Sharing the Road

As the Pembina Institute's sixth executive director in 25 years, Ed Whittingham believes in the organization's ability to work with industry to improve sustainability. This article appears in the February issue of Oilweek

By Peter McKenzie-Brown

Twenty years ago the Newmarket Ontario Rotary Club offered 17-year-old Ed Whittingham the opportunity to become an international exchange student for one year – a privilege reserved for young men and women who will represent their country well, and who can clearly articulate themselves and their interests. In Whittingham’s case, he could already articulate a deep concern for the environment.

Assigned to a small city in Japan, his experience was transformational. “Rotary sent me at a formative time in my life, and I came of age there. I will always be grateful for that experience. I loved the people and the culture.” He studied for a year there as an undergrad, and went back on other occasions. “I worked on an assembly line there, in a lumber yard and as a clerk in a convenience store. I also fell in love with my wife Yuka there.” Today he can communicate fluently in spoken and written Japanese, and he and Yuka have two young children – Beck (age six) and Alice (age four).

Whittingham received his BA from McGill University and an MBA in international business and corporate sustainability from York University’s celebrated Schulich School of Business. Yet virtually all his professional experience in Canada has been with not-for-profit environmental organizations.

Such is the cosmopolitan background of the Pembina Institute’s sixth executive director, who began his term on January 1st of this year, as the organization began preparing to celebrate its 25th anniversary. His unusual background is appropriate, given the unusual nature of the organization he leads – an organization now celebrating its 25th anniversary.

Pembina was the first environmental organization to express concern about the oilsands, back in 1986, but it has always supported the notion of oilsands development. “I think there’s a real opportunity to responsibly develop the oilsands – to develop it in a way that doesn’t impair key environmental thresholds – for example, the Athabasca River, critical air sheds, and critical habitat.” Doing all this, he says, “can and should provide healthy jobs for Albertans.” He says he opposes “command and control regulation (like that used during) the National Energy Program. It unnecessarily and unfairly destroys people’s livelihoods.” Whittingham believes a collaborative, business-friendly model “is doable. I meet with industry people a lot and I find that many of them think it’s doable, too.”

He acknowledges that these views “put us offside with some other environmental groups,” but doesn’t much care. It’s consistent with the organization’s mission to “advance sustainable energy solutions through innovative research, education, consulting and advocacy.” The organization’s vision is “a world in which our immediate and future needs are met in a manner that protects the earth’s living systems; ensures clean air, land and water; prevents dangerous climate change; and provides for a safe and just global community:” not much there to argue about.

The Pembina Institute is a unique Alberta success story. Founded in 1986 by Rob McIntosh – a high school teacher living in the rural community (population 7,000) of Drayton Valley – that small town on Alberta’s Cowboy Trail is the homeland of an organization which now employs 60 “faces” in Whittingham’s word – 50 fulltime – in offices in Vancouver, Yellowknife, Drayton Valley, Calgary, Toronto and Ottawa. Pembina even has a US policy bureau in Washington, DC.

The institute focuses on four key issues. “In internal parlance we call them rocks” he says, as in the rocks upon which they build their organization. The oilsands are one rock. “Our position is one of responsible oilsands development, not shutting down development.” Another is climate change: “How can we help create a low-carbon economy?” The others are transportation – looking at lower-carbon transportation systems, an effort that includes policies on optimal community organization, for example. “We also do a lot of work around renewable energy and energy efficiency,” which together represent the fourth rock. The institute prepares policy documents, serves as an advocate and has a strong educational mandate.

There is more, however. “Every one of these rocks involves policy research and advocacy, but they also involve consulting.” And this is one of the curious features of the Pembina Institute: it is a not-for-profit organization, but only half of its revenue comes from the Pembina Foundation (chaired by Rob Macintosh, who founded the Pembina Institute) and other such organizations. “The other half comes from consulting provided by our content staff. (Our rocks) provide consulting services to federal and provincial governments, to corporate clients and to municipalities and first nations.”

Most of Pembina’s consulting staff are “passionate and talented engineers.” Since he joined the institute about six years ago, Whittingham has been the principal exception. This is not to say he isn’t passionate and talented; he just isn’t an engineer. In a self-effacing way, he says his BA stands for “bugger-all,” while his MBA is a “masters in bugger-all.”

Ask Whittingham what he’d like to accomplish during his term as executive director, and he’s pretty straightforward. Most people move on from this job after about five years. Marlo Raynolds (who just finished his term) was the exception – he was the ED for seven years. “At the end of five years I’d like to leave behind a healthy organization – that’s number one. Secondly, each year in our planning we develop a list of goals; I’d be very happy if we achieved half of our ambitious policy goals. In a broader sense, I’d like to be able to believe I had made a difference on the climate change issue” – the notion that CO2 emissions from human activity are heating up the planet. At the end of his term he’d “like to see Canada firmly on the path to making realistic cuts in CO2 emissions – cuts that are in line with the science.”

