The Canadian Oil Sands: A Backgrounder: Environmental Concerns

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Climate Change

The production of petroleum from oil sands uses significant amounts of energy, almost all derived from the combustion of fossil fuels and resulting in CO₂ emissions. As a result, oil sands operations have been criticized for their GHG emissions, both for the absolute amount (which is increasing rapidly) and in intensity (i.e., tonnes of CO₂ per barrel of oil) in comparison to conventional oil operations. That criticism has also driven opposition to transportation projects that would move bitumen to markets, such as TCPL’s Keystone pipeline to U.S. refineries and markets and Enbridge’s Gateway project to Pacific markets.

There are alternative perspectives on the oil sands compared to conventional oil emissions intensity difference. For example using a complete life-cycle analysis, the percentage differences between oil sands and conventional oil becomes smaller. Applying the well-to-wheels approach, in which the amount of GHG emissions for the entire life-cycle of oil is included (i.e., including extraction, processing, distribution and end use of the refined product by the consumer), GHG emissions associated with oil sands oil are often stated to be five to 15 percent higher than those for average crude oil operations. The percentage increases, however, if GHG emissions are measured for only a portion of the life-cycle, such as from extraction to distribution, i.e., well-to-pump.

Recently, disputes with the European Union and California have arisen over the treatment of oil sands oil for purposes of the Low Carbon Fuel Standards (LCFS) being developed in those jurisdictions. Canadian government, provincial government and industry officials have argued against the high GHG intensity numbers assigned to oil sands oil for purposes of those standards, suggesting that they are discriminatory and/or inaccurate. In addition, some producers in the oil sands argue that the GHG emissions intensity from their facilities is lower than from other oil sands producers and that oil sands oil should therefore not be treated in a single category. Many argue that there are significant quantities of heavy oil produced in other jurisdictions which have even higher GHG emissions per unit of production than oil from the oil sands but that those sources are not treated in the same way as the oil sands for purposes of the LCFS.

The goals of optimizing the use of oil sands and reducing the amount of GHG emissions may not be mutually exclusive. As more advanced and efficient technology is developed for oil sands mining and in situ operations, the intensity of GHG emissions is expected to decrease, whereas it is expected to increase for conventional crude oil with the shift towards use of heavier crude oil. Industry has certainly responded, not only by the ongoing technological advances which can reduce emissions per unit of production, but also, perhaps belatedly, by a determined public relations effort to ensure the broader public discussion includes a better appreciation of the broader factual context.

Governments are providing incentives to industry to reduce emissions. The government of Canada has committed to reduce GHG emissions in Canada to 17 percent below 2005 levels by 2020 in parallel with the U.S. and its legislation. Currently this commitment seems likely to result in the application of performance standards to large emitters on a sector by sector basis with the government having announced that oil and gas will be the next sector dealt with (vehicle standards are in place and a draft coal-fired electricity standard has been made public). Many in industry favour greater flexibility using market-based approaches like a cap-and-trade with offsets system or even a carbon tax. Alberta has imposed GHG emission intensity reduction obligations on large GHG emitters under the Climate Change and Emissions Management Act and the Specified Gas Emitters Regulation. This obligation can be met by operational improvements, by acquiring Alberta-generated carbon credits or by paying to the provincial government $15 per excess tonne emitted. The Alberta government has also committed approximately $2 billion towards the development of carbon capture and storage (CCS), a process that involves capturing GHG emissions and storing them indefinitely in geological formations under the earth’s surface or using them to enhance production from certain oil fields (Enhanced Oil Production or EOR). It has also announced the intention to give extra carbon offset credits to those who successfully sequester CO₂ in geological formations. The federal government has also committed hundreds of millions of dollars to support CCS. While Alberta will be relying significantly on CCS to manage emissions in the future, CCS is not without its challenges, both technical and economic.

Environmental Regulation

The primary regulators for oil sands projects are the ERCB and Alberta Environment. However, depending on the type of oil sands operation (either surface mine or in situ extractions) and where the site is located, many other regulators can be involved. The application review process for oil sands mine operations is more in-depth than for in situ operations because of the greater land disturbance and necessity of tailings ponds. Each of the oil sands operations may require an environmental assessment and the completion of an Environmental Impact Assessment report, depending on the scope of the proposed project.

If the oil sands operation remains within the province and does not involve a federal authority, the environmental assessment will involve provincial regulators such as Alberta Sustainable Resource Development; Alberta Culture and Community Spirit; Alberta Health and Wellness; Alberta Tourism, Parks and Recreation; Alberta Transport; the Alberta Utilities Commission; and the Natural Resources Conservation Board.

