canada’s oil sands rush fills a and provincial governments to significantly critical gap by providing a comprehensive reduce royalties and taxes to spur investment. overview of the impacts and making recom- Ambitions of producing one million barrels mendations regarding their management. per day of oil from the oil sands by 2020 The natural resources of our country are ours have been greatly exceeded: this goal was to decide how best to manage. This report surpassed in 2004. This intense rate of should compel Canadians to demand that development is being driven by a steadily the governments of Alberta and Canada rising market price for crude oil, growing ensure that sound environmental manage- uncertainty about the global supply of oil ment and protection accompany the and rapidly growing demand from the economic opportunities arising from oil sands United States and Asia. Canada’s so-called development. Furthermore, the intensity of “black gold,” now regarded as an abundant, energy requirements and environmental secure and affordable source of crude oil, impacts of development are clear indications is the focus of international attention. With that we need to fundamentally re-evaluate international attention, comes international how we produce and consume transportation responsibility. A feverish rush of oil sands fuels. Now is the time to focus our resources investment and development, not unlike the on implementing energy systems that allow us gold rush that swept through North America to restore our environment and build healthy in the 19th century, is underway. This new and resilient communities. wealth comes at a cost. The rapid and unconstrained oil sands Managing the environmental impacts arising expansion now before us risks squandering from this pace and scale of development is a a publicly owned resource and creating considerable challenge that must be urgently a legacy of environmental degradation addressed, particularly in light of the new and long-term environmental liabilities. goal of producing five million barrels per To combat these challenges and further day by 2030. As Alberta’s northern boreal the positive legacy desired by the public, forest is torn up for oil sands development, politicians and industry, we have put the environmental impacts to air, land and forward recommendations to improve the water in Alberta are increasing rapidly. environmental management of the oil sands Not surprisingly, Alberta is now Canada’s while calling for an accelerated transition pollution capital for industrial air pollutants. towards sustainable energy in Canada. And the oil sands are the single largest contributor to greenhouse gas emissions growth in Canada. Dr. Marlo Raynolds, Executive Director A more positive future is possible. Calgary, November 2005

THE PEMBINA INSTITUTE OIL SANDS FEVER vii SOURCE: PHOTO BY MELINA MARA. © 2005, THE WASHINGTON POST. REPRINTED WITH PERMISSION 1 Canada’s Oil Sands Rush 1.1 Location and Scale

ATHABASCA

PEACE 100 RIVER Fort McMurray 95

90

85

80

75 Albertaberta 70

Edmonton CANADA 65 Calgary COLD LAKE 60

55 U.S.A.

Oil sands areas Extent of Athabasca Wabiskaw-McMurray deposit

The vast majority of Canada’s oil sands oil sands deposit, which includes all the are located in Alberta and underlie an deposits that can be surface mined and FIGURE 1: area larger than Florida. Oil sands are extensive in situ (in place) reserves. Alberta’s oil found in three deposits: Peace River, The Alberta Energy and Utilities Board sands deposits Cold Lake and Athabasca (Figure 1, SOURCE: © 2005 (EUB) estimates that approximately ALBERTA ENERGY Table 1). Collectively these deposits 1.7 trillion barrels of crude bitumen AND UTILITIES BOARD underlie approximately 149,000 square (the technical term for the fossil fuel kilometres of Alberta’s northeastern extracted from the oil sands) are in boreal forest – roughly 23% of the the oil sands but predicts that only 1,2 province. The Regional Municipality 19% of this total (315 billion barrels), of Wood Buffalo, more specifically the will ultimately be recovered. A smaller city of Fort McMurray (population amount, 174 billion barrels, could 61,000), serves as the regional hub for be recovered using today’s technology 3 oil sands development. and under current and anticipated This report will focus on the largest economic conditions. This amount is and most heavily developed Athabasca counted as established oil reserves.4,5

THE PEMBINA INSTITUTE OIL SANDS FEVER 1 1 Canada’s Oil Sands Rush

Deposit Initial volume of crude Land area bitumen in place (square kilometres) (barrels) Athabasca 1.37 trillion 102,610 (in situ + surface mineable) (110 billion is surface mineable) (2,800 is surface mineable)

Cold Lake 201 billion 29,560

Peace River 129 billion 17,250

Total Oil Sands 1.7 trillion 149,420

TABLE 1: Area and bitumen resource of Alberta’s oil sands deposits 7

1.2 A Brief History

In 1944, the Alberta government government invested in the oil sands TAR SANDS: partnered with a company called again by forming the Alberta Energy A FUNDAMENTALLY Oil Sands Limited to build a pilot oil Company (AEC), a 50/50 partnership DIFFERENT TYPE OF OIL sands extraction plant at Bitumount, between the government of Alberta and “It’s the single largest a site north of Fort McMurray where its citizens. The AEC became a direct hydrocarbon deposit on much early experimentation had equity investor in Syncrude’s original the Earth, and it’s next occurred. When the costs for the operations through an 80% ownership door to the biggest construction of the plant doubled to of the pipeline carrying oil from market for oil products, $500,000 in 1948, Oil Sands Limited Syncrude to Edmonton, a 50% the United States. What’s wrong with it? pulled out, and the government of ownership in Syncrude’s power facility It’s crap oil.... You’ve Alberta took over sole control of the and a 50% ownership in the Syncrude got to use a lot of plant. After successfully demonstrating plant.10 By 1978 Syncrude was also energy and a lot of pots extraction of bitumen from the oil producing oil from the oil sands.11 and pans to extract it sands in 1949, the government then from the sand, and you For several decades, Suncor and have low-quality oil. It’s sold the Bitumount complex at a loss Syncrude faced numerous challenges 8 a high-cost business and for $180,000. such as breakdowns, freeze ups, a lot of capital and a lot Commercial development did not fires and high costs. But by 1986 of operating costs.” begin until 1967 when the Great advancements in technology had Neil Camarta, former Senior Canadian Oil Sands Company reduced the operating costs of Vice President, Oil Sands, Shell Canada 6 (now Suncor) started the first open producing synthetic crude oil from pit surface mines in the Athabasca Cdn$35 to Cdn$13 per barrel.12 deposit.9 In 1973, the Alberta

2 OIL SANDS FEVER THE PEMBINA INSTITUTE Canada’s Oil Sands Rush 1 1.3 Tar Sands Makeover

Until the mid-1990s, development of the dirty sounding “tar sands.” The of the tar sands, the original name term “oil sands” was selected as the new for oil sands, was still considered risky brand name for tar sands, and they and unprofitable. Then in 1993, were framed as “a national prize.”14 the Alberta Chamber of Resources In 1997, the governments of Alberta convened the National Oil Sands Task and Canada implemented a key Force (the Task Force), a collective recommendation of the Task Force of oil industry and government by introducing a generous royalty representatives, to draft a framework regime and federal tax breaks for for making the oil sands an economi- oil sands development. The Alberta cally attractive resource. In its 1995 government’s Generic Oil Sands report entitled The Oil Sands: A New Regime collects only 1% of total Energy Vision for Canada, the Task revenue until all capital costs (for new Force laid out a 25-year strategy that projects and expansions) are recovered, envisioned tar sands production at which time 25% of total revenue doubling or tripling to reach between is collected. This creates strong 800,000 and 1.2 million barrels per motivation for rapid re-investment and 13 day by 2020. The strategy also called expansion. Similarly, the tax breaks for efforts to improve public perception introduced by the federal government

“The Task Force has identified a clear vision for growth and answered – affirmatively – the fundamental question: Should oil sands development proceed?” “To attract investment, the Task Force has embarked on a carefully calculated, new course for development.” “The industry must develop an active and on-going program to change outdated perceptions of the oil sands and create an informed, supportive public that understands the value and potential of the oil sands.” National Oil Sands Task Force, The Oil Sands: A New Energy Vision for Canada (1995) 15

Raw oil sands. The tar-like bitumen found in these sands becomes oil only after an expensive and intensive feat of engineering succeeds in washing the bitumen from the sand and converting it into a synthetic crude oil. SOURCE: SUNCOR

THE PEMBINA INSTITUTE OIL SANDS FEVER 3 1 Canada’s Oil Sands Rush

have made the oil sands industry the significant new expansion began envy of Canada’s industrial sector. to unfold. The scale of this new Only five years after the release of the development greatly exceeded Task Force’s recommendations, the expectations. Fuelled by strong growth necessary conditions for an oil sands in demand for transportation fuels, boom were in place. Further reductions particularly in the United States, and in operating costs and rising crude oil a favourable fiscal regime, oil sands prices also heightened industry interest. production more than doubled to Numerous expansion plans and new approximately 1.1 million barrels per projects were launched. A wave of day between 1995 and 2004 – 16 years ahead of the anticipated timeline.16 1.4 Global Attention

The United States’ Energy Information were seen as an abundant, accessible BILLIONS INVESTED Administration (EIA) and the Oil and and affordable source of crude oil. To date, four of the five Gas Journal took notice and formally largest publicly traded Not surprisingly, the world has also oil companies in the recognized Canada’s oil sands as an taken notice. Major powers are world – Royal Dutch/ economically viable resource in 2003, positioning themselves to ensure their Shell, ExxonMobil, vaulting Canada’s oil reserves from 21st access to the oil sands, which have been ChevronTexaco position in the world to 2nd (Figure 2). 17 described by the U.S. Energy Policy and TotalFina The oil sands, lavishly described as “black – have invested or Development Group as “a pillar of committed to invest gold,” “resources beyond belief” and sustained North American energy and 19,20,21 billions of dollars in oil “the eighth wonder of the world,” economic security.”22 sands development. In the first half of 2005, Oil Reserves by Country (Billions of Barrels as of December 2004) Chinese oil companies signed three deals to tap into Canada’s Saudi Arabia 259 oil sands reserves by 179 purchasing stakes in two Canada start-up oil sands Iran 126 companies and a proposed pipeline to Iraq 115 transport synthetic crude oil from the oil sands to Kuwait 99 the Pacific coast for = 10 Billions of Barrels 92 shipping to China.18 Abu Dhabi Note: Of Canada’s 179 billion barrels Venezuela 77 of proven reserves, 175 are Alberta’s oil sands have located in the oil sands. become a frequent Russia 60 destination for foreign politicians, bureaucrats Libya 39 and energy executives FIGURE 2: Oil reserves by seeking to see Nigeria 35 country (billions of barrels 23 firsthand the scale as of December 2004) 22 of the resource. United States SOURCE: Oil and Gas Journal December 2004 05050 100 150 200 250 300

4 OIL SANDS FEVER THE PEMBINA INSTITUTE Canada’s Oil Sands Rush 1 1.5 New Goals and Speculation “We appreciate the fact From 1999 through 2004, Suncor and 1.5.1 Oil Sands Domination that Canada’s tar sands Syncrude both expanded their surface are now becoming mining operations. Four new surface In 2001, crude bitumen production economical, and we’re mines and seven new in situ operations exceeded conventional crude production glad to be able to get the access toward [sic] in Alberta for the first time.30 This trend were also approved in the Athabasca oil a million barrels a day, sands region.24 This wave of develop- is predicted to continue (Figure 4). headed toward two ment is projected to increase production By 2003 oil sands represented 54% of million barrels a day.” to more than two million barrels per day Alberta’s total oil production and one- U.S. President George W. by 2010-2012.25 third of Canada’s total oil production.31 Bush, March 23, 2005 34 In 2005, oil sands production will With increasing confidence that oil represent about half of Canada’s total prices are likely to remain high, 6 wild speculation abounds regarding 5 ) y

potential a d

r e

production. p

s l 4 e r

The Canadian r a b

Association n o i l l i m of Petroleum (

n 3 o i t

Producers c u d o (CAPP) has r p

s d projected that n

a 2 s

l production i O could reach

2.7 million 1 barrels per day by 2015.26 In 2004, 0 2003 2015 2030 the Alberta Chamber of Resources put forward a production of crude oil.32 The Canadian vision of producing five million barrels Association of Petroleum Producers FIGURE 3: per day by 2030 (Figure 3).27 More (CAPP) predicts that by 2015, three Projected growth recently, the government of Canada has in oil sands out of four barrels of oil produced in envisioned producing six million barrels production Canada will be from the oil sands.33 per day of production by 2030, and to 2030 some energy analysts have projected New growth in oil production is production as high as eleven million being driven by global demand for oil, barrels per day by 2047. 28,29 For the with domestic demand in Alberta purpose of this report, we will assume representing only a small fraction of the more conservative projection of five total production (Figure 5). In the million barrels per day by 2030. short term, growing demand for

THE PEMBINA INSTITUTE OIL SANDS FEVER 5 1 Canada’s Oil Sands Rush

3.00

2.50

2.00 y a d

Crude Bitumen r e p

s l e r r a b

1.50 f o

s n o i l l i M

Synthetic Crude Oil 1.00 (upgraded crude bitumen)

Pentanes Plus Heavy Oil 0.50

Light/Medium Oil

0.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

FIGURE 4: Crude oil production in Alberta 1995–2014 35

2.50

2.00

1.50

1.00

Crude Bitumen Exports

0.50 Synthetic Crude Oil (upgraded bitumen) Exports

Alberta Demand

0.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

FIGURE 5: Alberta demand and export of crude bitumen and synthetic crude oil (upgraded bitumen) 1995–2014 36

6 OIL SANDS FEVER THE PEMBINA INSTITUTE Canada’s Oil Sands Rush 1

synthetic crude oil is projected to come suggest will continue.39 In September from existing markets in the American 2005, the Canadian Imperial Bank of Midwest and Rocky Mountain regions Commerce reported that the price for but may also expand to potential oil might average US$84 per barrel in markets on the U.S. East and West 2006 and US$100 by the fourth quarter coasts and the Far East.37 The Canadian of 2007.40 Even the Toronto Dominion National Energy Board predicts that Bank, which projected that slowing by 2015 there will be a 90% increase economic growth in the United States to 2.8 million barrels per day of would lead oil prices to drop to $US45 Canadian crude oil exports to the in early 2007, has acknowledged that United States, with about 70% the world has entered a new era of coming from the oil sands.38 sustained higher crude prices.41 With estimates that the oil sands will be profitable as long as the price of oil stays 1.5.2 Rising oil prices above $US25, there is little doubt that Neither the Task Force nor the producing synthetic crude oil from the governments of Alberta and Canada oil sands will remain a highly profitable predicted that geopolitical instability venture.42 This prediction is confirmed in the Middle East and surging global by the commitment of billions of dollars demand for oil would drastically of investment by the world’s most increase oil prices (Figure 6) – a trend powerful oil companies. many energy and financial analysts

$120 . S .

U $100 $ (

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p $80 S

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e d u r $60 C

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s a x er

t $20 s eT e W

$0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

FIGURE 6: Spot prices for West Texas Intermediate crude oil 1990–2007 43

THE PEMBINA INSTITUTE OIL SANDS FEVER 7 1 Canada’s Oil Sands Rush 1.6 The Impacts of Irresponsible Demand

North Americans are starting to see the oil sands as a source of cheap and locally available oil that will meet their demand for transportation fuels. As illustrated in Figure 7, most of the synthetic crude oil from the oil sands goes to producing transportation fuels. As we struggle with the concept that the era of abundant oil may be drawing to a close, a dangerous mythology is emerging about the role of oil sands in perpetuating highly inefficient transportation fuel consumption. CAPP’s predicted oil sands production of 2.7 million barrels per day in 2015 would only meet 11% of the United States’ projected demand.45 Looking to 2030, the five million barrels per day Growing demand for transportation fuels is being driven by inefficient use in gas guzzling vehicles. Approximately 65% of projected oil sands production of a barrel of synthetic crude oil goes to making gasoline and projected would only fulfill 16% of diesel fuel. SOURCE: DAN WOYNILLOWICZ, THE PEMBINA INSTITUTE North American demand in 2030, or less than 5% of global demand.46,47 Global transportation fuel consumption is rising so quickly that even feverish oil sands development will not be able to keep pace. The oil sands are not, as some may suggest, the proverbial silver bullet that will allow our affection for inefficient personal vehicles to persist. Globally, we face a significant energy challenge, in part because of our fleet of inefficient vehicles. The average fleet fuel efficiency of North America’s personal vehicles in 2005 is 11.2 liters per 100km.48 The peak average fuel efficiency in North America, 10.7 litres per 100 km, occurred in 1986 before automakers began selling large volumes of sport FIGURE 7: utility vehicles (SUVs). Today, the End products from a barrel of oil 44

8 OIL SANDS FEVER THE PEMBINA INSTITUTE Canada’s Oil Sands Rush 1

13.0

North American average fleet fuel 12.0 efficiency for passenger cars

11.0

10.0 Irresponsible Demand

9.0

Fuel Economy (L/100km) “These Canadian oil sands will help keep 8.0 American SUVs running in the years to come.” European average fleet fuel efficiency 7.0 Knight Ridder Newspapers, October 2005 50

6.0 “In the long run, rich 1990 1995 2000 2001 2002 2003 countries and emerging countries are going to FIGURE 8: Irresponsible demand for private-vehicle fuel in North America (L/100 km) have to be much more discriminating about average fleet fuel efficiency is the Given the magnitude of impacts what we use oil and coal for.’’ same as it was in 1981. The difference associated with producing fuel from between North America’s average the oil sands, Canadians should be Former U.S. President Bill Clinton, October 2005 51 fleet efficiency and the European concerned with this inefficient use of average is 3.4 litres per 100 kilometres, their natural resource. As an emerging which is a conservative estimate global energy supplier, Canada should of the amount of wasted fuel.49 take responsibility and show leadership This wasted energy is what we by providing incentives for responsible refer to as irresponsible demand. consumption. Canada could set The irresponsible demand for fuel an example by adopting its own between 1990 and 2003 is shown best available technology fleet fuel in Figure 8. efficiency standard. 1.7 The Untold Story

In 1995, the Task Force gave relatively Production exceeded this target in less little heed to the question of how to than a decade. With a new goal of mitigate the environmental impacts producing five million barrels per day by of producing one million barrels per 2030, the question of how to manage day from the oil sands. Perhaps they the associated environmental impacts assumed that they would have 25 years becomes even more urgent. to address this question. They did not.

THE PEMBINA INSTITUTE OIL SANDS FEVER 9 1 Canada’s Oil Sands Rush

Oil Sands Fever documents the priorities to ensuring that irreversible environmental and climate change environmental harm is prevented challenges arising from the oil sands through proactive management. development that occurred between In 1995, the Task Force deemed the 1996 and 2004 and describes the even principal risk for the oil sands to be greater consequences of the immense “that the full economic and social development now contemplated. The potential of the resource will not be regulatory agencies responsible for realized in public and private wealth ensuring development that is “fair, creation.”52 In our opinion, a decade responsible, and in the public interest” later it is clear that the greatest are overwhelmed by the sheer pace of risk associated with the oil sands is development. These agencies must be the long-term environmental and empowered to effectively and proactively climate implications arising from manage the growth. To do so the the current pace and approach to government must shift its efforts and exploiting this resource.