On the question of the views of climate-change sceptics, who reject much of this thinking for the first time in the interview he deviates from his characteristic mild-mannered ways. “Twelve thousand refereed journal articles support the science,” he says. He was a delegate at the global CO2 conference in Cancun late last year, where “the US Department of Defense gave a major presentation on it. Using their own science, they told us they recognize it as a problem, and they are looking for ways to protect the US from its effects.” One potential problem they identified was change in global fish stocks – a major source of protein for the world’s growing population. Another was major migrations of refugees in response to deteriorating farming in rural areas. This could have a serious impact on the US border with Mexico. Reflecting another concern addressed in that presentation Whittingham asks, “What are the military implications if melting ice in the Arctic opens up sea lanes?”

“What I would like to say to the sceptics is this: ‘Climate change is real. Get over it. It’s happening.’” He stresses again that the presenters at that session “were not dreadlocked, Birkenstock-wearing, pot-smoking pinko commie liberals. They were commanders from the American military, and they were telling us how they are planning to protect the US from the effects of climate change.”

When you walk away from a discussion with Whittingham, you have a lot to chew over. The organization is clearly committed to carbon emissions as a deep and immediate concern. But as an organization it is tremendously practical: The Pembina Institute preaches low carbon outcomes but it also teaches how to achieve them in economically sensible ways.

In print, this writer has occasionally taken exception to the institute’s facts and to its interpretations of the facts. However, there is no gainsaying the organization’s collective commitment, intelligence and talent. As importantly, the Pembina group of environmental organizations – several are now affiliated with the Pembina Foundation – in general take a practical and somewhat business friendly approach to environmental concerns.

In this 25th anniversary year it is appropriate not only to salute Whittingham as the Pembina Institute’s new executive director. It is equally appropriate to salute the organization’s founder, Rob Macintosh, who after two and a half decades is still at the wheel. Differences notwithstanding, one can only hope that Pembina’s second quarter century will be as successful – and as provocative – as the first.

Perception, Reality and Transparency

Image via Wikipedia

Industry is working to improve its communications, but more importantly its actual performance

This article appears in the October issue of Oilsands Review

by Peter McKenzie-Brown and Deborah Jaremko

The oilsands industry is under near-constant attack from environmental groups and other non-governmental organizations (NGOs) bent on putting an end to “the most destructive energy project on earth.” The phrase “stop the tar sands,” and the moniker “dirty oil” are well known, and not taken lightly. The Alberta government and various industry organizations are taking on the challenge of battling negative perception with the facts about existing development, but also with something even more powerful — commitment to do better, and to prove it.

The “Big Lie” and the Age of the Internet
As Adolf Hitler was dictating his book Mein Kampf in 1925, he coined the term “the Big Lie.” A propaganda technique, the Big Lie refers to a falsehood so “colossal” that no one would believe that someone “could have the impudence to distort the truth so infamously.” Hitler used the technique to good effect through his years of tyranny. However, in established democracies things are different. Government, media, academia and business are all held to account, and among those organizations anything like the use of the Big Lie encounters widespread derision.

“Government tends to be constrained by fact,” says Alberta government spokesman Jerry Bellikka, with withering irony. “We are held to account for what we say. If we were to knowingly put out misinformation, academics, environmentalists, opposition politicians, the public and traditional media would hold us to account. When the premier is talking about emission reductions in the oilsands, if he does not say ‘per barrel,’ he is called on it right away.”

But in emergent web-based media, accountability is self-imposed. Most of the influential NGOs use reasoned arguments and collaborate with government and industry as they advocate for their causes; the Pembina Institute comes to mind. However, some major environmental groups use those media without much regard for facts. Therein we may find the 21st Century version of the Big Lie.

“[Some] people are making pretty outrageous claims,” says Bellikka. “What they want is a reaction. It’s one thing to have a discussion based on fact and current data. It’s another thing to put out inflammatory material, not much of which is accurate...it’s to get a reaction and that’s what these campaigns are designed to do. They are based on emotions, on wild accusations. Yet these same groups call governments the propaganda machines.”

The message presented by anti-oilsands groups in various forms — from feature-length documentaries and short YouTube videos to online games and protest actions — is one of environmental and social degradation that has been called as much as “Armageddon.”

“We want to lift the lid on the horrors of oil exploration taking place in a country that has a reputation for being the cleanest in the world,” says Michael Marx, executive director of Corporate Ethics International, the group behind the recent ReThink Alberta campaign. The initiative, spread through the web and via billboards in four U.S. cities as well as London, England, encourages potential tourists to Alberta to reconsider their travel investment until the tar sands industry is no more. “Tar sands mining in Alberta has not only caused irreparable damage to the environment but the health of local communities which have seen a dramatic rise in rare cancers linked to the same compounds found in tar sands operations.”