Where the proposed oil sands project expands beyond the provincial boundaries or involves a federal authority, there will be a joint environmental assessment review conducted by provincial and federal regulators, including federal regulators such as the Canadian Environmental Assessment Agency; Environment Canada; Fisheries and Oceans Canada; Health Canada; Natural Resources Canada; Transport Canada; and Parks Canada. After the environmental assessment review is completed, the application is subject to final approval by the applicable regulatory board to determine if the proposed project is in the public interest. In making this decision, the board will balance economic, social and environmental factors and may require a hearing before a joint panel of representatives from the provincial and federal governments, the ERCB or a judge, as litigation could result. The board has the authority to impose conditions on any approval granted and it will continually monitor projects to ensure compliance.

The regulatory process has gradually shifted and is becoming increasingly more stringent. The ERCB has released new guidelines for oil sands mining operations and continues to make changes to some of its guidelines. Two recent ERCB directives are: Directive 073: Requirements for Inspection and Compliance of Oil Sands Mining and Processing Plant Operations in the Oil Sands Mining Area and Directive 074: Tailings Performance Criteria and Requirements for Oil Sands Mining Schemes. The ERCB has indicated that it will implement regulatory changes regarding its application requirements for commercial oil sands projects (Directive 023) and requirements regarding gas/bitumen production in oil sands areas (ID99-01), which are expected to start within its fiscal year.

Although the regulatory process for Alberta oil sands are becoming more stringent, both the government and the industry remain committed to working together in the most efficient way possible to attain the goals of maximizing returns and protecting the public interest. This is exemplified by the recently completed Alberta Competitiveness Review, wherein the provincial government recognized the need for a more efficient, coordinated and collaborative regulatory system in order to maximize investment appeal. As part of this strategy, the government is poised to streamline, harmonize and coordinate the compliance process by creating a results-based view of regulation that is focused on outcomes and has commissioned a task force to undertake a comprehensive review of the regulatory system.

First Nations Issues

The courts have established that both the federal and provincial governments have a duty to consult with, and where necessary accommodate, First Nations or Aboriginal people if treaty or aboriginal rights may be adversely affected by government actions. Therefore, where the government of Alberta, through its regulatory agencies, intends to approve an oil sands project on or near lands over which First Nations or Métis communities have claimed traditional hunting, trapping or fishing rights, the duty to consult will be triggered.

The provincial government often delegates the procedural aspects of such consultation to project proponents. The government has developed Alberta’s First Nations Consultation Guidelines on Land Management and Resource Development, which sets out the process for determining whether consultation is necessary and the role of government departments and the project proponent in the consultation process.

The degree of consultation required depends on the strength of the rights claimed by the affected Aboriginal group and the nature and level of the potential impact on those rights. At minimum, consultation will require that the First Nation or Aboriginal group be notified of the scope, location and potential adverse impacts of the project.

Although the ultimate responsibility for the adequacy of consultation efforts lies with the government, the project proponent must meet with the affected First Nation or Aboriginal group to explain the government process and discuss the impacts on the treaty or aboriginal rights claimed, as well as avoidance or mitigation of those impacts. Where consultation is necessary, it must occur before decisions are made, i.e., during the planning of the project before the application for government approval. In addition, the environmental and regulatory approval process for a project may require the project proponent to consult with affected Aboriginal groups. Environmental impact assessments often require identification and assessment of any adverse impacts of a project on Aboriginal and treaty rights. Securing the effective participation of Aboriginal groups in these processes may require that the project proponent fund enter into consultation protocol agreements with Aboriginal groups.

Governments must ensure that adequate consultation has taken place and that appropriate accommodation of affected Aboriginal and treaty interests is undertaken if necessary. Failure to adequately consult and, if necessary, accommodate Aboriginal concerns puts the project developer at risk of having project approvals challenged in Court, and potentially quashed on the basis that they violate constitutionally-protected Aboriginal and treaty rights.

Proponents of large oil sands projects with the potential to significantly impact the traditional territories of Aboriginal groups may also negotiate impact benefit agreements with affected Aboriginal groups to ensure effective consultation and address concerns related to the proposed projects. These agreements may address commitments made in the regulatory and environmental review process, funding arrangements to address social concerns (such as educational and training opportunities), environmental mitigation and consultation and information-sharing protocols for the long term. Increasingly, First Nations and other Aboriginal groups are seeking agreements whereby their communities would secure long-term economic benefits from oil sands development on their traditional lands.