“Higher oil prices are merely one of a “Notwithstanding our commercial long number of warning signs, natural, interests, Canadians stand to be social and economic, all telling us that harmed by a world that is polluted and our addiction to fossil fuels is ecologic- depleted of energy resources. Thus, we ally harmful, technologically backward, must join policy makers everywhere to economically costly, and practically promote conservation and efficiency unnecessary.... The point is not measures, as well as investment in whether the price rises but, rather, alternative energy sources. Despite how we perceive that fact. What the fact that we in Canada have an we face is not a threat so much abundance of oil, gas, uranium and as an opportunity, if not an epochal hydroelectric power, our vast resources challenge. And when opportunity will not last forever.” knocks it is time to open the door. As David Kilgour, MP Edmonton – Millwoods / the oil system door closes we need to Beaumont, June 15, 2005 54 open a different door, one that opens the way to clean efficient energy.” Vincent di Norcia, Editor, Corporate Ethics Monitor 53

10 OIL SANDS FEVER THE PEMBINA INSTITUTE 2 From Tar to Tank 2.1 Making Oil from Tar Carrying 400 tonnes per load, oil sands mining companies use the biggest trucks in the world. PHOTO: SUNCOR ENERGY

It takes two tonnes of oil sands ore to yield one barrel of oil. PHOTO: DAVID DODGE, THE PEMBINA INSTITUTE

Oil sands deposits are composed square kilometers as of sand, silt, clay, water and about the surface mineable 10%-12% bitumen.55 They have a zone within the dark color and a strong hydrocarbon Athabasca deposit.58 smell. The technical term for the Crude bitumen is oil extracted from oil sands is crude extracted from the bitumen, which is defined as a mined oil sands viscous (thick), heavy oil that will not through a process flow to a well in its natural state.56 that essentially Depending on the depth of the reserves, mixes the oil sands oil sands are either surface mined (also with hot water to wash the bitumen known as strip mining) from open pits from the sand. Millennium mine or heated so the bitumen can flow to conveyors from air.

a well and be pumped to the surface In situ recovery is used to access deeper PHOTO: DAVID DODGE, (in situ extraction). To be surface mined, deposits. The Alberta government THE PEMBINA INSTITUTE the deposit must be less than 100 metres estimates that approximately 93% of from the surface (Box 1, Figure 9).57 Alberta’s oil sands can only be developed The EUB has defined an area of 2,800 using in situ recovery.59 But unlike

THE PEMBINA INSTITUTE OIL SANDS FEVER 11 2 From Tar to Tank

FIGURE 9 Schematic of an oil sands mining operation SOURCE: CENTRE FOR ENERGY

OIL SANDS SURFACE MINING

To mine the oil sands, Oil sands mining trucks are wetlands need to be drained, 15 metres long by 7 metres tall, conventional crude oil, the thick, rivers diverted, and all trees have 4-metre tall tires and are viscous bitumen cannot be recovered and vegetation stripped from 40% heavier than a Boeing using conventional well drilling the surface. 747 airplane. 63,64 techniques. Special recovery methods, Extracting a barrel of bitumen Approximately four tonnes of most commonly the injection of high- material (two tonnes of soil and using surface mining requires pressure steam, are needed to separate rock above the deposit and two • Two to five barrels of fresh 65 the tar-like substance from the sand. tonnes of oil sands) must be water (a barrel can hold mined to produce one barrel 159 litres, a little more than Heating the bitumen reduces its 60 (159 litres) of synthetic crude oil. an average bathtub) thickness so that it can flow to a well The hydraulic shovels used in • 250 cubic feet of natural and be pumped to the surface. The the oil sands are the largest in gas,66 enough to heat a the world – each scoop of the predominant in situ technology is called Canadian home for almost shovel moves over 40 cubic steam assisted gravity drainage (SAGD) 1.5 days. metres of material.61 (Box 2, Figure 10). Every two days, mining opera- • The mining and extraction tions move enough oil sands process recovers about to fill Toronto’s Skydome or 90% of the bitumen found 67 New York’s Yankee Stadium.62 in the deposit.

Oil sand is mined from 100-metre deep pits and then fed into an extraction facility where hot water is used to wash the bitumen from the sand and clay. PHOTO: DAVID DODGE, THE PEMBINA INSTITUTE

12 OIL SANDS FEVER THE PEMBINA INSTITUTE From Tar to Tank 2

IN SITU OIL SANDS PRODUCTION

The predominant in situ A large SAGD project can have technology is Steam Assisted up to 25 well pads spread over After being separated from the sand, Gravity Drainage (SAGD). a 150-square-kilometre parcel the bitumen must be upgraded before of land crisscrossed by above- Well pads ranging in size from it can be refined into gasoline, diesel, ground pipelines.68 one to seven hectares are cleared jet fuel and other hydrocarbon products of all vegetation, and multiple A central facility produces high- (Box 3, Figure 11). The upgrading pairs of horizontal wells are pressure steam that is carried by process converts the bitumen from drilled into the bitumen-containing above-ground pipelines to the well thick, molasses-like oil, through the formation: an injector well and a pads where it is injected into the addition of hydrogen, into a lighter, producer well. formation to reduce the viscosity of the bitumen. higher quality synthetic crude oil that Well pads generally have can be sent to refineries. between 4 and 10 well pairs The bitumen and water (from the (8 to 20 wells). condensed steam) then drains by gravity to the lower producer well where it is pumped to the surface. The water and bitumen are returned to the central facility by another above-ground pipeline, which separates the bitumen from the water and recycles the water to produce more steam. Extracting a barrel of bitumen using SAGD technology requires • 2.5 to 4 cubic metres of steam to produce 1 cubic metre of bitumen • 1000 cubic feet of natural gas,69 enough to heat a Canadian home for about 5.5 days. The SAGD process recovers between 60%-80% of the bitumen found in the geological formation. FIGURE 10: Schematic of a steam assisted gravity drainage (SAGD) operation

THE PEMBINA INSTITUTE OIL SANDS FEVER 13 2 From Tar to Tank

UPGRADING OIL SANDS TO SYNTHETIC CRUDE OIL FIGURE 11 Producing the final synthetic crude processes (e.g., production of fertilizers) Schematic of oil sands upgrading oil from bitumen requires two stages or stored in massive sulphur blocks. SOURCE: CENTRE FOR ENERGY of upgrading. About 65% of the bitumen is upgraded The first stage cracks the large bitumen in Alberta to form light, sweet synthetic hydrocarbons into smaller molecules. crude oil.70 The remainder is transported This is done using either coking or by pipeline to other regions of Canada hydrocracking or both. In the coking and the United States for upgrading. Bitumen must first be upgraded or transformed process, excess carbon is removed when One barrel of synthetic crude oil high temperatures (circa 500°C) crack into synthetic crude oil produces enough gasoline to fill before it can be refined. the bitumen molecules by vaporizing three-quarters of a Chevy Avalanche’s them. The excess carbon forms a solid gas tank, or enough to drive it about PHOTO: DAVID DODGE, THE PEMBINA INSTITUTE residue called coke. The coke, which 490 kilometres.71 resembles coal, is then stockpiled as a waste by-product. Hydrocracking involves the addition of hydrogen to bitumen molecules that are cracked using a catalyst, such as platinum. The second stage of upgrading is called hydrotreating whereby high pressure and temperatures (300-400°C) are used to remove nitrogen and sulphur. In hydrotreating, metals, sulphur and nitrogen are removed using a catalyst in a hydrogen environment. The nitrogen is removed as ammonia and is usually used as a source of fuel, while the sulphur by-product is converted to elemental sulphur and either transported for use in other industrial

14 OIL SANDS FEVER THE PEMBINA INSTITUTE From Tar to Tank 2 2.2 Fuel for the Oil Sands

Both surface mining and in situ operations are energy intensive “Burning a clean fuel to make a dirty fuel is a endeavours. Natural gas is used both form of reverse alchemy, to generate the heat necessary to extract like turning gold into the bitumen from the oil sands and as lead. It also leaves less a source of hydrogen to upgrade the gas for more sensible bitumen into synthetic crude oil. uses, such as making electricity and heating Natural gas has traditionally been your home....When you selected as the fuel of choice because calculate the toll on gas it was relatively clean burning, readily reserves, the cleanest available and (until recently) cheap.72 and most versatile Table 2 shows how much natural gas hydrocarbon, the oil sands don’t look like is consumed on a per-barrel basis to a godsend after all.” produce bitumen and convert it into synthetic crude oil. The oil sands Eric Reguly, May 28, 2005 The Globe and Mail 78 industry consumes about 0.6 billion cubic feet of natural gas per day, enough to heat 3.2 million Canadian homes per day.73,74 In 2012, to produce two million barrels per day will require approximately two billion cubic feet of natural gas per day, more than 1.5 times the amount of natural gas that would be available from the proposed Mackenzie Valley Pipeline Suncor installed scrubbers in 1996 to reduce (Figure 12).75 This daily requirement is S02 emissions, achieving a 75% reduction in roughly equivalent to the amount of S02 emissions relative to 1990. Regional S02 emissions are expected to grow to 295 tonnes natural gas needed to heat all of the per day, which is higher than currently approved homes in Canada for a day.76 emission rates, but lower than the actual emission rates of the early 1990s. PHOTO: SUNCOR ENERGY

Volume of Natural Gas Consumed Activity (cubic feet) per Barrel of Bitumen

Approximately 750 Surface mining and upgrading (250 extraction and 500 upgrading)

1500 (1000 extraction In situ production and upgrading and 500 upgrading)

TABLE 2: Natural gas consumption for bitumen and synthetic crude oil production 77

THE PEMBINA INSTITUTE OIL SANDS FEVER 15 2 From Tar to Tank

6 5 FIGURE 12: ) t

Projected natural o o f

c

gas demand for i

b 4 u c

oil sands n o i l

production l i b

79 (

2004–2030 s t n e 3 m e r i u q e R

s a G

l a

r 2 u t a N

1

0 2004 2012 2030

NUCLEAR ENERGY IN THE OIL SANDS – AN EMERGING DEBATE The oil sands industry is coming under fire for its ever-increasing demand for With natural gas prices on the of acquiring Deer Creek Energy high quality, clean-burning natural gas. rise, oil sands companies have Limited, publicly opened the Moreover, the purchase of natural gas quietly mulled the idea of using debate by announcing that it is a major cost for mining and in situ nuclear energy to produce was considering the construction operations (15% and 60% of the synthetic crude oil. This is not of a nuclear facility in the oil the first time that nuclear energy sands region between 2020 total operating costs respectively), has been considered. In 1958, and 2025.82 and projections of rising natural a collective of oil companies Alberta’s premier, Ralph Klein, gas prices have prompted oil sands approached the governments has reportedly dismissed the producers to actively seek alternative of Alberta and Canada with a idea because of concerns sources of energy. 84,85 proposal to detonate a 9-kiloton with nuclear waste disposal. atomic bomb underground to But he also noted that he was At the present time, gasification of coal liquefy bitumen so it could be firmly against using natural or oil sands residue (i.e., the coke by- 80 pumped to the surface. While gas because it represents product of upgrading) appears to be the the proposal was considered a “a tremendous waste of a most likely alternative source of energy number of times, it was never resource.” 83 The Canadian to fuel the oil sands.86,87 However, implemented. environmental community has In 2003, the Canadian Energy long advocated against the use unless mitigating technologies are also Research Institute concluded that of nuclear power in Canada employed, the alternatives to natural advanced CANDU reactors because of environmental risks, gas pose an even greater environmental could be economically viable hazardous waste issues and and climate threat. in the oil sands.81 In September poor economic performance. 2005, Total SA, who has a Many stakeholders would likely stake in the Surmont in situ oppose proposals for the use of project and is in the process nuclear energy in the oil sands.

16 OIL SANDS FEVER THE PEMBINA INSTITUTE From Tar to Tank 2 2.3 Transportation to Refineries FIGURE 13: Major Canadian and U.S. crude oil pipelines and markets.

SOURCE: NATIONAL ENERGY BOARD

Moving synthetic crude oil and bitumen exported to China, other Asia-Pacific from the oil sands producers to refineries markets and California.91 is accomplished through a network of In addition to a proposal to expand the pipelines that run from Fort McMurray capacity of its TransMountain pipeline, to Edmonton and Hardisty. While some Terasen is considering a pipeline to refining occurs in the Edmonton region, Kitimaat to compete with Enbridge’s most of the oil sands product is pipe- Gateway pipeline.92 Construction of these lined to Ontario, the Midwest and terminals and their use by oil tankers Rocky Mountain regions of the United would require a lifting of the moratorium States, or to British Columbia and on tanker traffic along the Pacific coast. 88,89 Washington. (Figure 13) These proposals have already encountered There are several new proposals to significant public opposition. expand the pipeline capacity between Once transported to Canadian and Fort McMurray and Edmonton, and American refineries, synthetic crude oil from Edmonton to both eastern Canada is converted into a wide variety of and to the West Coast for export to petroleum products. From a barrel California and Asia-Pacific markets, of oil, approximately 72% (by volume) 90 chiefly China. Enbridge is proposing a is refined into transportation fuels new pipeline, the Gateway Pipeline, from (40% to gasoline, 25% to diesel fuel, Edmonton to a new, deep-water marine 7% to jet fuel). From the refineries, terminal in Kitimaat, British Columbia, these fuels are transported by tanker from where synthetic crude oil will be trucks to local gas stations.

THE PEMBINA INSTITUTE OIL SANDS FEVER 17 The upgrading plants are massive complexes that take years to build. PHOTO: MELINA MARA. © 2005, THE WASHINGTON POST. REPRINTED WITH PERMISSION 3 Climate Change Consequences 3.1 Escalating Greenhouse Gas Emissions

The oil sands are the single largest contributor to GHG emissions growth in Canada. PHOTO: DAN WOYNILLOWICZ, THE PEMBINA INSTITUTE

The science of climate change leaves 26% over the past decade, the rapid little doubt that deep reductions in rate of new development has more than global greenhouse gas emissions (GHG) consumed these gains.94 must be achieved if we are to prevent In 1997, the upstream fossil fuel drastic worldwide impacts from climate producing industry (activities encom- change. These reductions will need to passing the extraction, production and go far beyond the requirements of the transportation of raw oil, natural gas Kyoto Protocol: industrialized countries and coal) accounted for 98 megatonnes such as Canada need to reduce their (Mt) of GHG emissions, of which 16% GHG emissions to 80%-90% below (16 Mt) was emitted from oil sands 93 the 1990 level by 2050. operations.95 The most recent estimate The oil sands are the single largest of GHG emissions for the entire oil contributor to GHG emissions growth sands industry is for the year 2000, in Canada. While the emissions when the industry emitted 23.3 Mt, or intensity of producing oil sands 3% of Canada’s total GHG emissions.96 has decreased substantially, i.e., To project future GHG emissions

THE PEMBINA INSTITUTE OIL SANDS FEVER 19 3 Climate Change Consequences

growth from the industry, we have created will have to shoulder its responsibility four scenarios (Table 3). As shown by in the global effort to reduce emissions Table 3 and Figure 14, even the best- by requiring the industry to implement case scenario (Scenario 1) will lead to technologies that cut the emissions significant growth in GHG emissions. intensity of production, or to offset If oil sands development is not curtailed GHG emissions by investing in or more aggressively managed, Canada emission reductions elsewhere.

Scenario Annual reduction 2015 – annual 2030 – annual and fuel type in GHG intensity GHG emissions GHG emissions (megatonnes) (megatonnes) Scenario 1 2.3% 57 83 – natural gas Scenario 2 1% 66 118 – natural gas Scenario 3 – oil sands 2.3% 94 138 residue (e.g., coke) Scenario 4 – oil sands 1% 97 175 residue (e.g., coke)

TABLE 3: Scenarios for GHG emissions from oil sands in 2015 and 2030 97

180

160

140

120

100

80 Emissions (Mt/yr) 60

40

20

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029

Year

FIGURE 14: GHG emission projections for anticipated oil sands production to 2030

20 OIL SANDS FEVER THE PEMBINA INSTITUTE Climate Change Consequences 3

OIL SANDS AND CANADA’S EVER-INCREASING “KYOTO GAP”

The federal government regularly In October 1998, the Kyoto gap was produces projections of Canada’s future updated to 185 Mt, with 45% (21Mt) GHG emissions under a so-called of the increase attributed to new business-as-usual scenario in which projections for oil sands production.99 governments implement no policies or In December 1999, a further update measures to reduce emissions. The resulted in a Kyoto gap of 199 Mt.100 difference between projected business- as-usual emissions in 2010 (the middle In February 2002, the Kyoto gap was year of the five-year period to which the further revised to 238 Mt, with 18 Mt Kyoto target applies) and the Kyoto of the new increase attributed to an target is commonly referred to as the additional rise in projected oil sands Kyoto gap. The Kyoto gap measures the production.101 amount by which annual emissions must In April 2005, the government stated be reduced below the business-as-usual that the Kyoto gap is “likely in the area level to reach the Kyoto target. The of 270 Mt.”102 It is widely understood federal government has repeatedly that yet more increases in future oil increased its estimate of Canada’s sands production were, once again, Kyoto gap, to a significant degree a key factor in this latest increase to because of increased projections of oil the gap.103 sands production: It should be noted that the details of The emissions projection produced by why the business-as-usual scenarios the federal government in April 1997 needed revision in February 2002 and showed a Kyoto gap of 138 Mt.98 April 2005 have never been published.

”Living up to Canada’s commitment to Kyoto and at the same time 3.2 A Matter of Emissions Intensity ensuring continued growth together with Canada is one of the most energy- relative to other OECD countries is the transition to a less intensive countries in the industrialized result of increased consumption of fossil emission-intensive economy is the biggest world. Our energy intensity has declined fuel for electricity generation, increased single economic and over the past two decades, but it still energy consumption in the transport- political challenge for remains high because of our energy- ation sector and growth in fossil fuel Canadian energy policy intensive industries. Much of Canada’s production for export.105 in the coming years. energy production and consumption Curbing GHG While Canada’s obligation to reduce emissions is all the is fossil fuel based; therefore, the GHG emissions requires efforts to more challenging as economy’s GHG intensity – commonly reduce the carbon intensity of our Canada’s emissions referred to as carbon intensity – is economy, significant growth in oil sands are growing along with its production and similarly high. Canada’s emissions of development will produce the exact GHGs relative to GDP are 25% higher exports of energy which opposite. Production of synthetic crude consume large quantities than for the industrialized world as a oil from the oil sands is a more GHG of fossil fuels.” 104 whole. According to Environment intensive endeavor than producing Canada, this high carbon intensity International Energy Agency, conventional light or medium crude oil. January 2005 106

THE PEMBINA INSTITUTE OIL SANDS FEVER 21 3 Climate Change Consequences

90 85.5

80

70

60

50

FIGURE 15: 40 Average GHG intensity for 30 28.6

conventional oil GHG Intensity (kg CO2eq/barrel of oil) production versus oil sands synthetic 20 crude oil 107

10

0 Conventional Oil Average OS Average

As seen in Figure 15, the GHG intensity emissions from the oil industry are set of synthetic crude oil production from to rise dramatically. While there are a the oil sands is significantly higher variety of end-of-pipe solutions in the oil than the average intensity to produce sands under evaluation, such as carbon conventional oil in Canada. Therefore, as capture and storage, and alternative increasing production of synthetic crude energy sources, such as deep geothermal, oil from the oil sands offsets the decline they are years, if not decades, away from of conventional oil, the net GHG full-scale implementation.

