Pipes that carry hot steam to well heads at Cenovus Energy's oil sands operation in Christina Lake, Alberta, Canada, June 12, 2013. Oil sands producers are facing unprecedented environmental scrutiny just as crude prices show tentative signs of recovery, posing new hurdles to expansion in the high-cost sector.RICHARD PERRY/The New York Times
Oil sands producers are facing unprecedented environmental scrutiny just as crude prices show tentative signs of recovery, posing new hurdles to expansion in the high-cost sector.
Teck Resources Ltd. is being forced to lay out plans for achieving aggressive cuts in climate-altering greenhouse gases (GHGs) at a proposed bitumen mine, marking the first time carbon emissions have factored into approval of an oil sands project.
Meanwhile, First Nations and Métis groups in Alberta are seeking a more extensive federal review of Imperial Oil Ltd.'s $4-billion Aspen proposal, citing concerns over new solvent-aided production methods billed by the industry as key to reducing environmental impacts.
Both point to more onerous conditions for new bitumen projects as the industry – the fastest-growing contributor to Canada's GHG emissions – weighs profitability of multibillion-dollar expansions against low oil prices and the cost of more aggressive carbon-reduction policies set by governments in Edmonton and Ottawa.
Crude prices have more than halved since mid-2014 to around $50 (U.S.) a barrel, rendering new mining developments in northern Alberta uneconomic. Instead, the industry is relying for future growth on less costly steam-driven extraction projects.
Imperial, Cenovus Energy Inc. and others are counting on solvents to lower costs and emissions, but the technology has yet to be used on a commercial scale. The technique involves shooting butane, condensate and other petroleum liquids underground with steam to loosen seams of bitumen.
The technology "is not necessarily a bad thing," said Dan Stuckless, general manager of McMurray Métis. "It brings with it other environmental concerns that we don't think are well understood or were well assessed in the first place."
His is one of six aboriginal groups that want federal Environment Minister Catherine McKenna to designate Imperial's Aspen project under the Canadian Environmental Assessment Act. The move would also afford Mètis consultation rights for off-settlement members that don't exist in Alberta, he said.
The challenge comes as the Trudeau government conducts a wide-ranging review of the legislation that could take more than two years to complete.
Ottawa exempted steam-driven bitumen projects from federal environmental assessment in 2013. However, the Minister has discretion under existing rules to order a full review where she deems a project may cause adverse environmental effects.
A big worry is how much solvent remains in the ground, and its potential effects on groundwater and aquatic habitats for fish and other species. The industry pegs recovery rates for the additive in the range of 60 per cent to 70 per cent, and potentially as high as 90 per cent at some projects.
But the Alberta Energy Regulator did not require Imperial to conduct further assessments of possible effects when the company amended its project application last fall.
Aspen, located about 45 kilometres northeast of Fort McMurray, includes two phases that would produce 75,000 barrels of oil a day each. A regulatory decision is expected next year.
In July, the McMurray Métis, Mikisew Cree and the Fort McKay First Nation were among those who sent a joint letter to Ms. McKenna requesting the project undergo a more rigorous review.
A spokeswoman for Imperial said it has submitted a response to the Minister's office but declined further comment. There is no legislated timeline for the Minister to make a decision, a spokeswoman for the Canadian Environmental Assessment Agency (CEAA) said.
Meanwhile, federal regulators are also assessing whether to begin public hearings on Teck's $20.6-billion (Canadian) Frontier mine proposal, which, if approved, is not expected to pump any crude before 2026 at the earliest.
In documents submitted to the CEAA, Environment and Climate Change Canada asked Vancouver-based Teck to detail new technologies which hold promise to lower emissions, and set reduction targets "that are measurable and have timelines for achievement."
Among mitigation efforts planned are on-site co-generation of electricity, using ultralow-sulphur diesel in haul trucks and implementing an anti-idling program for the house-sized vehicles. A company official said Teck supports new research and would study other options over time.
But the federal department rebuked the company for comparing the project to today's generation of mines, underscoring difficulties as the industry adapts to new policies and weak prices.
They include two megaprojects that were scrapped because of shaky economics: Royal Dutch Shell PLC's Pierre River development and French oil major Total SA's Joslyn proposal.
With a file from reporter Shawn McCarthy in Ottawa