For decades, the oil sands in remote northern Alberta churned on, the gaping mines and toxic tailing ponds cutting into the boreal forest, but attracting little attention.
It has all changed – slowly, then suddenly.
Now, a bright spotlight is fixed on the oil sands. Tougher new laws and longer, more demanding regulatory processes are pushing companies to change how they approach environmental concerns.
And as companies adapt, costs for already-expensive oil sands projects will continue to rise.
The challenge of the new reality for the oil business goes on show today in Federal Court in Calgary. To keep its proposed $8-billion Kearl oil sands mine on schedule, Imperial Oil Ltd., majority-owned by Exxon Mobil Corp., is fighting the federal government to win back a key water permit.
The battle over the permit illustrates both the high stakes and the stepped-up environmental scrutiny facing oil sands producers. Without the permit, Imperial and Exxon, its 30-per-cent partner in the Kearl mine, can't go ahead with plans to drain the boggy muskeg at the Kearl site, 70 kilometres north of Fort McMurray.
Losing the permit could set the companies back a year or more behind on the project, on which Imperial has already spent $228-million, the company says in an affidavit.
The case is also being closely watched by the energy industry as a powerful and tangible reminder of the expanding risks ambitious oil sands developers face when building multibillion-dollar projects.
“When the expectations of society change, companies have to change and adapt accordingly,” said Pius Rolheiser, an Imperial spokesman said. “Companies that don't change and adapt will be in trouble.”
The Kearl hearing comes only days after the deaths of 500 migrating mallards at a Syncrude Canada Ltd. tailings pond – and the image of an oil-soaked survivor, one of the few – hammered home the new green reality: To succeed in the oil business, dealing with the environment is as important as the price of a barrel.
Syncrude, 25 per cent owned by Imperial Oil, took out full-page newspaper ads apologizing for the debacle.
Other companies with proposed oil sands developments are readying themselves to meet higher hurdles.
Public hearings on Total SA's plan for a 100,000-barrel-a-day oil sands mine will likely take place in the fall. The Paris-based firm has designed its project to use less water, smaller tailings ponds and be ready to incorporate the capture of carbon dioxide, a main greenhouse gas.
Total engineered its mine to exceed legislated expectations after taking note of the emerging trend toward greater scrutiny, said Michael Borrell, president of Total's Canadian business. “Clearly, there's a heightened awareness in general around the oil sands and the way developments are carried out and the impact they have on the environment.”
Public concerns influenced the design of Petro-Canada's proposed 140,000-barrel-a-day upgrader just northeast of Edmonton.
Two weeks of public hearings to review Petrocan's Edmonton-area upgrader begin June 23. Petrocan plans to use recycled waste water from the city of Edmonton rather than fresh water from the North Saskatchewan River. It is also designing the facility to be ready for carbon capture technology when it is available. The firm also has plans to use technology to reduce sulphur oxide and nitrous oxide emissions. The company's moves are in response to concerns heard earlier in the development process, said spokeswoman Veronica Curtis.
“We want to ensure this project is top notch, and to be a top-notch project, we need to address all the environmental concerns,” she said.
Imperial's loss in March of its federal water permit for Kearl was an unexpected setback for the project. Imperial had 1,000 workers at Kearl for site preparation by February. Draining the muskeg is part of preparing the area for construction.
The government voided the water permit after an early March Federal Court decision found the regulatory approval of Kearl partly incomplete. It didn't fully explain the issue of greenhouse gas emissions.
The case against Kearl had been pursued through public hearings, and then court, by environmental groups, led by the Sierra Club and Pembina Institute, which have hailed their partial victory in early March as “landmark” and “precedent-setting.”
Environmental groups are no longer easily ignored and companies now have to react, analysts say. “The widely reported ducks issue is just a sign of the direction the situation is taking,” said Vincent Lauerman of Geopolitics Central, an energy consultancy in Calgary. “Environmental issues are becoming an increasing factor.”