3.3 Canada’s Climate Contradiction

In December 2002, the federal demonstrates the need for Canada to government ratified the Kyoto Protocol more closely align its energy strategy legally binding Canada to reduce its with its climate obligations. GHG emissions to 6% below the 1990 In April 2005, the government level between 2008 and 2012. Despite replaced its 2002 Climate Change this obligation, Canada’s energy strategy Plan for Canada with a new plan: remains focused on accelerating growth Moving Forward on Climate Change – in oil sands production, the most A Plan for Honouring Our Kyoto GHG-intensive form of oil production. Commitment. This new plan lays out This stark contradiction in policy clearly the necessary steps for Canada to

22 OIL SANDS FEVER THE PEMBINA INSTITUTE Climate Change Consequences 3

OIL SANDS AND THE CLIMATE CONTRADICTION

“We must ensure that there is nothing, “Canada’s position on GHG as we move forward to implement emissions reduction is ambivalent. Kyoto, that in any way undermines It can be described as someone or impedes the growth of projects trying to ride two horses galloping in like the oil sands and obviously opposite directions. One horse pulls their contribution to the prosperity energy investments towards the fossil of this country.” fuels sector, thus increasing GHG emissions. The opposite horse pulls Deputy Prime Minister Anne McLellan, 2002 108 programmes and policies aimed at reducing GHG emissions.” Charles Caccia, former Chair, House of Commons Standing Committee on Environment and Sustainable Development, 2002 109

Growing GHG emissions from the oil sands threaten Canada's ability to meet its Kyoto obligation and diminish its international reputation. PHOTO: DAVID DODGE, THE PEMBINA INSTITUTE achieve a 270 Mt reduction in annual However, industry lobbying has led GHG emissions by 2010. An essential to government plans to require only component of this plan is a Large 36 Mt of reductions from Large Final Emitters (LFE) system of Final Emitters during 2008-2012. So mandatory emissions targets and although responsible for nearly 50% of trading to secure GHG emission Canada’s GHG emissions, they will only reductions by heavy industry, including be required to achieve 13% of the 270 the oil sands sector. Large Final Emitters Mt reduction target. Targets for new are responsible for nearly 50% of facilities in the LFE system are to be set Canada’s GHG emissions. at the level of “best available technology

THE PEMBINA INSTITUTE OIL SANDS FEVER 23 3 Climate Change Consequences

Project Kyoto compliance cost ($/barrel)*

Canadian Natural Resources Ltd. Horizon $0.18 Mine & Upgrader

OPTI/Nexen Long Lake SAGD $0.34

Petro-Canada Mackay River SAGD $0.12

Syncrude Mines & Upgrader $0.24

Suncor Mines, SAGD & Upgrader $0.24

Albian Sands Athabasca $0.15 Oil Sands Project

*Assumes $15/tonne and 85% free permit allocation

TABLE 4: Predicted Kyoto compliance costs for oil sands operators 110

economically achievable” (BATEA). confirmed, that these targets represent If the government accepts oil industry a worst-case cost of no more than arguments that its current technology 25 cents a barrel to the oil industry is already BATEA, then new oil sands (Table 4). Given that oil prices are likely facilities could be exempted from any to remain above US$50 per barrel, this meaningful contribution at all to is an economically insignificant and Canada’s Kyoto effort. The government inadequate contribution to Canada’s has estimated, and industry has Kyoto effort.

24 OIL SANDS FEVER THE PEMBINA INSTITUTE Climate Change Consequences 3

Certain companies have acknowledged intensity of 65 kilograms of GHGs per the need to take action to reduce their barrel of bitumen. The company plans GHG emissions thereby demonstrating to do this through a combination of an ability and willingness to go further reduced energy consumption, improved than what is likely to be required of energy efficiency, the purchase of them by the federal government. For domestic offsets and feasibility studies 111 example, after receiving approval for its regarding C02 capture. This example Athabasca Oil Sands Project (AOSP), clearly demonstrates that the industry Shell Canada committed to achieving can go well beyond what the federal a 50% reduction in GHG emissions government expects of it. relative to its projected emissions

3.4 Taking Meaningful Action

Both government and business leaders widely recognize climate change as “The scientific understanding of climate one of the greatest and most pressing change is now sufficiently clear to justify nations taking prompt action. It is vital challenges of the 21st century.112 that all nations identify cost-effective steps To effectively tackle this challenge that they can take now, to contribute to will require strong leadership and substantial and long-term reduction in net global greenhouse gas emissions.” action in both the short and long term on the part of government and the Statement by the National Science Academies of all 113 oil sands industry. G8 countries, China, India and Brazil. June 2005

THE PEMBINA INSTITUTE OIL SANDS FEVER 25 Only about 10% of the tar sands are actually oil. Therefore, vast quantities have to be mined to produce one barrel of oil. PHOTO: MELINA MARA. © 2005, THE WASHINGTON POST. REPRINTED WITH PERMISSION 4 Environmental Impacts 4.1 Cumulative Environmental Impacts

The expression “death by a thousand populations are affected, how much “There is no cuts” is often used to describe the habitat can be destroyed before wildlife environmental minister accumulation of environmental impacts species are lost and how much air on earth who can stop resulting from multiple industrial quality can change before the the oil from coming activities. Technically referred to as ecosystem is irreversibly stressed. out of the sand, “cumulative environmental impacts,” because the money is The following sections describe too big. But we have the accumulation of impacts may how the oil sands industry impacts to be very strict on appear insignificant on their own the region’s water, land and air and environmental impact.” but can lead to significant and often provide projections of the even greater Stéphane Dion, Federal irreversible ecological damage. In few impacts that will accompany planned Minister of Environment 115 places is this concept more tangible development to approximately 3.7 than in the Athabasca oil sands region, million barrels per day of oil sands where a proliferation of in situ and production.114 If production reaches surface mining operations are rapidly five million barrels per day (or higher) degrading the regional environment. by 2030, the environmental impacts The boreal forest ecosystem is resilient, will be even greater than those but it can only withstand so much described below. degradation before its ability to recover is exceeded. This proverbial “tipping point,” referred to as an ecological CUMULATIVE SOCIO-ECONOMIC IMPACTS threshold or environmental limit, represents the extent of change that As the hub of regional oil and Métis face similar an ecosystem can endure before this sands development, the challenges as they seek to Regional Municipality of balance the benefits of job change is irreversible. As the Wood Buffalo (RMWB) creation and a booming industrialization of the northeast is growing rapidly and economy with ensuring quadrant of Alberta continues changing. First Nations that their culture, the unabated through oil sands and Métis people make up region’s environment and development, forestry, and approximately 6% of the their traditional way of life RMWB’s population, the are preserved. Not unlike conventional oil and gas, threats vast majority of whom cumulative environmental to the region’s long-term ecological live in small communities impacts, the rush of sustainability escalate. outside Fort McMurray.116,117 development is having The RMWB is struggling cumulative socioeconomic We need to ensure we have the with the socioeconomic impacts. While beyond scientific information to understand impacts such as lack of the scope of this report, how the boreal ecosystem – its air, land affordable housing and managing these and water – will react to the impacts insufficient infrastructure socioeconomic impacts e.g., roads and schools. is also an urgent issue. of development. It would then be The regional First Nations possible to determine, for example, how much water can be removed from the Athabasca River before fish

THE PEMBINA INSTITUTE OIL SANDS FEVER 27 4 Environmental Impacts 4.2 Troubled Waters

Oil sands The scale and growth of surface mining from the Athabasca River and the operators rely and in situ development pose water long-term management of tailings. on large amounts use and management challenges that The Alberta Chamber of Resources of fresh water to extract the will need to be overcome to prevent has identified water use as one of bitumen from significant environmental impacts. the top four challenges for oil sands the oil sands. The predominant technologies for mining operations.118 PHOTO: DAVID DODGE, extracting bitumen from the oil sands THE PEMBINA INSTITUTE Similarly, in situ operations can impact all rely on large amounts of fresh the quantity and quality of both water, which is withdrawn from groundwater and surface water bodies both groundwater and surface water (including wetlands). From lowering bodies (rivers and lakes). the levels of groundwater aquifers to Oil sands mining operations impact the production of large volumes of water resources in a number of ways, waste associated with water treatment, both directly and indirectly, as a result in situ operations pose a number of of muskeg and overburden drainage, risks to water resources. aquifer dewatering, withdrawal of water

28 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4

4.2.1 The Athabasca River The Athabasca River is the longest river in Alberta, winding 1,538 kilometres from its source, the Athabasca Glacier in Jasper National Park, to Lake Athabasca in Wood Buffalo National Park. It enters Lake Athabasca at the Peace-Athabasca Delta, the largest boreal delta in the world, and one of Oil sands companies are currently the most important waterfowl nesting licensed to divert a total of 349 million 119 and staging areas in North America. cubic metres of water from the Athabasca Oil sands surface mining operations River, enough to satisfy the needs of a city upstream of the delta have been listed of two million people. as one of the threats to its integrity PHOTO: DAVID DODGE, THE PEMBINA INSTITUTE because large amounts of water are withdrawn from the Athabasca River the river’s instream flow needs and is for use in the extraction process.120 the amount of water the river needs Between two to five barrels of water are to sustain a healthy environment. withdrawn from the Athabasca River The Athabasca River has less water for each barrel of bitumen extracted. flowing during the winter months, Less than 10% of the water approved so habitat for the many fish species for withdrawal is returned to the e.g., northern pike, walleye and burbot river.121 The Athabasca River’s that spend the winter in the Athabasca ecosystem requires adequate flows River is limited. Therefore, further and natural seasonal variations to reductions in flow because of water support healthy fish populations. withdrawals could reduce the amount This relationship is referred to as of habitat available for fish. The Athabasca River flows into the Peace- Athabasca Delta, the largest boreal delta in the world, and one of the most important waterfowl nesting and staging areas in North America.

PHOTO: DAVID DODGE, THE PEMBINA INSTITUTE

THE PEMBINA INSTITUTE OIL SANDS FEVER 29 4 Environmental Impacts

After five years of gathering particles – that is pumped to tailings information, Alberta Environment ponds. While commonly referred to as plans to identify how much water ponds, these enormous bodies of water must remain in the river to provide and the dykes that contain them are adequate habitat for the fish. Then some of the largest human-made the department can make informed structures in the world. Collectively, decisions about how much water can they cover an area of land greater than be withdrawn during the winter while 50 square kilometers.124 ensuring that the ecosystem is fully In these ponds, the sand, silt and protected. However, considering the fine clays slowly settle to the bottom. industry’s assertion that alternatives Then as much water as possible is to water-based extraction technology pumped back to the extraction plant will likely not emerge for 20 years,123 and reused in the extraction process. it is also critical for industry and Because of the bitumen that remains government to manage the timing in the tailings, the ponds pose a and development of future projects number of environmental risks (whether singly or as a region) including the migration of pollutants to ensure that the Athabasca River into the groundwater system and is protected. “The tailings ponds in leakage into the surrounding soil Canada would not be and surface water.125 legal in the United One such group of pollutants are the States under our 4.2.2 A Tailings Legacy naphthenic acids that are a naturally environmental laws.” Water used for extraction at oil sands occurring family of compounds found Tom Bachtell, Wind River mines ends up in tailings – a slurry of 122 in bitumen. During the bitumen Resources Corp bitumen, water, sand, silt and fine clay

Tailings ponds already cover an area of land greater than 50 square kilometers.

PHOTO: CHRIS EVANS, THE PEMBINA INSTITUTE

30 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4

TAILINGS PONDS Approximately six cubic metres of tailings are created for every cubic metre of bitumen produced. The tailings are comprised of 3-5 cubic metres of water and approximately 1.5 cubic metres of fluid fine tailings.126,127,128 Syncrude’s Southwest Sand Storage (SWSS) Facility is one of the three largest dams in the world.129 Existing tailings ponds can be seen from space. Syncrude’s Mildred Lake tailings pond contains more than 400 million m3 of tailings, enough to fill 160,000 Olympic-sized swimming pools. 130,131 Suncor’s mining operations include nine tailings ponds that cover an area of 2,280 hectares.132

Tailings ponds pose a number of environmental risks including the migration of pollutants into the groundwater system and the leakage into the surrounding soil and surface water. PHOTO: DAN WOYNILLOWICZ, THE PEMBINA INSTITUTE Noise from propane cannons and floating scarecrows are used to extraction process, these acids become The ultimate objective is to wait for deter migratory birds concentrated and end up in the tailings the fine clay particles to settle in the from landing in the oil- ponds. The concentration of naturally tailings and become what is known slicked tailings ponds. PHOTO: DAVID DODGE, occurring naphthenic acids in rivers as fluid fine tailings. This can take THE PEMBINA INSTITUTE in the region is generally below anywhere from a few decades to 150 1 milligram per litre (mg/ L) but years depending on the technology may be as high as 110 mg/L in employed.136 These fluid fine tailings tailings ponds.133 pose a reclamation challenge because The water in tailings ponds is also they are simply too wet and toxic to acutely toxic to aquatic life.134 incorporate into a reclaimed landscape. Although recent studies indicate The National Energy Board charac- that acute toxicity in wild mammals terizes the problem of managing is unlikely under worst-case exposure fluid fine tailings as “daunting” – the conditions, repeated exposure may have volume of fluid fine tailings produced adverse health effects.135 In addition, by Suncor and Syncrude alone will the presence of the bitumen in the exceed one billion cubic metres by tailings ponds means that migratory the year 2020, enough to fill 400,000 137 birds that might be tempted to land Olympic-sized swimming pools. must be scared away by propane If a company were not able to cover cannons (a noise deterrent) and the cost of cleaning up tailings ponds, floating scarecrows. these costs could become major public liabilities.138

THE PEMBINA INSTITUTE OIL SANDS FEVER 31 4 Environmental Impacts

New technology that produces stakeholders. In response, the Joint consolidated or thickened tailings is Panel, composed of a federal appointee now being used to reduce the amount and two members of the EUB, of fluid fine tailings and create tailings directed the EUB, Alberta material that can be incorporated into Environment and Alberta Sustainable a reclaimed landscape. But even with Resource Development to work these technologies there will be fluid with industry to develop tailings fine tailings that require special management performance criteria.142 management. The industry is currently While this work was to be completed suggesting that these fluid fine tailings by June 30, 2005, the government has be placed in the mine pit after mining not, at the time of writing, published is complete and “capped” with water these performance criteria. from the Athabasca River. In theory, these “end pit lakes” will be deep enough (65-100 metres) and of a 4.2.3 Freshwater Aquifers great enough volume to ensure that Both oil sands mining and SAGD the contaminants will be adequately operations can impact freshwater diluted before draining into the aquifers by lowering their levels and Athabasca River watershed. Whether creating a similar decrease in water these lakes will support aquatic life levels in streams, ponds, lakes and and become sustainable aquatic wetlands that are connected to ecosystems is still unknown. groundwater. The study of the Surface mine operators have committed hydrogeology of the region has only to only discharging water that meets just begun. Consequently the flow Alberta’s Surface Water Quality of water between aquifers of varying Guidelines from these end pit depths is not well understood. When lakes.139,140 However, in the absence groundwater is pumped from a well, it of any demonstration end pit lakes, causes a decrease in the pressure and the feasibility of this commitment or water levels in the aquifer around the the necessary mitigation should it well. This decrease in pressure can prove impossible remains unknown. cause water from aquifers closer to Further, these guidelines do not include the surface to “leak” down, which can water quality limits for some of the cause lowering of water in wetlands, chemicals, such as naphthenic acids, reduced discharge of groundwater to found in the fluid fine tailings that will streams, lakes and wetlands, and the 143 be placed in the end pit lakes. Despite lowering of the water table. This is concern about the persistence and referred to as a drawdown effect. aquatic toxicity of naphthenic acids, Once the mine pit is excavated, Alberta Environment does not have groundwater levels are often lowered in any regulations for this toxin.141 the area to prevent flooding of the pits. At the joint federal-provincial Because multiple mines may be regulatory panel hearing for Shell’s pumping water from an aquifer, the Jackpine Mine – Phase 1 (now removal of groundwater from a large approved), the above issues were area of the landscape can lower the raised by a number of concerned groundwater level in adjacent areas.

32 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4

This can result in reduced groundwater treatment processes are landfilled flows to peatlands, wetlands and other or injected into disposal wells that surface water bodies. are drilled in deep, porous rock The area impacted by the drawdown formations. Given the substantial effect of removing this water can be up volumes of water used by SAGD to 100 square kilometres.144 Because operations, the amount of solid waste prevention of pit flooding is considered produced is significant. For example, essential, even if significant impacts are between 2005 and 2025 EnCana’s detected (e.g., wetlands drying out), Foster Creek SAGD operation will there is not any possible mitigation. dispose of 48 million cubic metres of sludge into deep wells and send almost In situ projects also impact freshwater 260,000 tonnes of waste to landfill.145 aquifers through the SAGD technology used to recover bitumen. After the To minimize the cost of transporting recovery, 90%-95% of the water, waste to regional landfills, many known as produced water, is de-oiled operators are constructing their own and treated so it can be reused in the landfills and disposal wells. This steam generator. Because some of the has led to a proliferation of waste water is lost in the treatment process, disposal facilities, another long-term additional groundwater must be environmental concern. The withdrawn. For every cubic metre of predominant use of landfills is also a bitumen produced, about 0.2 cubic serious issue because “disposing metres (200 litres) of additional concentrates and effluent sludge in groundwater must be added to produce landfills could have significant more steam. To minimize the need to environmental and ecological impact use freshwater aquifers, almost all on the nearby soil and groundwater SAGD projects in the region use some due to the high concentration of acids, fresh groundwater mixed with saline hydrocarbon residues, trace metals and 146 groundwater (from deeper formations). other contaminants.” While the use of saline groundwater for SAGD operations avoids additional 4.2.5 Troubling Trends demands on freshwater aquifers, treating it for use in the steam in Water Use generators produces large volumes of Canadians are increasingly concerned solid waste. about the long-term sustainability of surface and groundwater resources and the health of aquatic ecosystems. In the 4.2.4 Waste from midst of a drought and public concerns Water Treatment about the quantity and quality of fresh When saline water or produced water is water, the government of Alberta being used at SAGD facilities for steam developed its Water for Life strategy in 147 production, it must either be blended 2003. During the development of with fresh water or treated. The wastes this strategy, the public identified the from desalinization and other use of water by the oil and gas sector as one of its key concerns.

THE PEMBINA INSTITUTE OIL SANDS FEVER 33 4 Environmental Impacts

During the Despite the government’s commitment consultation for the to addressing this concern, water Water for Life use for oil sands mining and SAGD Strategy in 2003, operations is growing at an incredible the public identified the use of water by rate. Of all the users of water from the oil and gas the Athabasca River, oil sands mining sector as one of its operations are by far the largest and key concerns. the fastest growing. (Figure 16). PHOTO: DAVID DODGE, THE yet to receive approval, would push the PEMBINA INSTITUTE Approved oil sands mining operations are already licensed to divert 349 cumulative withdrawal of water from 3 million m3 of water per year from the the Athabasca River to 490 million m 150 Athabasca River. This is approximately per year (Figure 17). two times the volume of water The amount of freshwater used for required to meet the municipal needs SAGD operations is also of concern. of Calgary, a city of almost one Most of the oil sands deposits in million people, for a year.149 Further Alberta (93%) can only be accessed exacerbating the matter is the fact that, using in situ technologies such as unlike most other water users, only one SAGD, and therefore the future of the six approved oil sands mines demand for groundwater is likely to discharges water back to the river. grow exponentially. Because it is more Planned oil sands mines, which have expensive to drill wells into deep saline

Oil Sands Mines

FIGURE 16: Licensed surface water allocations from the Athabasca River and its tributaries, 2005 148

Agricultural Other Use Commercial Dewatering Water Management Habitat Enhancement Municipal Industrial Irrigation

34 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4

600

500

400

300 Million cubic metres

200

100

0 Existing Projects Existing + Approved Projects Existing + Approved + Planned Projects

FIGURE 17: Cumulative aquifers and treat the saline water for projects in Alberta (Athabasca, Peace Athabasca River use in the steam generators, use of River and Cold Lake oil sands deposits) water allocations freshwater is projected to continue to is projected to more than double for existing, grow. The demand for fresh surface between 2004 and 2020 (Figure 18). approved and planned oil sands and groundwater for in situ oil sands mining operations

18.00

16.00

14.00

12.00

10.00

FIGURE 18: 8.00 Future water demands for in 6.00 situ oil sands production in Alberta151 4.00

2.00 Million cubic of freshwater per year (groundwater and surface water) rface water)

0.00 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

THE PEMBINA INSTITUTE OIL SANDS FEVER 35 4 Environmental Impacts 4.3 Transformed Lands

The Athabasca oil sands deposit is “Canada’s boreal 4.3.1 The Boreal Forest situated wholly within this boreal forests represent Described as a global endowment, enormous environmental forest. The region is not only subject to wealth – for biodiversity, Canada’s boreal forest stretches for in situ and surface mining development clean air and clean 310 million hectares across the country, but also to conventional oil and gas water. Their conservation covering about 30% of Canada’s production and logging operations. should be a priority of landmass.154 A mosaic of intercon- every Canadian.” Within the region, Alberta Pacific nected forest and wetlands, the Forestry Limited (Al-Pac) holds a Environment Canada, boreal forest supports a wide range Forest Management Agreement (FMA) Western Boreal Conservation of biodiversity and fulfills critical Initiative 152 for 5.8 million hectares of land, ecological services such as climate the majority of which is within “The world’s boreal 155 regulation and carbon storage. the Athabasca oil sands region.158 forest, a resource Canada’s boreal forest contains 35% of which Canada is Environment Canada has warned of the world’s wetlands and has the the major trustee, that the development of the oil sands is under siege.” largest coverage of peatlands in the presents “staggering challenges for world.156 It provides habitat for many Senate Sub-committee on the forest conservation and reclamation.” 159 153 important wildlife species and has Boreal Forest, 1999 Surface mining operations drastically the highest diversity of breeding alter the landscape and lead to changes bird species in North America.157 in surface and groundwater flows.

