Monday, July 26, 2010

Redrawing Mining Boundaries

Alberta's Regulator increases the size of the province's surface mineable area by 40 per cent.
By Peter McKenzie-Brown
Last year Alberta’s Energy Resources Conservation Board report rebalanced the provincial agency’s estimates of oilsands reserves, shifting them somewhat in the direction of surface mineable reserves. This raises questions about environmental impacts, for which the inimitable Pembina Institute have happily provided at least one group of answers.

The oilsands are a vast geological mystery, but last year the ERCB put into place a piece of the underlying puzzle 14.5 townships (1,350 square kilometres) in size. Mineable reserves are those with overburden of 65 metres or less. Based on an analysis of more than 2,000 exploratory wells drilled in recent years, the Board’s analysis increased the boundaries of the mineable Athabasca oilsands by almost 40%. The mineable oilsands area of north-eastern Alberta now measures 51.5 townships.

The first change in the surface mineable area since the Board first drew the boundaries in the early 1980s, this change increases total established mineable reserves – in many jurisdictions called “proved” reserves – by 11%, or about 3.5 billion barrels; more than Britain’s total reserves. These are new reserves. Previously, the Board had not done a resource calculation for the area.

While the mineable sands did well, deeper sands did not. As part of its report, the Board reduced established in situ reserves in the Peace River area on the principle that some previously booked reserves in the Bluesky-Gething deposit were too thin to be economic. As a result, the ERCB reduced the in situ component of established oilsands reserves by about 5.5 billion barrels. The net outcome was that Alberta’s established reserves of bitumen totalled about 170 billion barrels. About 20% of that resource is theoretically mineable. The balance will require in situ recovery procedures like SAGD.

Rick Marsh, a senior geologist with the Board, stresses that this report makes no differences for planning by individual companies, although he observes that landowners have posted this new assessment on their websites. “The purpose of this is to determine on a global or provincial basis what the bitumen reserves of the province of Alberta really are. There is no connection between the regulatory side and the (ERCB’s) resource assessment side. Whether regulatory approval to develop is given will determine whether our resource estimate is correct or not. If development doesn’t take place for environmental or economic reasons, or for any other reason, then we will have to de-book some of those reserves, adjust them downward.”

Marsh notes that there are spots within the boundary expansion that are not appropriate for mining (they would require in situ development) and stresses that, in any case, the new ERCB boundary has no regulatory effect. Leaseholders in the surface mineable expansion area include Shell, UTS Energy, Total S.A. and Synenco Energy; they can propose whatever approach to development they want, whether surface mining or in situ techniques. It’s up to regulators (primarily the provincial Department of Energy) to approve developments.

Economic and Environmental Implications
It isn’t difficult to figure out the energy implications of this analysis. From an economic and technical perspective, the ERCB report enlarges the technically more accessible sources of bitumen. The availability of more mineable reserves, if developed, would mean a lot more economic activity in Alberta, more royalties to the province and greater energy security to the world. Greater production would contribute greatly to Alberta’s status as an energy power. It would enable the industry to develop larger export markets – whether in the United States or, if a pipeline to the west coast is ultimately constructed, to East Asia. And, of course, the Canadian balance of trade would benefit. In a higher-oil-price world, the economics of oilsands development are terrific.

But what are the environmental costs? Especially in respect to air pollution, the balance of costs is well worth considering. According to an important 63-page Canadian Energy Research Institute (CERI) study, Green Bitumen, SAGD production generates 1.3 times the emissions of conventional oil. By contrast, integrated mining and upgrading projects produce 0.6 times the level of emissions. (Emissions from older plants are much higher than these averages.) As we shall see, this could dramatically change.

First, however, consider the notions of the Pembina Institute, which will always have an axe to grind in respect to bitumen production. “The technologies used to mine, extract and upgrade bitumen to synthetic crude make the product among the most environmentally costly sources of transport fuel in the world,” the organization proclaims.

In May, Pembina issued a report summing up its view of the relative environmental impacts of the two oilsands production systems as follows. In situ oil sands production generates more greenhouse gases and sulphur dioxide emissions per barrel. Oil sands mining affects habitat more from land clearing, generates more nitrogen oxides and uses more water during production.

This report follows Pembina’s release in March of a “report card” on nine non-mining plants in the oilsands. In that report Pembina observed that in situ plants are responsible for greater air pollution than mining plants. “When the land disturbance and fragmentation effects associated with natural gas production are considered,” the authors added, “the influence on wildlife habitat of in situ operations can reach (environmental impact) levels that are equal to and sometimes greater than mining.” According to Simon Dyer, the institute’s oilsands program director, “both mining and in situ oil sands development produce significant cumulative environmental impacts and those remain unaddressed.”

Plain Facts
It’s easy to find yourself flinching at the organization’s messianic sense of its own rightness. However, the Pembina Institute plays an important gadfly role within the oilsands industry. As an advocate for better environmental performance, it brings public and governmental pressure to bear on the industry.

Pembina does confirm its raw data with producers before conducting its analysis and releasing its publications, and that is to the ENGO’s credit. However, the organization then invariably puts its collective boots to the necks of lesser environmental performers – or, when justified, damns exceptional performers with faint praise. In one presentation on its website, Pembina labels statements from the Alberta government and the industry as “Spin” but describes its own biases as “Plain Facts.” Perhaps a reality check is in order. To use just one example from the table above, in situ projects mostly use non-potable groundwater, 90% of which they recycle, and then re-inject that water into underground formations. In the interest of spin, Pembina forgets to mention this plain fact.

The good news about the ERCB’s expansion of the surface mineable area in the Athabasca sands is that it describes a huge volume of petroleum that can be developed safely and, as technology and production practices improve, in more environmentally sustainable ways. Especially if your biggest concern is air pollution, oilsands mines are the way to go. Where to go is a plain fact of the ERCB report.

According to the highly-respected Canadian Energy Research Institute, combining carbon capture and storage or using nuclear energy as a component of production could create oilsands plants producing fewer greenhouse gas emissions per barrel than conventional crude oil. In the study noted earlier, CERI describes an astonishing scenario. “The oil sands could pave the way as a bold new energy system,” CERI argues, “producing hydrocarbons to power our economy with almost zero GHG emissions being released into the atmosphere.” Looking forty years into the future, the institute suggests that “by 2050 the reduction from CCS coupled with nuclear energy would enable the oil sands to produce at 2030 rates with zero emissions being released, creating the cleanest sources of produced crude oil on the planet.”

The irony, of course, is that in this case the real visionary is a research institute with ties to the University of Calgary and funded by industry and government. Like the Pembina Institute, most ENGOs are just gadflies. They have a role in the ecosystem, but revolutionary change is taking place without them.
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