The boreal forest is an interconnected mosaic of interconnected forests and wetlands. In fact ecologists say that “wetland” might be a better term to describe the great northern forest since 40% of the boreal forest landscape in Alberta consists of wetlands. The forest provides critical ecological services including carbon storage and climate regulation. Environment Canada has warned that the development of the oil sands presents “staggering challenges for forest conservation and reclaimation.”

PHOTOS: DAVID DODGE, THE PEMBINA INSTITUTE

36 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4

In addition to directly removing large areas of wildlife and bird habitat, areas of habitat surrounding surface mines may be less frequented by wildlife because of noise and the presence of humans. To allow wildlife to move between virtual “islands,” effective habitat corridors of undisturbed land between projects are essential. While in situ operations are considered by some to impose less impact on the land than surface mines, the network of seismic lines, roads, power line corridors, pipelines and other infrastructure create a patchwork of fragmented habitat.160 Fragmentation occurs when extensive, continuous develop and cannot be recreated.162 During surface mining areas of habitat are reduced to isolated In the coming decades, almost operations, rivers are and usually smaller patches of habitat. 10% of the region’s wetlands will diverted, wetland complexes are drained This can reduce the amount of habitat be converted, mostly by oil sands available and the movement patterns and the thin boreal forest operations, and permanently soils are stripped away. of wildlife and birds. While it appears 163 removed from the landscape. PHOTO: DAVID DODGE, more benign than the expansive open THE PEMBINA INSTITUTE pit mines, habitat fragmentation “may Wetlands account for approximately be the most serious threat to biological 40% of the boreal forest landscape diversity and is the primary cause of in Alberta and fulfill an important 164 the present extinction crisis.”161 ecological role. In addition to being important habitat for rare plants and “Today the boreal wildlife, wetlands and peatlands act region is undergoing 4.3.2 Surface Mining human-induced changes as a sponge, regulating both surface of unprecedented and Reclamation and groundwater flows by absorbing magnitude and rapidity, water from spring snowmelt and many of which are During surface mining operations summer storms and recharging potentially irreversible rivers are diverted, wetland complexes groundwater aquifers in times of in cultural timeframes.” are drained and the thin boreal forest drought. In addition, they act as Global Forest 165 soils are stripped away. The future natural filters, cleansing the water Watch Canada reclaimed landscape that is currently that passes through them. being proposed by the industry will be radically different from the original For the lands affected by oil sands mosaic of wetlands and forest. Current development to be returned to the plans will lead to the creation of dry, Province of Alberta, a company must forested hills instead of wetlands, a demonstrate that it has reclaimed the larger percentage of lakes (the end pit land to an “equivalent land capability.” lakes), and the absence of peatlands, This is defined as “the ability of the which take thousands of years to land to support various land uses after

THE PEMBINA INSTITUTE OIL SANDS FEVER 37 4 Environmental Impacts

OIL SANDS conservation and reclamation is similar the reclaimed landscape. While they RECLAMATION: PAST, to the ability that existed prior to an pose fewer challenges than the fluid PRESENT AND FUTURE activity being conducted on the land, fine tailings, consolidated tailings Oil sands mining but that the individual land uses have some reclamation challenges represents the most will not necessarily be identical.” 170,171 of their own because of their high intensive and It is important to note that this concentrations of salt173 and the environmentally damaging method of oil definition does not require that presence of bitumen and naphthenic extraction in Alberta, the pre-disturbance ecosystem be acids. Because of the toxicity of involving the drastic re-created. It is likely that the reclaimed naphthenic acids it has been noted that alteration of surface and landscape will lack the biodiversity reclamation of tailings into terrestrial 166,167 subsurface materials. of its pre-disturbance state, and it and aquatic landscapes at the end Very little area directly is acknowledged that it will be a of a mining operation must “address affected by mining major challenge to re-establish self- residual levels of naphthenic acids operations has been 172 restored to land with sustaining ecosystems. and their rate, fate, and transport in 174 equivalent capability to As noted in Section 4.2.2, the tailings the environment.” the pre-mined land, produced using consolidated tailings Surface mining will result in irreversible and after 40 years of mining no operations technology will be incorporated into impacts to entire watersheds because have received a reclamation certificate. Suncor states that it has reclaimed 858 hectares of land since it started operations in 1967, less than 9% of its total land disturbed to date.168 Syncrude’s operations have disturbed 18,653 hectares, with 4,055 hectares of land reclaimed.169 In response to growing criticism, the industry has adopted what it refers to as “progressive reclamation,” which aims to reclaim land as quickly as is technically possible. However, even with progressive reclamation, virtually no reclamation is undertaken for the first 20-30 years of a project.

Reclamation of mines and old tailings ponds present a very significant challenge. Some doubt whether boreal forest can be reclaimed to something resembling the natural ecosystem that once existed. Since mining began in the late 1960s none of the reclaimed lands have been certified as reclaimed. PHOTO: THE PEMBINA INSTITUTE

38 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4

it is not possible to re-create the Horizon Mine: “Mitigation paired In some oil sands ecological diversity and inter- with reclamation assumes a post- reclamation work, relationships of the boreal ecosystem. project success rate of 100%. Residual trees are growing on reclaimed lands, For example, the approved and planned effects are considered on this basis. but biologists are still development of several surface mines Uncertainty with reclamation questioning whether a in the Muskeg River watershed methods is assumed to be resolved self-sustaining boreal threatens to damage the entire with ongoing reclamation monitoring forest ecosystem can watershed.175 Environment Canada and research.”177 ever be re-created. has stated that this level of impact PHOTO: DAN WOYNILLOWICZ, This optimism is not shared by all THE PEMBINA INSTITUTE to the Muskeg River watershed may stakeholders. Al-Pac’s 2005 Forest 176 be irreversible. Management Plan, which lays out its Given that widespread reclamation harvest plans for the next 200 years, using tailings material has not yet states that “in cases such as oil sands been demonstrated, there is significant developments, the productive status is uncertainty with regards to the long- removed from the landbase for the length term stability of created landforms, of the timber supply analysis/FMP - 200 the long-term performance and survival years. These lands may be returned to of native vegetation species, and the productive ecosystem status (emphasis ability to restore landscape biodiversity. added).” 178 At best, reclamation of the Despite all the uncertainty, applications oil sands region will be large-scale for new surface mines take successful experiments that are unlikely to reclamation as a given. Canadian restore a self-sustaining boreal forest Natural Resources Ltd. stated in the ecosystem within the next century. environmental assessment for its

THE PEMBINA INSTITUTE OIL SANDS FEVER 39 4 Environmental Impacts

companies acquire a mineral The woodland caribou lease, which allows them to is a threatened species begin exploration. New roads and can be very are constructed to access sensitive to disturbance the area, and a network of and habitat loss. intersecting seismic lines and PHOTO: CPAWS exploration well sites are cleared. Although progress has THREATS TO been made to reduce the width WOODLAND CARIBOU of seismic lines, the region is Woodland caribou have 4.3.3 Fragmented Forests covered with seismic and well site scars. been designated as This is because the oil industry is still “threatened” under Fragmentation has a negative effect on not required to replant seismic lines Alberta’s Wildlife Act species that require extensive tracts of and well sites with trees after the soil and the federal Species habitat such as interior-nesting birds at Risk Act (SARA). They has been reclaimed. Environment 179 are extremely sensitive and large carnivores. In addition, Canada has noted that clearing in the to disturbance and stay the construction of new roads and boreal forest for seismic exploration well back from clearings corridors increases access for hunting by the oil and gas industry, including such as roads, seismic and other recreational uses that the oil sands industry, equals or exceeds lines and well sites. The can place additional pressures on combination of forestry, the amount removed by the forestry oil and gas, and oil wildlife populations. industry each year.180 sands development is Fragmentation of the forest by in situ The Al-Pac FMA that overlaps much continually shrinking the operations begins as soon as oil sands areas of effective habitat of the Athabasca oil sands deposit has that can support viable populations. Cleared paths such as seismic lines have made it far easier for hunters as well as wolves and other predators to access areas where the caribou are located.

Environment Canada has noted that clearing in the boreal forest for seismic exploration by the oil and gas industry, including the oil sands industry, equals or exceeds the amount removed by the forest industry each year.

PHOTO: DAN WOYNILLOWICZ, THE PEMBINA INSTITUTE

40 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4

more than 100,000 kilometres of linear FIGURE 19: Satellite image of the oil sands from an developments, with an average density altitude of 320 kilometres of 1.8 kilometres per square kilometre SOURCE: TERRASERVER.COM within its FMA (that is, within one square kilometre of forest there exists 1.8 kilometres of linear cuts).181 If forestry activity persists at current levels and the energy sector expands as predicted, the average density of linear developments will increase to over five kilometres per square kilometre.182 As one of the most sensitive animals in the boreal forest, woodland caribou are used as an indicator of the health of the boreal ecosystem. Woodland Archie Waquan, former Chief of the caribou habitat quality has declined by Mikisew Cree. 23% over the past several decades in PHOTO: DAVID DODGE, the Al-Pac FMA. Further declines are THE PEMBINA INSTITUTE expected if trends in industrial development continue.183 “When industry talks about footprint, sometimes I think it’s an overused term. 4.3.4 A Growing “Footprint” A footprint... how The “footprint” of oil sands develop- I know it, is after two ment in Alberta’s boreal forest is growing or three rains it’s gone. rapidly. Individual mines range in size A footprint. The foot- prints you see up north from 150 to 200 square kilometers. here are not exactly Mine pits and massive tailings ponds footprints, okay.” are easily visible to the naked eye from Chief Archie Waquan, the altitude of an orbiting space shuttle Mikisew Cree First Nation 186 (Figure 19), and an aerial overview of areas with in situ operations reveals a “What’s happening to spider web of above-ground pipelines the boreal forest within the 3,450-square- and well pads (Figure 20). kilometre oil sands Approximately 1,807 oil sands lease Surface Mineable Area agreements are in place covering an of northeast Alberta, 184 can legitimately be area of 32,000 square kilometres. described as an While this may seem like a substantial ecological holocaust.” number of leases, close to 80% Dr. Richard Thomas 187 of oil sands areas are still available for exploration, leasing and development.185 The amount of FIGURE 20: landscape destruction experienced to Satellite image of an area of in situ date is only a hint of what is still to development, Cold Lake Alberta come (Figures 21 and 22). SOURCE: TERRASERVER.COM

THE PEMBINA INSTITUTE OIL SANDS FEVER 41 4 Environmental Impacts

THE OIL SANDS “FOOTPRINT” IN PERSPECTIVE

Existing, approved and currently planned oil sands mines and in situ projects in the region will directly impact more than 2000 square kilometres of boreal forest. This is • Approximately 28,465 NFL football fields. • Approximately 2.5 times larger than Calgary and 3 times larger than Edmonton • More than 5 times the size of Denver. • Almost the size of Tokyo – home to 12 million people.

FIGURE 21: Current oil sands leases north of Fort McMurray – Athabasca Oil Sands

In 2003, Alberta Environment kilometres of land that had been reported that the Athabasca oil sands directly impacted, approximately 90% region had approximately 430 square of which was the result of three oil

42 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4 FIGURE 22: Current oil sands leases south of Fort McMurray – Athabasca Oil Sands

sands mines and two SAGD impacted, or approved for future operations.188 By mid-2004, the disturbance by oil sands operations, total amount of land either already was 950 square kilometres.189

THE PEMBINA INSTITUTE OIL SANDS FEVER 43 4 Environmental Impacts

The most recently filed environmental to a cumulative disturbance of impact assessment (EIA) has projected more than 2000 square kilometres.190 that currently planned oil sands This growing footprint is illustrated development in the region will lead in Figure 23.

2500.0

FIGURE 23: 2000.0 Land disturbance and 2000.0 reclamation in the Athabasca oil sands region 191 1500.0

1000.0 950.4

500.0 330.6 Area of land disturbed by oil sands operations (square kilometres)

56.3 0.0 0.0 Cetified r as Reclaimed Area Under Reclamation Current Disturbance Approved Disturbance Planned Disturbance (not approved) 4.4 Polluted Air

4.4.1 A Pollution Capital Every day the oil sands industry The rapid expansion of the oil sands consumes enough is driving up the pollution emitted in natural gas to heat Alberta. According to PollutionWatch, 3.2 million Canadian companies in Alberta emitted more homes for a day. than one billion kilograms of air PHOTO: DAVID DODGE, THE PEMBINA INSTITUTE pollutants in 2003, which puts Alberta in the #1 spot in the country for air releases from industrial sources.192 oxides (N0x), sulphur dioxide (S02), Criteria Air Contaminants (CACs) volatile organic compounds (VOCs) are the most common air pollutants and particulate matter (PM) - all of released by heavy industry burning which are emitted in large volumes by fossil fuels. CACs are defined as “air oil sands operations.193 Table 5 provides pollutants that affect our health and an overview of the human health contribute to air pollution problems” effects and environmental impacts and include such things as nitrogen associated with these pollutants.

44 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4

Pollutant Effects on Human Health Effects on the Environment TABLE 5: Nitrogen oxides (N0x) • Irritates the lungs and increases • Is a major component of acid rain, Effects of criteria air 200 susceptibility to respiratory which can contaminant emissions 194 infections • leach essential nutrients from the soil on human health and • Combines with VOCs in the presence and thereby negatively affect health the environment of sunlight to form ground-level and rate of growth of trees ozone, which can cause damage to • reduce capacity of lakes and soil to 195 human health neutralize acids and potentially change the pH condition of lakes and soil • alter lakes and soil that become acidified • Can create a “fertilizer effect,” called eutrophication, which can alter the types of plants and animals that can live in the boreal forest 201 • Can combine with VOCs in the presence of sunlight to form ground-level ozone 202 • Contributes to the formation of smog and haze

Sulphur dioxide (S02) • At high levels can cause premature • Is a major component of acid rain death, increased respiratory symptoms • Contributes to the formation of smog and disease, decreased lung function, and haze as well as alterations in lung tissue and structure, and in respiratory tract defence mechanisms 196

Particulate matter (PM2.5) • Can be carried deep into the lungs • Is composed of organic and elemental • Has been linked with heart and lung carbon particles from combustion of problems such as asthma, bronchitis fossil fuels as well as sulphur and and emphysema 197 nitrogen compounds that can contribute to acid deposition • Strong links between high levels • of airborne sulphate particles and Contributes to the formation of smog increased hospital admissions for and haze heart and respiratory problems, and higher death rates from these ailments 198

VOCs • Individual VOCs can be toxic • Can combine with N0x in the presence of to humans sunlight to form ground-level ozone 203 • Benzene is a VOC emitted by oil • Contributes to the formation of smog sands operations. It is carcinogenic and haze. to humans and a non-threshold toxicant, which means that there is some probability of harm at any level of exposure 199

THE PEMBINA INSTITUTE OIL SANDS FEVER 45 4 Environmental Impacts

While several other toxic pollutants barrel of synthetic crude oil. Despite are also emitted such as heavy metals, these efforts, the emissions intensity polycyclic aromatic hydrocarbons of oil sands production for common (PAHs)204 and ammonia, they will pollutants remains higher than that of not be discussed in detail. conventional oil production because The oil sands industry has reduced the there are many more steps involved in volume of pollutants it emits (referred producing synthetic crude oil from oil to as emissions intensity) to produce a sands (Figures 24 and 25).

0.2500

FIGURE 24: Nitrogen oxide intensity of producing synthetic 0.2000 crude oil from oil sands versus conventional oil in Alberta 205,206 0.1500

Kilograms/barrel

0.1000

0.0500

C on il Oil il ve e o sands crude o ntional crud

0.0000 New Mine and Upgrader SCO Light/medium crude oil

0.2500

FIGURE 25: Sulphur dioxide intensity of producing 0.2000 synthetic crude oil from oil sands

versus conventional 0.1500 oil in Alberta 207 Kilograms/barrel

0.1000

0.0500

Co il Oi il nve e o l sands crude o ntional crud

0.0000 New Mine and Upgrader SCO Light/medium crude oil

46 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4

Crude Oil Synthetic Crude Oil TABLE 6: Pumpjacks to bring oil to the surface Mining and extraction: In situ: Steps required before oil Pumps to ship the oil by pipeline Mine vehicles to uncover and transport Steam injection to liberate bitumen can be refined to a central facility the oil sands deposit from sand and clay Heated water and agitation to extract Pumpjacks to bring the oil to bitumen from sand and clay the surface Tailings ponds Pumps to ship the bitumen by pipeline Mine vehicles to fill in pits and to a central facility reclaim mine Energy to treat and reuse water

Heaters to separate water Upgrading to break down the bitumen using high heat and pressure and other impurities Removal of sulphur compounds Removal of sulphur compounds if present

In 2003, Syncrude and Suncor’s facilities were ranked number one and two respectively as Alberta’s largest emitters of CACs.208 Similarly, their facilities ranked fifth and eleventh among the most polluting facilities 209

in Canada. The anticipated growth of air pollution from oil Extracting and sands development promises to upgrading the oil sands keep Alberta ranked number one in into synthetic crude oil Canada for air pollution for decades, requires the burning of large amounts of fossil with more oil sands facilities likely fuels and therefore emits to join the national Top 20 list of significant amounts of polluting facilities. air pollution.

PHOTO: DAVID DODGE, THE PEMBINA INSTITUTE 4.4.2 The Impacts of Increasing Air Pollution Since commercial oil sands production began, the residents of Fort McMurray and other towns in the region have expressed concerns with air toxins and acid-forming pollutants. Extracting and emits significant amounts of air upgrading the oil sands into synthetic pollution. The air quality in the crude oil requires the burning of large Fort McMurray area is the same or amounts of fossil fuels and therefore better than in Calgary or Edmonton.

THE PEMBINA INSTITUTE OIL SANDS FEVER 47 4 Environmental Impacts

However, the air quality of the region they assess the impacts from combined will be further degraded as oil sands air pollution: production rises to 2.5 million barrels per day, when facilities that have been approved go into production, and then Existing Currently polluting sources to 3.7 million barrels per day when currently planned facilities also go into Approved Existing + government-approved sources production.210 (Figures 26 and 27). Existing + approved NB: Companies evaluate three oil Planned + projects awaiting approval sands production scenarios when

800

700

600

500

400

300 Tonnes/day

200

100

0 Existing Approved Planned Existing Approved Planned Existing Approved Planned Sulpur Dioxide Oxides of Nitrogen Volatile Organic Compounds

FIGURE 26: Total air emissions existing, approved and planned for the Athabasca oil sands region 211

40

35

30

25 Existing PM2.5 20 Approved PM2.5 Planned PM2.5 tonnes/day 15

10

5

0 FIGURE 27: Total particulate matter (PM2.5) emissions existing, approved and planned for the Athabasca oil sands region 212

48 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4 Sulphur that is removed from the bitumen during upgrading is stored in large sulphur blocks.

PHOTO: DAVID DODGE, THE PEMBINA INSTITUTE

BITUMEN Bitumen contains sulphur that must be removed at the upgrading stage so that the bitumen can be sent to a refinery. Most of it is converted into elemental sulphur, but some is released to the air. The total currently approved level of sulphur dioxide releases from all sources in the Athabasca 4.4.3 Future Trends oil sands region is 245.5 tonnes/day. 215 in Air Pollution Particulate matter (PM2.5) refers to microscopic airborne solid and liquid When environmental assessments particles less than 2.5 microns in size. KEARL OIL SANDS are conducted to evaluate the impacts PM2.5 is emitted directly when fossil of increasing air emissions, the Imperial Oil’s Kearl Oil fuel is burned. Emissions of S0 , N0 Sands Mine fleet of impacts from the proposed project 2 x and VOC also combine to form trucks and shovels are compared to an approved scenario. particulates in the atmosphere. account for over one-half Computer-generated air dispersion of the project’s emissions models are used to predict the In response to human health concerns, of PM2.5. Fleet air concentration of air pollutants for the federal and provincial governments emissions are dominated have agreed to establish a “Canada by 114 haul trucks that both the approved scenario and a run 24 hours a day, planned scenario. Wide Standard” for PM2.5 at 30 7 days a week, 365 micrograms per cubic metre (ug/m3). days a year at peak As depicted in Figures 28 and 29, 216 This standard is to come into effect production. Each modelling of today’s approved scenario, in 2010.214 truck has an engine which includes three operating mines that is roughly equivalent and three mining operations at various This standard reflects a political in size to a locomotive stages of planning and construction, tradeoff between economic activity engine. Imperial’s and human health because numerous mine fleet will add shows that maximum predicted approximately 376 ambient air concentrations of N0 and epidemiological studies on short-term x tonnes of PM2.5 per year response to PM indicate adverse 217 S02 already exceed provincial, national 2.5 to the region’s airshed. and international guidelines.213 New health effects well below the Canada projects will exacerbate this situation. Wide Standard level (15 ug/m3 and

THE PEMBINA INSTITUTE OIL SANDS FEVER 49 4 Environmental Impacts

450

400 Alberta 1-hour Objective

350

300 World Health Organization 250 1-Hour Guideline

200 Alberta 24-hour Objective 150

Ambient Air Concentration Alberta Annual Objective 100

50 World Health Organization Annual Guideline 0 1-hour (ug/m3) 24-hour (ug/m3) Annual (ug/m3) Averaging period

FIGURE 28: Approved scenario – predicted maximums for nitrogen oxides exceed guidelines 218

800

700

600

500 Alberta 1-hour Objective

400 World Health Organization 24-Hour Guideline 300 Alberta 24-hour Objective 200 Ambient Air Concentration World Health Organization Annual Guideline 100 Alberta Annual Objective 0 1-hour (ug/m3) 24-hour (ug/m3) Annual (ug/m3) Averaging period

FIGURE 29: Approved scenario – predicted maximums for sulphur dioxide exceed guidelines 219

50 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4

potentially lower).220 Recognizing that 4.4.4 Acid Rain the 30 ug/m3 standard was inadequate, the Province has developed the When acid rain or particles fall onto Alberta Particulate Matter and the land, they are measured as the Ozone Management Framework.221 potential acid input (PAI). Expressed This framework was designed to in kiloequivalents per hectare per year BENZENE (keq/ha/yr) 228 PAI is used to evaluate prevent degradation of air quality Benzene, one of the in areas that are below the Canada the environmental impacts of acidifying VOCs emitted by oil Wide Standard level. emissions (N0x and S02). Scientists can sands operations, has been the target of a Modelling of the approved scenario estimate how much acid the land can withstand before the chemistry of its successful nation-wide shows that although PM levels are reduction campaign 2.5 soil begins to change, resulting in rising, all communities in the region that started in 1995 in changes to the types of plants and trees would experience concentrations response to concerns that make up the ecosystem. Land with about the level of human below the Canada Wide Standard.222 sensitive soils can absorb less acid than exposure. Actual The planned scenario models predict land with non-sensitive soils. This releases of benzene further increases in PM2.5. This and concentrations amount of acid is referred to as the of benzene in the air means that seven communities will 229 ecosystem’s critical load. have been reduced be subjected to levels higher than the Critical loads have been determined significantly, and the Alberta Particulate Matter and Ozone national reduction effort Management Framework Level of for Alberta soils ranging from sensitive, has now entered a 20 ug/m3 – the level that requires to moderately sensitive, to not second phase.232 Alberta Environment to implement a sensitive. If one were to assume that Meanwhile, benzene the entire area affected by emissions levels in the air in management plan to prevent further Fort McMurray and 223,224 from oil sands operations has non- degradation of air quality. surrounding communities sensitive soil, a very conservative Emissions of VOCs are also on the are rising in conjunction assumption, an area equivalent to with rising VOC rise because of both emissions from almost 500 square kilometres is at emissions in the burning fossil fuels (e.g., natural gas, risk from the acidifying emissions oil sands.233 diesel, coke) and the growing number of oil sands projects that are already The massive tailings of tailings ponds. (VOCs are a large operating or have been approved to ponds account for the category of pollutants that share one operate (Figure 30). This area will high VOC emissions in characteristic – they evaporate or the region. For example almost double to 1000 square Imperial Oil estimates volatilize into the air.) In 2002, kilometres in the planned scenario. 230 Alberta was among the top four that its tailings pond will Water bodies are also at risk of account for about three- states and provinces in North America quarters of its total daily for emissions of VOC emissions.225 acidification in the Athabasca region. release of 74.01 tonnes Currently operating and approved oil A 2004 study predicted that the of VOCs.234 sands developments account for more acidifying emissions from planned oil than 500 tonnes per day of VOC sands development would result in the 231 emissions.226 Once planned oil sands acidification of 25 lakes in the region. development is considered, this total is This study only analyzed the sensitivity predicted to grow to more than 750 of 6% of the lakes in the region so this tonnes per day.227 tally may be underestimated.

THE PEMBINA INSTITUTE OIL SANDS FEVER 51 4 Environmental Impacts

800,000

700,000

600,000

500,000

400,000

Hectares 300,000

200,000

100,000

0 Sensitive soil (0.25 keq/ha/yr) Moderately senstive soil (0.5 Non-senstive soil (1.0 (0.25 keq/ha/yr) keq/ha/yr) Critical acid load (kiloequivalents per hectare per year)

Approved scenario Planned scenario

FIGURE 30: Area of land above the critical load for acid deposition to soil 235

In an effort to proactively prevent Preliminary national emissions LONG RANGE TRANSPORT OF environmental damage to the region’s projections from 2000 to 2020 ACIDIFYING EMISSIONS ecosystem from acid deposition, the predict that the general trend for government of Alberta has implemented S02 and N0x will be downwards by Acid-forming pollutants an initial management framework can travel hundreds or 8% and 16% respectively. However, even thousands of developed by the Cumulative emissions of S02 and N0x from oil kilometers. Alberta’s Environmental Management and gas and oil sands development oil sands development Association stakeholders. However, are predicted to increase during this have the potential to successful implementation is subject 236 time period. Whereas S02 emissions contribute to the plume to the political will of government to of acid compounds that are predicted to decline by 21% travels across Canada implement the recommendations, in eastern Canada and 38% in and undermines efforts and to provide adequate funding and the US, they are expected to rise to reduce impacts in human resources to ensure successful by 15% in western Canada.237 eastern Canada. completion of key scientific research.

52 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4 4.5 Managing Cumulative Environmental Impacts

4.5.1 Regulating and Managing disturbance. The regulatory authority of the government of Canada is limited the Oil Sands to instances in which a proposed The oil sands are a provincial resource, project requires a federal approval or and therefore the government of permit, most commonly related to the Alberta is the primary regulator of Department of Fisheries and Oceans’ their development. The government- (DFO) jurisdiction over fisheries.240 appointed EUB is a regulatory agency tasked with ensuring “that the 4.5.2 Creating a Plan discovery, development, and delivery of Alberta’s energy resources and utilities The regulatory agencies evaluate the services take place in a manner that environmental impacts of oil sands is fair, responsible, and in the public development on a project-by-project interest.”238,239 The EUB is the primary basis. However, as the second wave decision maker regarding proposed of development began in the mid- projects. Subject to EUB approval, 1990s, regional Aboriginal and Métis, Alberta Environment (AENV) is community members and environ- responsible for granting regulatory mental groups noted that the project- approvals and licenses for air emissions, by-project review of proposed oil water withdrawals and land sands development ignored the cumulative environmental impacts.

“Most of the world’s forests are islands of wilderness in a sea of development. We’d like to flip that around in the boreal and have islands of economic development in a sea of wilderness.” Stewart Elgie, Canadian Boreal Trust 241 The Athabasca River at sunrise near Wood Buffalo National Park.

PHOTO: DAVID DODGE, THE PEMBINA INSTITUTE

THE PEMBINA INSTITUTE OIL SANDS FEVER 53 4 Environmental Impacts

Rather than altering its regulatory the governments of Alberta and approach, in 1999 the government of Canada, Aboriginal and Métis groups, Alberta crafted a Regional Sustainable and environmental non-governmental Development Strategy (RSDS) for organizations.247 The 72 environmental the Athabasca Oil Sands in recognition issues identified in the RSDS were of “The unprecedented pace of prioritized, and it was anticipated that development in the Athabasca Oil the highest priority issues (Category A) Sands Area” and the resultant would be addressed within two years. “increased potential for effects on environmental quality, species diversity and abundance, and human health.”242 4.5.4 Slipping Timelines The purpose of the RSDS was to In 2001, the government of Alberta develop a framework that would, released a progress report on the RSDS, among other things: “Create an in which it noted that, contrary to the enhanced management framework that RSDS plan that had stated that will adapt to the changing needs of the management objectives for category A area, which will guide government’s themes would be completed in two environmental and resource managers” years, no management objectives had and “Develop a strong foundation of been completed. This lack of progress environmental information and science was linked to “the complexity of to assist in making decisions on the environmental issues and the sustainable resource and environmental consultative, interactive nature of the management in the region.”243 partnership process, and the work group’s demand for a thorough approach make the strategy’s original 4.5.3 Implementing the Plan targets unrealistic.”248 Further, the In 2000, the Cumulative report noted: “The effort required by Environmental Management the working groups is very intensive Association (CEMA)244 was established and necessitates individuals to commit to work with the Government of their time over and above their regular Alberta to implement the RSDS by work activities.... This is compounded collecting scientific information and by the increasing pace of development making recommendations for how and large number of projects in the oil best to manage the cumulative sands area that are often drawing on environmental impacts of industrial the same consultants.”249 245 development in the region. In the While all stakeholders have placed hopes of replicating Alberta’s Clean significant emphasis on the success of 246 Air Strategic Alliance (CASA) success CEMA, it has been far less effective in developing provincial air quality than originally envisioned. Between management systems for other 2000 and the end of 2004, CEMA’s industrial activities, CEMA was working groups produced 52 reports established as a consensus-based, and four recommendations to the multistakeholder group comprised of government of Alberta, including one representatives from the oil industry,

54 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4

regional environmental management the government and Aboriginal framework.250 As demonstrated in and ENGO members of CEMA, Table 7, the timelines for CEMA competing for their time and resources. delivering management plans have been Regulatory decision makers such as the consistently delayed and may not be EUB have acknowledged that CEMA complete before many more approvals has not been keeping pace with the rate are granted for oil sands development. of oil sands development in the region. Given the importance and scope While the EUB has made recom- of conducting research to define mendations to various provincial and environmental thresholds and develop federal government agencies regarding regional environmental management their role in ensuring that CEMA is systems, undertaking this work effective and the RSDS is implemented, in parallel to ongoing oil sands these agencies have done little in development is a challenge. The steady response. As a result, an ongoing stream of applications for proposed lack of human resources and limited oil sands projects submitted for government leadership has hampered regulatory and stakeholder review CEMA’s ability to achieve its objectives. imposes a significant workload on

LOTS OF TALK, LITTLE ACTION

“The [Energy and Utilities Board] process to verify that both existing funding mechanisms that may not Board notes that OSEC [the Oil and future oil sands developments keep pace with CEMA’s increased Sands Environmental Coalition] has remain in the public interest. workload from oil sands expansions, requested that the Board conduct a The Board believes that CEMA’s new oil sands mining and in situ public inquiry into the ecological work is important and that the results projects, and other contributors of carrying capacity of the region. will assist the Board in meeting its regional cumulative effects” 253 In this case, the Board believes that regulatory mandate to ensure that Alberta Energy and Utilities Board, CNRL as long as the various initiatives are energy developments are carried out Horizon Mine Decision Report, 2004 making adequate progress such an in an orderly and efficient manner inquiry is unnecessary. However, it that protects the public interest. is clearly possible for a number of The Board understands that CEMA “The [Joint Federal-Provincial reasons that the proposed consensus is dealing with complex and difficult Review] Panel understands that based processes may not be able to issues within a multistakeholder there is good support in general move forward as quickly as needed. forum. Nonetheless, it is concerned for CEMA but widespread concern Accordingly, the Board has decided with delays in the issuance of about delays in delivery of to reserve its decision on OSEC’s recommendations.” 252 environmental management request for a Section 22 proceeding, Alberta Energy and Utilities Board, True objectives and plans &The Panel and may reconsider this request at North Fort Hills Mine Decision Report, 2002 has serious concerns about delays some time in the future.” 251 in the issuance of recommendations Alberta Energy and Utilities Board, Muskeg and the ability of CEMA to meet River Mine Decision Report, 1999 “The [Joint Federal-Provincial the proposed timelines.” 254 Review] Panel has concerns that Alberta Energy and Utilities Board, CEMA’s effectiveness may also Shell Jackpine Mine – Phase 1 Decision “In a series of decision in this area, be influenced by the volume and Report, 2004 the Board has placed significant complexity of its work, multiple reliance on the success of the CEMA priorities of stakeholders, and

THE PEMBINA INSTITUTE OIL SANDS FEVER 55 4 Environmental Impacts

Working Group Schedule Schedule Schedule Current Deliverable set in revised in revised in status (WG) 2001255 2002 256 2004 257 2005258 N0 /S0 Recommendation x 2 Acid Deposition Management Framework Q2* 2002 Q4 2002 – Management WG delivered August 2004 Nitrogen Management Framework 2006 Deferred indefinitely Ground Level Ozone Q4 2003 Q4 2003 2005 Deferred to 2006 Instream Flow Needs Interim system by end of 2005 Surface Water WG Q2 2004 Q4 2004 Q4 2005 Management Framework with further refinement in 2006 Watershed Integrity Q4 2003 Q4 2005 Deferred to 2006 Management Framework No longer being Surface Water Quality Objectives Q2 2003 Q3 2003 worked on by CEMA. Sustainable Completed Ecosystem Management Tools Q4 2002 Ecosystem WG February 2004 Management Systems for Cultural Q2 2002 Q4 2003 Q4 2005 Deferred to Q4 2006 and Historical Resources Management Systems for Wildlife and Fish Q3 2003 Q4 2003 Q4 2006 Deferred to Q4 2007 Management Systems for Biodiversity Q1 2003 Q4 2004 Q4 2007 Trace Metals & Air Implemented Trace Metals Management System Q4 2001 Q2 2002 Contaminants WG May 2002 Trace Air Contaminants Q1 2003 Q2 2003 Q4 2006 Deferred to 2007/08 Management Objective Revised to general health risk Health Risk Assessment for Fort McKay 2007 assessment 2007 Landform Design Performance Objective Reclamation WG Q4 2002 Q4 2002 Completed Q1 2005 (landform design checklist) Land Capability Classification System Q4 2005 (2nd Edition) Revegetation Manual (2nd Edition) Q4 2005 Delayed to 2006 Criteria for Reclamation Certification Q4 2004 Q4 2004 Q1 2005 Delayed to 2006 Landscape Design Guide Q1 2005 Q4 2005 Expected Guidelines on Practical Methods to Q4 2005 Q4 2005 Q4 2005 Re-establish Biodiversity and Wildlife Guidelines for Designing End Pit Lakes Q4 2007 Guidelines for Wetland Establishment Q3 2009 (2nd Edition) *Q = annual quarter (i.e., January–March (Q1); April–June (Q2); July–September (Q3); October–December (Q4))

TABLE 7: Projected timelines for CEMA Working Group deliverables from 2001, 2002 and 2005

56 OIL SANDS FEVER THE PEMBINA INSTITUTE Environmental Impacts 4 4.6 Protecting the Environment

In the rush to develop the oil sands, While the members of CEMA remain efforts to proactively manage the supportive of their role in advancing cumulative environmental impacts and developing regional environmental have proven inadequate. Neither the management systems, we believe a government nor industry has placed number of changes are required to enough priority on identifying the enable the organization’s success. ability of the regional environment In addition, development should to withstand impacts and developing occur in a precautionary manner plans to manage oil sands development that continuously seeks to minimize within these constraints. As a result, environmental impacts. This continuous numerous proposed oil sands projects improvement can be driven by the under regulatory review will be establishment of clear environmental considered without the extent of performance targets to encourage scientific information and cumulative the oil sands industry to dedicate its impact management systems considerable capacity for technological recommended by the government’s innovation towards achieving a own Regional Sustainable reduction in environmental impacts. Development Strategy (RSDS).

THE PEMBINA INSTITUTE OIL SANDS FEVER 57 A giant truck heading back to the mining area leaves an extraction plant PHOTO: MELINA MARA. © 2005, THE WASHINGTON POST. REPRINTED WITH PERMISSION 5 Government’s Helping Hand

250

Other Oil & Gas

Oil Shale & Oil Sands

Refining Transportation & Storage

200 Enhanced Oil & Gas

150

100

50

- 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

Source: International Energy Agency Database of Research and Development Expenditure

FIGURE 31: Federal research and development budget for energy in Canada 1971–2003.

The governments of Alberta and development support (Figure 31) Canada have played a significant role and incredibly favourable royalty and in bolstering the industry and creating tax treatment. strong incentives for investment. Given These direct and indirect subsidies projected oil prices, oil sands companies have contributed greatly towards will be generating significant profits. overcoming technical and cost barriers Therefore, continued government and minimizing investment risk. generosity will shortchange the public Many of these subsidies are still in owners of the resource. In the 1980s place today although the industry and 1990s, government assistance came has attained an undeniable level of in the form of generous research and economic sustainability.

THE PEMBINA INSTITUTE OIL SANDS FEVER 59 5 Government’s Helping Hand 5.1 Rent Collection 5.1.1 Government as Steward 5.1.2 Fair Compensation? In Canada the citizens of a province The governments of Alberta and own the majority of its natural resources. Canada are responsible for collecting the The government is the steward of the oil economic rent associated with oil sands sands and is responsible for ensuring that production. Their role is to capture as the owners receive maximum benefit much of the “economic rent” that is from their development. The govern- available on the sale of a barrel of oil ment allows companies to produce on behalf of the citizens of the province the oil and earn a fair return on their (Figure 32). The economic rent is the investment, while at the same time amount left over after a fair return on ensuring that a portion of the revenue investment plus all the company’s costs from the sale of the oil is transferred to find the resource (exploration costs), to the citizens of Alberta. The owners construct facilities (development costs) receive the dual benefit of economic and operate facilities (operation costs) growth and job creation, while also being have been deducted from the sale price compensated for the liquidation of the of the oil. The provincial government non-renewable resource. collects economic rent by charging fees in exchange for the rights to develop certain oil sands deposits (bonus bids and lease sales) and by collecting royalties on the sale of the oil. The federal government has no direct jurisdictional authority over the development of a province’s resources, but all Canadians benefit through the collection of federal taxes. If the provincial and federal government fail to capture all the available economic rent, oil companies receive profits in excess of their fair return on investment. Successive years of windfall budget surpluses give the appearance that FIGURE 32: The economic rent for a barrel of oil

60 OIL SANDS FEVER THE PEMBINA INSTITUTE Government’s Helping Hand 5

100

80

60

40

20

0 Alaska Norway Alberta BC SK NWT YT

FIGURE 33: Average portion of economic rent captured in each region 1995–2002.

the government of Alberta is doing an 5.1.3 Alberta’s Favourable adequate job of collecting economic rent from its oil and gas resources. Royalty Regime However, economic rent capture has In 1996, the government of Alberta been decreasing in recent years, reaching acted on the recommendations of the “[Given the low royalties a low of 31% in 2000. Alberta’s average National Oil Sands Task Force and from oil sands produc- collection of rent from conventional oil implemented the Generic Royalty tion, it] appears that, and gas between 1995 and 2002, while at least implicitly, the Regime with the following set of government of Alberta comparable to some other Canadian objectives: 260 has opted for higher jurisdictions, was considerably lower • Accelerating the development activity levels in the oil than that of both Norway and Alaska and gas industry and (Figure 33). 259 • Facilitating development by private a lower take on each sector companies unit of production.” The government may choose to leave excess profits in the hands of companies • Ensuring that development is Institute for Public Economics, 2002 261 to promote additional investment in competitive with other petroleum exploration and development, and to development opportunities on a encourage companies to risk investment world scale when prices are uncertain or techno- Under this regime, the Alberta logies are unproven. This has been government collects a 1% royalty an explicit strategy of both levels until “project payout,” which is defined of government to promote rapid to include all projects costs, including development of the oil sands. 100% of capital development and operating costs in the year incurred plus

THE PEMBINA INSTITUTE OIL SANDS FEVER 61 5 Government’s Helping Hand

Oil Sands Royalties Oil Sands Production (million $2000) (million barrels of oil equivalent)

800 400 Oil Sands Production 700 350 Oil Sands Royalties 600 300

500 250

400 200

300 150

200 100

100 50

0 0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

FIGURE 34: Oil sands production and royalties 1995–2004.

an acceptable rate of return. This means this period (from $1.6/BOE of oil that new projects and expanded projects sands in 1996 to $0.5/BOE of oil pay a very low royalty rate until all the sands in 2004).262 initial costs have been recovered. After project payout is reached, the regime imposes a uniform 25% royalty payable 5.1.4 Federal tax breaks on net project revenue, which equates The federal government provides to the gross revenue minus all costs. generous allowances for “writing-off” With the significant increase in oil sands capital costs related to oil sands production taking place, one might developments to encourage investment expect to see a comparable increase in in the oil sands. This means that when associated royalty revenues. However, a company makes a capital investment the 1% royalty rate until project payout (such as the purchase of new equipment is a powerful incentive to reinvest profits or the construction of new or expanded from the oil sands into expansion, oil sands projects), it can use 100% of which further delays revenue collection that expenditure to reduce the amount by the Province. Figure 34 shows oil of tax that it has to pay on income sands production is increasing (up from the project. In other words, the 133% between 1995 and 2004), and company only pays federal income tax royalties from oil sands are decreasing on the income from the project once it 263 (down 30% over the same period). The has written off all eligible capital costs. Province obtained declining revenues for These tax rules make oil sands projects each barrel of oil equivalent (BOE) over much more attractive and profitable

62 OIL SANDS FEVER THE PEMBINA INSTITUTE Government’s Helping Hand 5

than they would be otherwise. $5 million and $40 million for every According to the Commissioner on $1 billion invested.265 Between 1997 the Environment and Sustainable and 2004, capital investments in the oil Development, this results in a sands totalled $27.5 billion.266 Using the significant tax benefit relative to range estimated by the Department of other energy sectors. 264 Finance, between 1997 and 2004 oil The federal Department of Finance sands companies received a benefit of estimates that the tax benefits granted to between $137.5 million and $1.1 billion oil sands companies are worth between for these generous capital write-offs.

5.2 A New Fiscal Regime

In the decade since the governments of for rapid re-investment and growth. Alberta and Canada modified the fiscal The current fiscal policy provides the regime for the oil sands, continued oil industry and its shareholders with reductions in operating costs combined an inequitable share of the wealth with radically improved market derived from oil sands exploitation. conditions have The majority of changed the wealth derived from economics of the “Canada has shown that it can non-renewable transform impossible energy industry. The oil sands dreams into reality. When the resources rightfully are now a mature and oil sands of the Athabaska [sic] belongs to the public. extremely profitable were discovered in the 1960s, Further, the non- sector. Now outdated, no technology existed to exploit renewable nature unnecessary and them and the economics were of this resource simply crazy. It took decades increasingly of dedication and, especially, makes it imperative detrimental, the sustained federal support ($40 that this wealth be royalty and tax billion in various fiscal incentives invested to benefit regimes create a and tax breaks) to eventually multiple generations. powerful incentive transform this impossible project into a thriving industry that will provide enormous amounts of both energy and wealth to the country for decades to come.” Stéphane Dion, Minister of the Environment, Government of Canada

THE PEMBINA INSTITUTE OIL SANDS FEVER 63 From the air, the giant trucks look like little ants in the large mines. You can see the mine layering in this photo. The bottom of the mine is as deep below the surface of the former boreal forest as the length of a football field. PHOTO: CHRIS EVANS, THE PEMBINA INSTITUTE 6 A Time for Stewardship and Leadership

Given the scale and pace of the develop- A SUSTAINABLE ENERGY SYSTEM IS ONE THAT ment, it is clear that Canada has a global responsibility for demonstrating Provides the services of energy to meet stewardship and leadership in preventing peoples’ needs today and the needs of the current and rapidly increasing future generations in an accessible, equitable environmental impacts of oil sands and most efficient manner exploitation. Furthermore, any Enables stabilization of atmospheric development of the oil sands must concentrations of greenhouse gases be done in the context of a national Protects or restores the earth’s air, land and strategy for the transition from water resources throughout its life-cycle environmentally intensive conventional Is safe and results in no burdens of risk for energy to an economy based on future generations sustainable energy. Empowers communities to live satisfying and The magnitude of the risks and healthy lives opportunities arising from Canada’s oil sands rush is unprecedented in the society’s overall wellbeing and protect history of Canadian energy production. the environment, we provide the All Canadians, including future following key recommendations, generations of Canadians, have a organized under four core themes, for stake in the outcome. To improve responsible stewardship and leadership: 6.1 Responsible Use To demonstrate leadership in the more energy and conventional energy in efficient use of natural resources, and collaboration with the provinces, in light of the increasing demand for First Nations, industry and energy and the associated environmental non-governmental organizations implications of today’s energy systems, (NGOs). the government of Canada should • Provide incentives for responsible • Develop a national energy consumption. framework by the end of 2006 • Regulate Canadian fleet fuel with targets and supporting efficiency based on best available policies for energy efficiency, technology. energy conservation, renewable

THE PEMBINA INSTITUTE OIL SANDS FEVER 65 6 A Time for Stewardship and Leadership 6.2 Protecting the Climate

To ensure that the oil sands industry • Invest in research and provide does its fair share in meeting Canada’s incentives to promote the GHG reduction obligations enshrined commercialization of more within the Kyoto Protocol, we efficient transportation-based recommend that the government technologies and the development of Canada of low-impact alternative fuels. • Define Best Available Technology Looking beyond 2012, we recommend Economically Achievable (BATEA)- that the governments of Canada and based targets for the oil sands Alberta industry at a level that ensures new • Require all existing and new oil sands and expanded projects make a operations to be carbon-neutral meaningful contribution towards (net zero GHG emissions) by 2020 meeting Canada’s emission- through a combination of actual reductions obligations. reductions and emission offsets.

6.3 Protecting the Regional Environment

Over the next two years, regulatory • Establish interim environmental agencies will be asked to review limits that protect human health proposed oil sands projects that will and the environmental integrity push production to approximately 3.8 of the region before approving million barrels per day, more than triple additional oil sands development. the current production. Over the next • Establish clear reclamation several years, regulatory agencies may be expectations that ensure the long- faced with proposals to further increase term ecological sustainability of the production to five million barrels per region before approving additional day or more. These public-interest oil sands development. decisions must be made in an informed and precautionary manner to The governments of Alberta ensure that cumulative environmental and Canada impacts are proactively managed. • Create the conditions for CEMA to We recommend that successfully refine environmental The government of Alberta limits and develop regional environmental management • Establish a conservation offset systems to guide decisions about within the oil sands region by future oil sands development. protecting an area of intact boreal This will require the development forest of high conservation value of specific memoranda of that is representative of the region.

66 OIL SANDS FEVER THE PEMBINA INSTITUTE A Time for Stewardship and Leadership 6

understanding between government process in a timely fashion. and CEMA that include clear Commit to a process to consult deliverables and a firm schedule, with stakeholders and a schedule the provision of additional human to implement new standards and and financial resources, and clear systems to manage these issues. statements of political expectation • Ensure that industry maximizes and support for meaningful their use of best available outcomes. technologies to minimize the • Assume responsibility for those rate of increase of cumulative issues that will not or cannot be environmental impacts. addressed through the CEMA

6.4 Establishing an Equitable Fiscal Regime A significant shift in the fiscal regime expansion of low-impact renewable is required to achieve a successful energy. transformation towards a sustainable • Maximize the collection of royalties energy future. This shift includes and taxes to compensate current full incorporation of the polluter-pay and future generations of Albertans principle into a revised regime. and Canadians for the utilization We recommend that the governments of this publicly owned, non- of Alberta and Canada renewable resource. • Establish a timeline for eliminating • Invest a portion of the wealth federal subsidies, especially tax derived from royalties and taxes advantages, to the oil and gas into a permanent fund for sector. sustainable energy to foster further • Redirect subsidies and favourable innovation in energy conservation, fiscal policies towards conservation energy efficiency and the production of energy, energy efficiency and of low-impact renewable energy.

THE PEMBINA INSTITUTE OIL SANDS FEVER 67 Suncor oil sands upgrader. PHOTO: THE PEMBINA INSTITUTE Endnotes 1 - 30

1 Data was taken from Table 2.3 and converted from hectares 17 In the summer of 2005, Total initiated a friendly takeover of to square kilometres. Source: Alberta Energy and Utilities Deer Creek Energy Limited, a small Canadian oil company Board, Alberta’s Reserves 2004 and Supply/Demand focused on oil sands development. As of September 2005, Outlook/Overview (2005), Statistical Series (ST) 2005-98, Total had acquired 78% of the issued and outstanding pp. 2-7. shares of DCEL, with the intent of acquiring the remainder.

2 2 Source: http://www.total.com/en/press/press_releases/ 2 The province of Alberta is 661,190 km (260,000 mi ) pr_2005/050913_total_acquires_78_deer_creek_7917.htm. in area. 18 Chinese investments in the oil sands include China 3 Population data source: Petroleum & Chemical Corp.’s (Sinopec) purchase of http://www.woodbuffalo.net/population.htm. a 40% stake in Synenco Energy’s Northern Lights project, 4 Alberta Energy and Utilities Board, Alberta’s Reserves 2004 CNOOC’s purchase of one-sixth of MEG Energy, and and Supply/Demand Outlook/Overview (2005), Statistical PetroChina International Company Ltd.’s commitment to Series (ST) 2005-98,p. 2. half of the capacity of Enbridge’s proposed Gateway pipeline to the Pacific coast. 5 The EUB defines established reserves as “Those reserves recoverable under current technology and present and 19 See, for example, Tamsin Carlisle, “A Black-Gold Rush anticipated economic conditions specifically proved in Alberta,” Wall Street Journal, September 15, 2005, by drilling, testing, or production, plus the portion of http://online.wsj.com/public/article/ contiguous recoverable reserves that are interpreted to 0,,SB112674051132041159-MVjoYsv_EzzxfBJ5r exist from geological, geophysical, or similar information 5QF2Qj3W54_20050921,00.html?mod=mktw. with reasonable certainty.” 20 Canadian Energy Research Institute (CERI), Oil Sands 6 Kevin Hall, “U.S. energy future rests with development of Supply Outlook, Potential Supply and Costs of Crude Bitumen Canadian oil sands,” October 6, 2005. Knight Ridder and Synthetic Crude Oil in Canada 2003-2017 (2004), Study Newspapers. No. 108. p. 1. 7 Data was taken from Table 2.3 and converted from cubic 21 Premier Ralph Klein, “Western Canada’s role in building a meters to barrels using a conversion factor of 6.2929 secure, abundant and sustainable energy future for North barrels/cubic metre. Alberta Energy and Utilities Board. America,” (presentation by Premier Ralph Klein to the Alberta’s Reserves 2004 and Supply/Demand Outlook/Overview Western Governors’ Association – North American Energy (2005), Statistical Series (ST) 2005-98, p. 2-7. Summit. Albuquerque, New Mexico. April 15, 2004.) 8 Doug Barnett, An Early History of the Athabasca Oil Sands, 22 Report of the U.S. National Energy Policy Development http://www.usask.ca/education/ideas/tplan/sslp/yukon/bitum Group, May 2001, http://www.dfait-maeci.gc.ca/can- ont.htm. am/washington/trade_and_investment/energy-en.asp. 9 National Energy Board, Canada’s Oil Sands – Outlook to 23 Data source: Oil and Gas Journal, December 2004. 2015 (2000), p. 15. 24 The four mining operations approved over this period 10 Nickle’s Energy, Information, Technology. Syncrude and Alta. were Albian Sands Muskeg River Mine, TrueNorth (now Gov’t reach agreement on tar sands development – still hinges on UTS/PetroCanada) Fort Hills, CNRL Horizon Mine and federal gov’t export tax. September 19, 1973, Shell Jackpine Mine – Phase 1. The seven in situ projects http://www.nickles.com/history/article.asp?article=history%5 approved included Suncor Firebag, EnCana Christina Lake, Chistory_0935.html. PetroCanada Mackay River, OPTI/Nexen Long Lake, ConocoPhillips Canada Surmont, PetroCanada Meadow 11 http://www.centreforenergy.com/generator2.asp?xml= Creek and Devon Jackfish. /silos/ong/oilsands/oilsandsHistoryXML.asp& template=1,1,1. 25 Alberta Chamber of Resources, Oil Sands Technology Roadmap – Unlocking the potential (2004), p. 7. 12 http://www.centreforenergy.com/generator2.asp?xml= /silos/ong/oilsands/oilsandsHistoryXML.asp& 26 Canadian Association of Petroleum Producers, Canadian template=1,1,1. Crude Oil Production and Supply Forecast 2005-2015 (2005), p. 2. 13 National Oil Sands Task Force, The Oil Sands: A New Energy Vision for Canada (1995), p. 33. 27 Alberta Chamber of Resources, Oil Sands Technology Roadmap – Unlocking the potential (2004), p. 2. 14 National Oil Sands Task Force, The Oil Sands: A New Energy Vision for Canada (1995), p. 5. 28 "We project that oil sands production will make up half of all Canadian crude production sometime in late 2007, and 15 National Oil Sands Task Force, The Oil Sands: A New Energy reach 2 million barrels per day in 2013, double the 1 million Vision for Canada (1995), pp. 4, 6, 36 and 12 respectively. barrels per day production reached in 2004, and reach 3 16 Between 1995 and 2004, Alberta’s crude bitumen production million barrels per day in 2018. The oil sands reach our very increased from 482,000 barrels per day to 1.1 million barrels provisional peak number of 11 million barrels per day in per day. Data was converted from cubic metres to barrels 2047.” Source: Multicyclic Hubbert Curve Theory and using a factor of 6.2929 barrels/ cubic metre. Source of 1995 Canada’s Future Oil Outlook: Could Oil Sands production data: Alberta Energy and Utilities Board. (2004), ST98- reach 11 million barrels per day? First Energy Capital Corp, 2004 – Graphs and Data – Section 2 Crude Bitumen. July 7, 2005. http://www.eub.gov.ab.ca/bbs/products/STs/st98-2004-data- 29 http://www.bloomberg.com/apps/news?pid= 2-bitumen.ppt. Source of 2004 data: Alberta Energy and 10000082&sid=aGEiywJ8Yr8s&refer=canada. Utilities Board, Alberta’s Reserves 2004 and Supply/Demand Outlook/Overview (2005), Statistical Series (ST) 2005-98, 30 http://www.centreforenergy.com/generator2.asp?xml= p.2. /silos/ong/oilsands/oilsandsHistoryXML.asp& template=1,1,1.

THE PEMBINA INSTITUTE OIL SANDS FEVER 69 Endnotes 31 - 66

31 Alberta Department of Energy, 46 Alberta Chamber of Resources, Oil Sands Technology http://www.energy.gov.ab.ca/com/Sands/Introduction/Oil_Sa Roadmap – Unlocking the potential (2004), p.7. nds.htm. 47 The International Energy Agency has estimated global oil 32 Alberta Department of Energy, demand to be 121 million barrels per day in 2030. Source: http://www.energy.gov.ab.ca/com/Sands/Introduction/Oil_Sa Birol, Faith. International Energy Agency, The Outlook to nds.htm. 2030 (2004), p.38, http://www.world- petroleum.org/first/first2004/Birol.pdf. 33 http://www.capp.ca/default.asp?TEMPORARY_ TEMPLATE=29&V_DOC_ID=1135. 48 Richard Heavenrich , Light-Duty Automotive Technology and Fuel Economy Trends: 1975 Through 2005 34 George W. Bush, President; President Fox of Mexico (U.S. Environmental Protection Agency, 2005), and Prime Minister Martin of Canada. Remarks at http://www.epa.gov/otaq/fetrends.htm. Bill Daniels Activity Center, Baylor University Waco, TX. March 23, 2005, 49 Average specific consumption of vehicles in the European http://www.state.gov/p/wha/rls/rm/2005/q1/43847.htm. Union in 2003: ODYSSEE Energy Efficiency Indicators in Europe. http://www.odyssee-indicators.org/. 35 Data source: Alberta Energy and Utilities Board (2005), Alberta’s Reserves 2004 and Supply/Demand Outlook/Overview. 50 Kevin G.Hall, “U.S. energy future rests with development Statistical Series (ST) 2005-98, of Canadian oil sands.” October 6, 2005. Knight Ridder http://www.eub.gov.ab.ca/bbs/products/sts/st98-2005- Newspapers. data.ppt. 51 Canadian Press, “ Clinton issues Alberta a global warming 36 Alberta Energy and Utilities Board,Alberta’s Reserves 2004 warning,” October 19, 2005. and Supply/Demand Outlook/Overview (2005), Statistical Series (ST) 2005-98. 52 National Oil Sands Task Force, The Oil Sands: A New Energy http://www.eub.gov.ab.ca/bbs/products/sts/st98-2005- Vision for Canada (1995), p. 12. data.ppt. 53 Vincent DiNorcia, “Editors Notes,” The Corporate Ethics 37 Alberta Energy and Utilities Board Alberta’s Reserves 2004 and Monitor. Volume 17, Issue 4, July–August 2005. Supply/Demand Outlook/Overview (2005), Statistical Series 54 David Kilgour, “Rise of an energy colossus,” National Post, (ST) 2005-98, pp.2–23. June 15, 2005. 38 National Energy Board, Canada’s Oil Sands – Opportunities 55 Alberta Energy, What is oil sands? (2004), and Challenges to 2015 (2004), p.32. http://www.energy.gov.ab.ca/100.asp. 39 For examples, see Matthew Simmons, “Peak Oil: 56 Alberta Energy and Utilities Board. 2005. Alberta’s Reserves The Reality Of Depletion,” presented at the Offshore 2004 and Supply/Demand Outlook/Overview (2005), Technology Conference in Houston, Texas on May 3, 2004, Statistical Series (ST) 2005-98, p.2-1. http://www.simmonsco-intl.com/files/OTC- World%20Energy%20Supplies.pdf and J. Mawdsley, 57 Alberta Energy Research Institute. Canadian oil sands: J. Mikhareva, and J. Tennison,, The Oil Sands of Canada – development and future outlook. p. 1, The World Wakes Up: First to Peak Oil, Second to Canada’s http://www.aeri.ab.ca/sec/new_res/docs/oil_sands_dev_ Oil Sands (Raymond James Equity Research, 2005) outlook_Isaacs_050214.pdf. http://www.raymondjames.com. 58 Data was taken from Table 2.3 and converted from 40 Ian Mackinnon, “Commodity Strategists: Oil May Average hectares to square kilometres. Alberta Energy and Utilities $93 in 2007,” Bloomberg, September 9, 2005. Board,Alberta’s Reserves 2004 and Supply/Demand Outlook/Overview (2005), Statistical Series (ST) 2005-98, 41 Roma Luciw, “Oil to fall to $45: TD” September 22, pp. 2–7. Globe and Mail, September 22, 2005. Update edition. 59 Alberta Energy, Facts on Oil Sands (2004), 42 Foster Natural Gas Report, Outlook for oil sands production http://www.energy.gov.ab.ca/docs/oilsands/pdfs/FactSheet_ in Canada factors in significant demand for natural gas. March OilSands.pdf. 11, 2004. Citing a study released March 3, 2004 by the Canadian Energy Research Institute entitled Oil Sands Supply 60 http://www.cnrl.com/imageviewer.php?pic=/client/ Outlook: Potential Supply and Costs of Crude Bitumen and body/22/54/sco_process_zoom.gif&alt=. Synthetic Crude Oil in Canada, 2003-2017. 61 http://www.syncrude.com/who_we_are/01_04_1.html. 43 Source of data for 1990-2004 from British Petroleum, 62 Alberta Energy, Facts on Oil Sands (2004), Statistical Review of World Energy 2005. p. 14. Source of http://www.energy.gov.ab.ca/docs/oilsands/pdfs/FactSheet_ data for 2005: Bloomberg Market Data, October 21, 2005, OilSands.pdf. http://www.bloomberg.com/markets/commodities/energypric es.html. Source of data for 2006-2007: Ian Mackinnon, 63 Brendan I. Koerner, “The Trillion-Barrel Tar Pit – “Commodity Strategists: Oil May Average $93 in 2007,” Who needs “oil independence” – our friendly neighbour to Bloomberg, September 9, 2005. the north is sitting on a black gold mine!” Wired Magazine, http://www.wired.com/wired/archive/12.07/oil_pr.html. 44 From a barrel of oil, 40% (by volume) is refined to gasoline for use in automobiles, 25% is refined to diesel fuel, 7% to 64 http://rocktoroad.com/oilsands.html. jet fuel, (total of 72% to transportation fuels), 8% is refined 65 L. Flint, Bitumen Recovery: A review of long term research to light fuel oil for heating, 7% to heavy fuel oil for power and development opportunities, p. 10, generation, 8% to “other” e.g., petrochemicals and 5% of the http://www.ptac.org/links/dl/osdfnlreport.pdf crude oil (or the equivalent amount of energy from natural and L. Sawatsky, Golder Associates, Improved Stewardship gas) is consumed in the refining process. Centre for Energy, of Water Resources that are Entrusted to Oil Sands Mine Our Petroleum Challenge – 7th Edition (2004), p. 16. (presentation to “Water and Land Issues for the Oil and 45 Projected oil demand in 2015 is estimated to be more than Gas Industry” March 22, 2004). 24 million barrels per day. Steve Maich, “Alberta is about to 66 Alberta Chamber of Resources, Oil Sands Technology get wildly rich and powerful,” Macleans, June 13, 2005. Roadmap – Unlocking the potential (2004), p .14.

70 OIL SANDS FEVER THE PEMBINA INSTITUTE Endnotes 67 - 100

67 National Energy Board, Canada’s Oil Sands – 89 National Energy Board, Canada’s Oil Sands – Opportunities and Challenges to 2015 (2004), p.25. Opportunities and Challenges to 2015 (2004), p. 50. 68 Petro-Canada, Application for Approval of the Meadow Creek 90 Alberta Chamber of Resources, Oil Sands Technology Project (2001), vol. 1, pp. 3–4. Roadmap – Unlocking the potential (2004), p.13. 69 Alberta Chamber of Resources, Oil Sands Technology 91 For more information on the proposed Gateway Pipeline, Roadmap – Unlocking the potential (2004), p. 14. see http://www.enbridge.com/gateway/. 70 Alberta Chamber of Resources, Oil Sands Technology 92 J. Mawdsley and J. Mikhareva, and J. Tennison, Roadmap – Unlocking the potential (2004), p. 3. The Oil Sands of Canada - The World Wakes Up: First to Peak Oil, Second to Canada's Oil Sands (Raymond James Equity 71 A Chevy Avalanche’s fuel efficiency is 16 miles per gallon. Research, 2005), http://www.raymondjames.com. Given that a barrel of oil can produce about 72 litres of gasoline, a barrel of oil produces enough gasoline to 93 For a complete discussion on this topic, see a forthcoming drive an Avalanche 490 kilometres. Sources: report examining the need for long-term deep reductions http://www.energy.gov.ab.ca/1960.asp and in GHG emissions, to be published by the David Suzuki http://www.fueleconomy.gov/. Foundation and the Pembina Institute, November 2005. 72 National Energy Board, Canada’s Oil Sands – 94 Government of Canada, Climate Change Plan for Canada Opportunities and Challenges to 2015. May 2004. p. 110. (2002), p. 29. 73 National Energy Board, Canada’s Oil Sands – 95 National Climate Change Process Analysis and Modelling Opportunities and Challenges to 2015. May 2004. p. 86. Group, Canada’s Emission Outlook – An Update (1999), pp. 45-46. 74 A typical Canadian home uses 72 GJ of energy each year for space heating (185 cubic feet of gas per day), on average. 96 Information provided to Robert Collier, San Francisco Source: Natural Resources Canada. Chronicle, by Environment Canada, May 5, 2005, and http://oee.nrcan.gc.ca/corporate/statistics/neud/dpa/tablestre then provided to author. nds2/res_ca_2_e_3.cfm?attr=0. 97 For the natural gas and residue scenarios, two emission 75 As much as 1.2 billion cubic feet per day of gas could be intensity improvements were used. The upper limit of each available to move through the Mackenzie Valley Pipeline. graph uses an improvement of 1% and the lower limit uses a Source: 2.3% improvement. A 1% emission intensity improvement http://www.mackenziegasproject.com/theProject/overview/in reflects the “autonomous energy efficiency index”. The AEEI dex.html. is a value energy modelers use to represent the natural, non- price induced change in energy efficiency over time. AEEI 76 Two billion cubic feet of gas could heat 10.8 million typically ranges from 0.5% to 1%. Canadian homes for a day. In 2001, Canada had approximately 11.5 million homes. The 2.3% emission intensity improvement is what Alberta Environment’s Climate Change Plan is targeting. By 2020, 77 Alberta Chamber of Resources, Oil Sands Technology Alberta will cut emissions in the province relative to GDP Roadmap: Unlocking the Potential. (2004), p. 14. by 50% below 1990 levels. A 50% improvement over 30 78 Eric Reguly, “Oil sands mother lode could doom gas reserves,” years is equal to a 2.3% annual improvement, assuming that Globe and Mail, May 28, 2005. contribution of oil sands to Alberta’s GDP remains at the same level. Expansion in the oil sands is expected to increase 79 2004 data from National Energy Board, Canada’s Oil Sands – and so will its contribution to the GDP. Opportunities and Challenges to 2015 (2004), p. 86. Production forecasts for 2012 and 2030, breakdown of As an interesting note, in the last decade the oil sands have production (SCO from in situ vs. surface mines and non- made a 26% reduction in emissions, which is equal to a 3% upgraded bitumen) and natural gas factors (for mining to annual reduction. While this amount may not be sustainable SCO, in situ to SCO and in situ to crude bitumen) all over the long term it is not unreasonable to expect that a from Alberta Chamber of Resources, Oil Sands Technology 2.3% improvement is possible especially when efficiency is Roadmap: Unlocking the Potential (2004). driven by higher energy costs. 80 http://www.innovationalberta.com/article.php?articleid=92. Utilization of residue for hydrogen and as an energy source is expected to come on-line in 2012. This date was chosen 81 R.B. Dunbar, and T.W. Sloan, Canadian Energy Research since this is when Suncor expects it might use a gasifier with Institute (2003), Does nuclear have a role in the development of Phase Two of its Voyageur project. Canada’s oil sands? Paper 2003-096. Sources: IPCC Third Assessment Report, 82 Dave Ebner and Simon Tuck, “Oil sands players eye nuclear Climate Change 2001, Mitigation Report, Section 3.5.5.6, option,” Globe and Mail, September 23, 2005. http://www.grida.no/climate/ipcc_tar/wg3/index.htm; 83 Canadian Press, “ Klein says nuclear energy not a good Alberta Environment, Albertans and Climate Change – option,” October 18, 2005. Taking Action (October 2002); Climate Change Plan for Canada (November 2002) p. 29; Suncor Energy, Voyageur 84 National Energy Board, Canada’s Oil Sands – Project EIA (2005), volume 1A, pp. 1–2. Opportunities and Challenges to 2015 (2004), p. 86. 98 Natural Resources Canada, Canada’s Emissions Outlook – 85 National Energy Board, Canada’s Oil Sands – an “Events-Based” Update for 2010 (1998), p. 1, Opportunities and Challenges to 2015 (2004), p. 110. http://www.nrcan.gc.ca/es/ceo/CEO-2010.PDF. 86 Alberta Chamber of Resources, Oil Sands Technology 99 Natural Resources Canada, Canada’s Emissions Outlook – Roadmap: Unlocking the Potential (2004), p. 57. an “Events-Based” Update for 2010 (1998), p. 11, http://www.nrcan.gc.ca/es/ceo/CEO-2010.PDF. 87 National Energy Board, Canada’s Oil Sands – Opportunities and Challenges to 2015 (2004), p. 90. 100 National Climate Change Process Analysis and Modelling Group, Canada’s Emissions Outlook – an Update (1999), 88 National Energy Board, Canada’s Oil Sands – p. 42. Opportunities and Challenges to 2015 (2004), p. 32.

THE PEMBINA INSTITUTE OIL SANDS FEVER 71 Endnotes 101 - 138

101 Analysis and Modelling Group, The Magnitude of the 119 http://www.pnr-rpn.ec.gc.ca/nature/whp/ramsar/ Challenge: Revising the Gap (powerpoint presentation to df02s06.en.html. Joint Ministers Meeting, February, 2002). 120 http://www.pnr-rpn.ec.gc.ca/nature/whp/ramsar/ 102 Government of Canada, Moving Forward on Climate Change df02s06.en.html. – A Plan for Honouring our Kyoto Commitment (2005), p. 12, http://www.climatechange.gc.ca/kyoto_commitments. 121 Of the 388 million cubic metres of water licensed for withdrawal from the Athabasca River, only 38 million cubic 103 See, for example, P. Calamai, “An elusive pollution target,” metres (10%) is licensed for return to the Athabasca River. Toronto Star, February 12, 2005. 122 John Hollenhorst, “Environmental Impact a 104 World Resouces Institute, Climate Analysis Indicators Tool Consideration in Oil Sands Business,” Online edition. (CAIT) Version 2.0 (2005), http://cait.wri.org/cait.php. KSL News, August 9, 2005. Here the industrialized world is taken to comprise the member countries of the Organization for Economic 123 Len Flint, Bitumen Recovery: A review of long term Co-operation and Development (OECD). research and development opportunities (2005), p. 42, http://www.ptac.org/links/dl/osdfnlreport.pdf. 105 http://www.eia.doe.gov/emeu/cabs/canenv.html. 124 B. Peachey, Strategic Needs for Energy Relate Water Use 106 http://www.iea.org/Textbase/press/ Technologies. Water and the EnergyINet (2005), p. 34, pressdetail.asp?PRESS_REL_ID=140. http://www.aeri.ab.ca/sec/new_res/docs/EnergyINet_and_ Water_Feb2005.pdf. 107 Average intensity for conventional oil derived from information provided in Canadian Association of Petroleum 125 National Energy Board, Canada’s Oil Sands – Producers, A National Inventory of Greenhouse Gas (GHG), Outlook to 2015 (200), p. 68 Criteria Air Contaminant (CAC) and Hydrogen Sulphide 126 Len Flint, Bitumen Recovery: A review of long term (H2S) Emissions by the Upstream Oil and Gas Industry (2004). Table 2. GHG Emissions For Year 2000 From Subject Oil research and development opportunities (2005), p. 10, and Gas Activity by Province/Territory, Pg. 19, Volume 1. http://www.ptac.org/links/dl/osdfnlreport.pdf. Average intensity for oil sands SCO was calculated as the 127 Bruce Peachey (New Paradigm Engineering Ltd.), average of operating surface mining operation intensities in discussion with the author, September 13, 2005. (Suncor, Syncrude, Shell – 2004 data from respective Sustainability Reports) and the “SAGD to SCO” 128 Alberta Chamber of Resources, Oil Sands Technology emission factor provided by Len Flint, Lenef Consulting Roadmap – Unlocking the potential (2004), p.3. (personal communication). 129 Adrienne Price and Carl A. Mendoza, How big is your 108 David Ljunggren, “Nothing must harm oil sands plans – man-made aquifer? Groundwater flow and salt transport in Canada minister” Reuters, November 29, 2002, sand tailings storage facility, Fort McMurray, Alberta. (2004), http://www.planetark.com/avantgo/dailynewsstory.cfm?newsi Paper No.194-6. Geological Society of America Abstracts d=18831. with Programs, Vol. 36, No. 5, p. 451. 109 Charles Caccia, “Taxation and Other Policies to Reduce 130 The largest tailings pond at Syncrude Canada Ltd. is the Greenhouse Gas Emissions and Enhance Competitiveness.” Mildred Lake Settling Basin, which has a water surface of (2002), Environmental Policy and Law, Volume 32, 13 square kilometres and contains over 400 _ 106 cubic Numbers 3-4, pp. 178–181. metres of fine tailings. Source: P.M. Fedorak, D.L. Coy, M.J. Salloum and M.J. Dudas., “Methanogenic potential 110 J.Mawdsley and J. Mikhareva and J.Tennison, The Oil Sands of tailings samples from oil sands extraction plants,” of Canada - The World Wakes Up: First to Peak Oil, Second to Canadian Journal of Microbiology (2002), Volume 48, Canada's Oil Sands (Raymond James Equity Research, 2005), pp. 21–33, http://cjm.nrc.ca. p. 53, http://www.raymondjames.com. 131 An Olympic-sized swimming pool holds 2,500 m3 of water. 111 http://www.shell.ca/code/values/climate/climate_asop.html. 132 Suncor Energy, 2005 Report on Sustainability (2005), p.67. 112 http://www.weforum.org/site/knowledgenavigator.nsf/ Content/_S1531?open. 133 Conrad Environmental Aquatics Technical Advisory Group (CEATAG), Naphthenic Acids Background Information 113 The Royal Society, Joint science academies’ statement: Discussion Report (1998), Alberta Department of Energy: Global response to climate change (2005), Edmonton, AB, Canada. http://www.royalsoc.ac.uk/document.asp?id=3222. 134 M.D.MacKinnon and H.Boerger, Description of two 114 Production of 3.7 million barrels per day was calculated treatment methods for detoxifying oil sands tailings pond water. using existing, approved and planned oil sands development Water Poll. Res. J. Can. 1986, 21, pp. 496–512. figures. Shell Canada Ltd. 2005. Application for the Muskeg River Mine Expansion. Appendix 2-6. 135 V.V.Rogers, M. Wickstrom. K. Liber and M.D.MacKinnon, “Acute and subchronic mammalian toxicity of naphthenic 115 Clifford Krauss, “In Canada’s Wilderness, Measuring the acids from oil sands tailings,” Toxicol. Sci. 2002, 66, Cost of Oil Profits,” New York Times, October 9, 2005. pp. 347-355. 116 The Regional Municipality of Wood Buffalo, Regional Profile: 136 P.M.Fedorak, D.L. Coy, M.J. Salloum and M.J. Dudas, the Regional Municipality of Wood Buffalo (2003). 2002. “Methanogenic potential of tailings samples from oil 117 The Athabasca Tribal Council represents the region’s five sands extraction plants.,” Canadian Journal of Microbiology, First Nations groups who have lived in the area for centuries. (2002), volume 48, pp.21-33, http://cjm.nrc.ca. For more information on First Nations within RMWB visit 137 National Energy Board, Canada’s Oil Sands: Opportunities www.atc97.org. and Challenges to 2015 (2004), p. 68. 118 Alberta Chamber of Resources, Oil sands Technology 138 Bruce Peachey, “Strategic Needs for Energy Relate Water Roadmap: Unlocking the Potential. Final Report (2004), Use Technologies,” Water and the EnergyINet, (2005), p35; Figure 3.3, p. 21. http://www.aeri.ab.ca/sec/new_res/docs/EnergyINet_and_ Water_Feb2005.pdf.

72 OIL SANDS FEVER THE PEMBINA INSTITUTE Endnotes 139 - 173

139 For example, see p. 65 of Alberta Energy and Utilities Board, 155 Global Forest Watch Canada, Boreal Canada: State of the Canadian Natural Resources Ltd. Application for an Oil Ecosystem, State of Industry, Emerging Issues and Projections – Sands Mine, Bitumen Extraction Plant, and Bitumen Report to the National Round Table on Environment and the Upgrading Plant in the Fort McMurray Area, (2004), Economy (2004), p. 4. Joint Panel Report. EUB Decision 2004-005. 156 Global Forest Watch Canada, Boreal Canada: State of the 140 Alberta’s Surface Water Quality Guidelines have been Ecosystem, State of Industry, Emerging Issues and Projections – developed for the protection of aquatic life, agriculture, Report to the National Round Table on Environment and the recreation and aesthetics, Economy (2004), p.5 http://www3.gov.ab.ca/env/protenf/publications/surfwtrqual- nov99.pdf. 157 Environment Canada, Western Boreal Conservation Initiative – Backgrounder (2004), p. 2. 141 John V.Headley and Dena W. McMartin, “ A review of the occurrence and fate of naphthenic acids in aquatic 158 Cumulative Environmental Management Association, environments,” Part A – Toxic/Hazardous Substances and Review and assessment of environmental effects information for Environmental Engineering (2004), Vol.A 39, No.8, pp. wildlife and fish indicators in the RSDS study area within the 1989-2010. Athabasca oil sands region (2003), p. 39. 142 National Energy Board, Canada’s Oil Sands: Opportunities 159 Environment Canada, Western Boreal Conservation Initiative and Challenges to 2015, An Energy Market Assessment (2004), – Backgrounder (2004), p. 2. p. 68. 160 National Energy Board, Canada’s oil sands: A supply and 143 Exploration Rio Alto Ltd. (now CNRL), Kirby Project market outlook to 2015 (2000), p. 83. Application for Approval to Alberta Energy and Utilities 161 Wilcox and Murphy in Boyce 1992. Cited in Cumulative Board and Alberta Environment (2002), Vol.2, p. C2-16. Environmental Management Association (2003), Review and 144 CNRL has estimated that for its Horizon surface mine, assessment of environmental effects information for wildlife and its aquifer depressurization will have a potential drawdown fish indicators in the RSDS study area within the Athabasca oil zone of 98 square kilometres (9,820 ha) in size. Source: sands region, p. 48. Canadian Natural Resources Ltd., Horizon Oil Sands 162 Alberta Environment, Conservation and Reclamation Project. Application for Approval (2002), Volume 6, Section 4, Information Letter – C&R/IL/00-2 -Guideline for wetland pp. 4-37. re-establishment on reclaimed oil sands leases (2000), 145 EnCana’s figure for Foster Creek is based on the anticipated http://www3.gov.ab.ca/env/protenf/landrec/documents/2000- average for 2005–2025, assuming 15,900 m3/day of bitumen 2.pdf. production or more. 163 Daniel Farr, Steve Kennett, Monique M. Ross, Brad Stelfox, 146 Florence Hum, Peter Tsang, Harding Thomas and Kantzas and Marian Weber, Al-Pac Case Study Report – Part 1. A..Apostolos, Review of Produced Water Recycle and Beneficial Management Objectives, Prepared for the National Reuse (2005), Institute for Sustainable Energy, Environment Roundtable on the Environment and the Economy. and Economy, University of Calgary, p. 29. July 2004. p. 4. 147 Government of Alberta, Water for Life: Alberta’s Strategy for 164 Preston McEachern and Theo Charette, Lakes in Alberta’s Sustainability (2003), http://www.waterforlife.gov.ab.ca/. Boreal Forest. Lakeline, Winter 2003/04. 148 Source of data is Golder Associates Ltd, A compilation of 165 Global Forest Watch Canada, Boreal Canada: State of information and data on water supply and demand in the lower the Ecosystem, State of Industry, Emerging Issues and Athabasca River Reach (2005), Prepared for the CEMA Projections – Report to the National Round Table on Surface Water Working Group. Table 13. Environment and the Economy (2004), p. 12. 149 For example, in 2003 the City of Calgary’s population 166 Alberta Center for Boreal Studies, The Oil and Gas Industry was 922,315 and its municipal water requirement in Alberta: Practices, Regulations and Environmental Impacts was approximately 174 million cubic metres per year. (November 2001), p. 13. Water use data: Sustainable Calgary, 2004 State of 167 Cumulative Environmental Management Association, Our City Report (2005), p.48. Review and Assessment of Environmental Effects Information http://www.sustainablecalgary.ca/sooc/sooc2004.pdf for Wildlife and Fish Indicators in the Regional Sustainable Population data: Development Strategy (RSDS) Study Area within the http://content.calgary.ca/CCA/City+Hall/Business+Units/ Athabasca Oil Sands Region (AOSR) (March 2003), p. 42. Community+Strategies/Social+Data/Research+Services/ Population+Size.htm. 168 Suncor Energy, 2005 Report on Sustainability (2005), p. 67. 150 Golder Associates Ltd., A compilation of information and 169 Syncrude Canada Ltd., 2004 Sustainability Report (2005), data on water supply and demand in the lower Athabasca p. 60. River Reach (2005), Prepared for the CEMA Surface 170 http://www3.gov.ab.ca/env/protenf/landrec/definitions.html. Water Working Group. 171 Alberta Energy and Utilities Board, Conservation and 151 Source of data: Alberta Environment, personal Reclamation Information Letter – Guidelines for Reclamation communication with M. Griffiths of the Pembina Institute. to Forest Vegetation in the Athabasca Oil Sands Region 152 Environment Canada, Western Boreal Conservation Initiative (January 1999). – Strategic Plan (2004), p.1. 172 National Energy Board, Canada’s Oil Sands: Opportunities 153 Cited in Environment Canada, Western Boreal Conservation and Challenges to 2015. (2004), p. 71. Initiative – Strategic Plan. p. 4. 173 Alberta Environment, Regulatory Perspective – Oil Sands 154 Natural Resources Canada, The State of Canada’s Forests Reclamation. Presented at CONRAD/OSERN Symposium 2004-2005 (2005), p. 44 2003, May 12 and 13, 2003, in Edmonton, Alberta.

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174 John V. Headley and Dena W. McMartin, “A review 192 http://www.pollutionwatch.org/pressroom/factSheetData/ of the occurrence and fate of naphthenic acids in aquatic PollutionWatch%20Alberta%20Overview%202003%20- environment,”. Part A – Toxic/Hazardous Substances %20FINAL.pdf . and Environmental Engineering (2004), Vol.A39, No.8, pp. 1989–2010. 193 Environment Canada (2005), http://www.ec.gc.ca/pdb/ape/cape_home_e.cfm. 175 Syncrude’s Aurora (North and South) mines, Albian Sands’ Muskeg River mine and Shell’s Jackpine Mine-Phase 1 are 194 Commission for Environmental Cooperation, Taking already approved and/or operating in the Muskeg River Stock: 2002 North American Pollutant Releases and Transfers watershed. Imperial’s Kearl Mine, Albian’s Muskeg River (May 2005), Overview, Page xxxiv. Mine expansion, and Husky’s Sunrise SAGD project are 195 http://www.acidrain.org/pages/acidEutrophications/ all currently under regulatory review. sub3_1.asp. 176 Alberta Energy and Utilities Board, Shell Canada Limited 196 http://www.ec.gc.ca/acidrain/acidair.html. Applications for a tar sands Mine, Bitumen Extraction Plant, Co-generation Plant, and Water Pipeline in the Fort McMurray 197 Commission for Environmental Cooperation, Taking Area (2004), Joint Panel Report. EUB Decision 2004-009, Stock: 2002 North American Pollutant Releases and Transfers p. 68. (May 2005), Overview, Page xxxvii. 177 Canadian Natural Resources Ltd.., Supplemental Responses. 198 http://www.ec.gc.ca/acidrain/acidair.html. (2004), Part 2, 21.5 (ii), p. 100. 199 Canadian Council of Ministers of the Environment, 178 Alberta Pacific Forestry Ltd., Draft Al-Pac FMA Area Forest “Canada-Wide Standard for Benzene Phase 1” (2000). Management Plan (2005), p. 157. 200 Environment Canada, Canadian Acid Deposition Science 179 Cumulative Environmental Management Association, Assessment: Summary of Key Results (2004), pp. 10–11. Review and Assessment of Environmental Effects Information 201 http://www.acidrain.org/pages/acidEutrophications/ for Wildlife and Fish Indicators in the Regional Sustainable sub3_2.asp. Development Strategy (RSDS) Study Area within the Athabasca Oil Sands Region (AOSR). March 2003. p. 42. 202 http://www.acidrain.org/pages/acidEutrophications/ sub3_1.asp. 180 Ibid. 203 http://www.acidrain.org/pages/acidEutrophications/ 181 Daniel Farr, Steve Kennett, Monique M. Ross, Brad Stelfox sub3_1.asp. and Marian Weber, Al-Pac Case Study Report – Part 1. Management Objectives. Prepared for the National 204 Polycyclic aromatic hydrocarbons (PAHs) are a group Roundtable on the Environment and the Economy. of more than 100 different chemicals formed during the July 2004. p. 5. incomplete burning of coal, oil and gas. PAHs enter the air mostly as releases from volcanoes, forest fires, burning 182 Daniel Farr, Steve Kennett, Monique M. Ross, Brad Stelfox coal and automobile exhaust. The majority of PAH and and Marian Weber, Al-Pac Case Study Report – Part 1. metal emissions in the oil sands region can be attributed Management Objectives. Prepared for the National to combustion of diesel fuels from the mining fleets. Roundtable on the Environment and the Economy. July 2004. p. 5. 205 Information taken from the Horizon Oilsands Project, Application for Approval. Emissions intensity include 183 Daniel Farr, Steve Kennett, Monique M. Ross, Brad Stelfox emissions from mining operations and upgrading of and Marian Weber, Al-Pac Case Study Report – Part 1. bitumen product as well as on-site electricity production. Management Objectives. Prepared for the National The emissions intensity is based on each barrel of bitumen Roundtable on the Environment and the Economy. production. Information taken from “A National Inventory July 2004. p. 5. of Greenhouse Gas (GHG), Criteria Air Contaminant 184 http://www.energy.gov.ab.ca/108.asp. (CAC) and Hydrogen Sulphide (H2S) Emissions by the Upstream Oil and Gas Industry,” Volume 1 and Volume 2. 185 http://www.energy.gov.ab.ca/108.asp. Specific segments of the industry excluded from the 186 Transcripts from CNRL Horizon Joint Panel Review, inventory are petroleum refining, heavy oil upgrading, p. 1299. Lines 10-15. oilsands mining, extraction and upgrading, and natural gas distribution. As well, emissions from electricity are 187 http://www.albertawilderness.ca/Issues/ML/threats.htm. not included. 188 Alberta Environment, Regulatory Perspective – Oil Sands 206 Emissions from SAGD operations have a lower emission Reclamation. Presented at CONRAD/OSERN Symposium intensity than oil sands mining, but this intensity is still 2003, May 12 &13 2003, in Edmonton, Alberta. substantially higher than that of conventional oil. 189 Alberta Environment. 2005. State of the Environment (2005), 207 Information taken from the Horizon Oilsands Project, http://www3.gov.ab.ca/env/soe/land_indicators/41_oilsands_ Application for Approval. Emissions intensity include reclamation.html emissions from mining operations and upgrading of bitumen product as well as on-site electricity production. 190 Albian Sands Energy Inc., Muskeg River Mine Expansion The emissions intensity is based on each barrel of bitumen Project, Appendix 2-6. production. Information taken from “A National Inventory 191 Sources of data: Alberta Environment State of the of Greenhouse Gas (GHG), Criteria Air Contaminant Environment 2004, (CAC) and Hydrogen Sulphide (H2S) Emissions by the http://www3.gov.ab.ca/env/soe/land_indicators/41_oilsands_ Upstream Oil and Gas Industry,”, Volume 1 and Volume 2. reclamation.html and Shell Canada Ltd. Application for Specific segments of the industry excluded from the the Muskeg River Mine Expansion (2005), Appendix 2-6. inventory are petroleum refining, heavy oil upgrading, oilsands mining, extraction and upgrading, and natural gas distribution. As well, emissions from electricity are not included.

74 OIL SANDS FEVER THE PEMBINA INSTITUTE Endnotes 208 - 239

208 Pollution Watch, Ranking facilities by air releases of CAC – 225 Commission for Environmental Cooperation, Taking Alberta (2005), Stock: 2002 North American Pollutant Releases and Transfers, http://www.pollutionwatch.org/rank.do?change=&healthEffe (May 2005), p. 53. ct=all&year=2003&provincesByList=RETR_TOTAL_COM BINED&facilitiesByList=RELE_AIR_CAC&provincesListFa 226 Albian Sands Energy Inc., Muskeg River Mine Expansion c=AB&facilitiesByButton=Rank&companiesByList=RETR_ Project, Air Quality and Noise Assessment, April 2005, TOTAL_COMBINED. Table 3, p. 4. 209 Pollution Watch, Ranking facilities by air releases of CAC – 227 Albian Sands Energy Inc., Muskeg River Mine Expansion Canada (2005), Project, Air Quality Planned Development Case Ambient http://www.pollutionwatch.org/rank.do?change=&healthEffe Predictions, April 2005, p. 28. ct=all&year=2003&provincesByList=RETR_TOTAL_COM 228 An expression of the potential to cause acidification in terms BINED&facilitiesByList=RELE_AIR_CAC&provincesList of equivalency to hydrogen ions deposited over a hectare of Fac=all&facilitiesByButton=Rank&companiesByList=RETR_ land per year. TOTAL_COMBINED. 229 Environment Canada, 210 Albian Sands Energy Inc., Muskeg River Mine Expansion http://www.ec.gc.ca/acidrain/acidforest.html. Project, Appendix 2-6, Developments in the Oil Sands Region, April 2005. 230 Albian Sands Energy Inc., Muskeg River Mine Expansion Project, Environmental Impact Assessment Appendices for 211 Figures for existing scenario for SO2 and NOx – Source: the Muskeg River Mine Expansion, Appendix 2-9, Air and Predicted Ambient Concentrations and Deposition of Noise Modelling Methods (April 2005), Tables 27 and 28, Priority Substances Released to the Air in the Oil Sands p. 107 and 108. Region – Final Report, RWDI West Inc. Submitted to Cumulative Environmental Management Association 231 N0x/S02 Management Working Group, 2004, N0x and S0x Trace Metal and Air Contaminant Working Group, Sensitivity Mapping. December 2003. Table 2.3, page 14. 232 Canadian Council of Ministers of Environment, Canada- Wide Standard for Benzene Phase 2 (2001), pp. 2-3. 212 Existing scenario totals for PM2.5 and VOC are comprised of approved emissions for Syncrude Mildred Lake, Aurora 233 Albian Sands Energy Inc., Muskeg River Mine Expansion North, Suncor Base Plant, Steepbank, Millenium, Upgrader Project, Air Quality Planned Development Case Ambient and South Tailings, PetroCanada MacKay River and Imperial Predictions, April 2005, Table 13, p. 28. Cold Lake. 234 Imperial Oil Resources Ventures Limited, Volume 5, 213 Alberta’s Ambient Air Quality Guideline (AAQG) for Kearl Oil Sands Project – Mine Development Regulatory nitrogen oxides (N0x) is based on the prevention of human Application , (Volume 5, Appendix 2B (July 2005), health effects. The guideline for sulphur dioxide (S02) is p. 2B-70. based on the prevention of effects to vegetation. 235 Albian Sands Energy Inc. Muskeg River Mine Expansion 214 Canadian Council of Ministers of Environment, Canada Project, Environmental Impact Assessment Appendices for Wide Standards for Particulate Matter and Ozone (2000), p. 4. the Muskeg River Mine Expansion, Appendix 2-9, Air and 215 Albian Sands Energy Inc., Muskeg River Mine Expansion Noise Modelling Methods, April 2005, Tables 27 and 28, Project, Air Quality and Noise Assessment, April 2005, p. 107 and 108. Table 3, p 4. 236 Marc Deslauriers, Pollution Data Branch – 216 Imperial Oil Resources Ventures Limited, Volume 1, Environment Canada, “Emission Inventories and Kearl Oil Sands Project – Mine Development (July 2005), Projections” (presentation at the SMOG Science pp. 5-64. Workshop, March 8 and 9, 2005 in Toronto). 217 Imperial Oil Resources Ventures Limited, Volume 2, 237 Environment Canada, 2004 Canadian Acid Deposition Kearl Oil Sands Project – Mine Development, Appendix 2B Science Assessment: Summary of Key Results. (July 2005), pp. 68–70. 238 http://www.eub.gov.ab.ca/BBS/eubinfo/default.htm. 218 Albian Sands Energy Inc., Muskeg River Mine Expansion 239 In Alberta, the environmental assessment (EA) process is Project, Air Quality and Noise Assessment, April 2005, encompassed within the Environmental Protection and Table 5, p. 11. Enhancement Act (EPEA), more specifically within the 219 Albian Sands Energy Inc,. Muskeg River Mine Expansion Environmental Assessment (Mandatory and Exempted Project, Air Quality and Noise Assessment, April 2005, Activities) Regulation (AR111/93) and the Environmental Table 4, p. 6. Assessment Regulation (AR 112/93). Schedule 1 of AR 111/93 lists oil sands mines and commercial oil sands 220 World Health Organization Regional Office for upgrading or processing plants as activities that require a Europe Copenhagen, Air Quality Guidelines for Europe mandatory environmental impact assessment (EIA). The (Second Edition, 2000), p. 192. Environmental Assessment Process is outlined in Part 2 of 221 The Particulate Matter and Ozone Management Framework the EPEA, which describes the purpose of the process and was recommended to government by the stakeholders of the the steps to prepare and submit an EIA. Section 49 of EPEA Clean Air Strategic Alliance in 2003. lists the required contents of an EIA report, which includes a description of monitoring plans for predicted environmental 222 Albian Sands Energy Inc., Muskeg River Mine Expansion impacts and proposed mitigation measures. Project, Air Quality and Noise Assessment, April 2005, Table 17, p. 37. Similar to EPEA, the Canadian Environmental Assessment Act (CEAA) includes Comprehensive Study Regulations 223 Albian Sands Energy Inc., Muskeg River Mine Expansion that identify projects and classes of projects that require a Project, Air Quality Planned Development Case Ambient comprehensive study. Included in the comprehensive study Predictions, April 2005, Table 16, p. 36. list are oil sands processing facilities and mines. 224 Clean Air Strategic Alliance, Particulate Matter and Ozone Management Framework (2003), pp. 31–34.

THE PEMBINA INSTITUTE OIL SANDS FEVER 75 Endnotes 240 - 266

240 Most commonly, federal involvement is triggered by an oil 250 CEMA Contract Summary. April 30, 2005. sands proponent’s requirement of a permit under Section 35(2) of the Fisheries Act for the alteration, disruption, 251 EUB Decision Report 99-2, p. 39. or destruction of fish habitat. Prior to DFO issuing an 252 EUB Decision Report 2002-089, p. 55. authorization, an environmental assessment of the project under the Canadian Environmental Assessment Act (CEAA) 253 EUB Decision 2004-005, p. 76. is required. 254 EUB Decision 2004-009, p. 77. 241 Fen Montaigne “The Great Northern Forest: Boreal,” 255 Cumulative Environmental Management Association, National Geographic (2002), vol.201, issue 6, pp. 42-66. Annual Report 2000 and 2001. Cumulative Environmental 242 Alberta Environment, Regional Sustainable Development Management Association – Wood Buffalo Region. Strategy for the Athabasca Oil Sands Area (1999), p. 1-2. 256 Cumulative Environmental Management Association 2002. For more information on the RSDS see CEMA Schedule Compared to Oil Sand Development Profiles. http://www3.gov.ab.ca/env/regions/neb/rsds/. 257 Cumulative Environmental Management Association. 243 Alberta Environment, Regional Sustainable Development 2004.CEMA Five Year Strategic Plan – Summary of Working Strategy for the Athabasca Oil Sands Area (1999), p.1. Group Activities. 244 For more information on the Cumulative Environmental 258 Cumulative Environmental Management Association Management Association (CEMA) see General Meeting October 4&5, 2005. Taken from schedule http://www.cemaonline.ca/. updates provided by the working groups. 245 http://www3.gov.ab.ca/env/irm/irm_actions.html. 259 Amy Taylor et al, When the Government is the Landlord 246 The Clean Air Strategic Alliance (CASA) was established (Pembina Institute, 2004), http://www.pembina.org/ in March 1994 as a new way to manage air quality issues publications_display.asp?category=11. in Alberta. CASA is a non-profit association composed 260 Richard Masson and Bryan Remillard., Alberta’s New Oil of diverse stakeholders from three sectors – government, Sands Royalty System (1996) Alberta Department of Energy. industry, and non-government organizations such as health and environmental groups. Stakeholders are 261 A. Plourde and Bradford Reid, “Natural Resource Revenues committed to developing and applying a comprehensive and the Alberta Budget” in Wilson, L. S., ed. Alberta’s air quality management system for all Albertans. Volatile Government Revenues. Edmonton, Alberta: For more information see: http://www.casahome.org/. Institute for Public Economics (2002). 247 As of January 2005, CEMA’s membership consisted of 262 All statistics from Alberta Energy and the Canadian 15 government representatiaves, 21 industry representatives, Association of Petroleum Producers. 14 Aboriginal and Métis represetatives, and 6 ENGOs 263 Appendix A-Government Support for Energy Investments. representatives. 264 Commissioner of the Environment and Sustainable 248 Alberta Environment & Sustainable Resource Development, Development, Report of the Commissioner of the Environment Regional Sustainable Development Strategy for the Athabasca and Sustainable Development (2000). Oil Sands Area – Progress Report (July 2001), p. 12. 265 Ken Ketchum, Robert Lavigne and Reg Plummer, 249 Alberta Environment & Sustainable Resource Development, Oil Sands Tax Expenditure (Department of Finance: 2001). Regional Sustainable Development Strategy for the Athabasca Oil Sands Area – Progress Report (July 2001) p.12. 266 Source: http://www.capp.ca/raw.asp?x=1&dt=NTV&e=PDF &dn=34093.

76 OIL SANDS FEVER THE PEMBINA INSTITUTE Oil SANDSFever

Until now the story of Canada’s oil sands has only been partially told. Tales about the vast economic potential of development have been told and re-told by the oil industry, government, energy analysts and the media, but there has been a dearth of information about the environmental consequences.

Oil Sands Fever: The environmental implications of Canada’s oil sands rush fills a critical gap by providing a comprehensive overview of the impacts and making recommendations regarding their management.

pembina.org oilsandswatch.org