The dramatic proliferation in the number of groups like Corporate Ethics International, and the growth in public and private grants and contracts flowing to them, have enabled NGOs to become powerful political forces. In a sense, they are now filling a credibility vacuum that has been developing for 20 years. Poll after poll has shown declining confidence in such institutions as government, business and traditional media. This has created great demand for independent information and analysis, which NGOs can easily deliver through web-based communications.

“They do not work with small budgets. They are often well-funded,” notes Bellikka. “[Some NGOs] have told us that when they do one of their campaigns they get lots of donations. Whether [that is] accurate or not, we don’t know; they don’t give us access to that sort of information directly. But, what we do know is that these are very well-funded campaigns. Greenpeace is an excellent example.” Last year Greenpeace had total worldwide income of about €200 million ($272 million), and directed about €28 million ($38 million) of that to off-oil climate and energy campaigns.

From Defence to Proactive Discussion and Education
Although often characterized by highly exaggerated and even inaccurate claims, it is more than big budgets and social media wizardry that grants off-oilsands groups a position in public perception. The truth is that the concerns are not entirely unfounded — oilsands development undeniably does negatively impact the environment. It is communicating the actual extent of this impact that has been the challenging burden of industry and government, but now that mission is being taken a step further.

“We have spent a long time being framed as villains by environmental organizations, and we have been trying to prove them wrong. That was not an effective approach,” says Janet Annesley, vice-president of communications for the Canadian Association of Petroleum Producers (CAPP). “We have to show Canadians our business. We have to show them the kinds of people who work in our companies and the solutions we find to problems in a difficult business. We need to exit the discussion about who is right and focus on doing good work.”

She says that according to CAPP polls, 74 per cent of Canadians say that the industry should be developing the oilsands. “Our strategy should be to say, ‘Yes, Mr. and Mrs. Canadian. You are right. And that is exactly what the industry is doing today.’ The advertising campaign we launched last June is simply following that plan.”

Annesley describes the off-oil NGOs as being driven by an agenda, but shares some consternation about what that agenda is. “They really seem to think that Big Oil is the only thing standing between society and a renewable energy future. That doesn’t make any sense, but they do seem to believe it.”

She continues, “We fundamentally beg to differ. The solutions are not available today. We know that energy demand is increasing, that energy resources are declining and that much of the conventional energy available is in countries that are very difficult to do business with. We know that energy supplies must diversify. We know that energy development is under greater scrutiny than ever before. And we know that the industry has to meet the planet’s growing energy needs in ways that are increasingly environmentally accountable. That is the rock and the hard place in which we sit.”

The industry is widely understood to offer economic benefits to Canadians, she says, and “we are widely understood to be reliable suppliers of energy. However, we are not widely understood to be providing environmental solutions. That’s where we need to focus. We need to be talking about the issues of economic benefits; energy security and environmental care in a balanced way, but that conversation shouldn’t begin with someone dangling from the top of the Calgary Tower [a recent Greenpeace action].”

Roger Gibbins, president and chief executive officer of the Canada West Foundation, sums up the problem nicely. “The oilsands proponents will to some degree always be on the defensive on the environmental front,” he says. “The oilsands industry has a lot of negative images to deal with. The industry has to acknowledge that its work has had an adverse environmental impact in the past, and begin there. I think that if the industry is a bit repentant, and admits it hasn’t done the best job in the past, it will be in a better place to win people’s minds and hearts. Just arguing with environmentalists doesn’t have that effect.”

CAPP’s Responsible Canadian Energy program
In announcing the winners of its Steward of Excellence awards this spring, CAPP launched a new program dubbed Responsible Canadian Energy, which is designed to be a platform from which the industry, unified, can demonstrate and communicate its commitment to responsible resource development.

“The way the world sees us is defined by our performance. The linkages between stewardship and the reputation of the energy sector have never been clearer,” says CAPP president David Collyer. “This is not at all about communicating our way out of a problem. It never has been and it won’t be in the future. We certainly need to focus on communications to improve awareness and understanding, but it is essential that this be underpinned by ongoing improvement. In a world that is always moving and changing, we can’t stand still. We have to do better, and we will.”

Collyer continues that, “For some, the oilsands is the economic saviour of a recession-weary country. For others, oilsands development symbolizes a world that has grown far too dependent on fossil fuels. In reality, the oilsands is neither. The truth, as they say, is somewhere in between. CAPP and its members fully recognize that the reputation of this increasingly important industry is determined by two things: performance and communication. We also know that both must be delivered consistently and authentically over time.”
CAPP says a performance report based on the Responsible Canadian Energy initiative will be issued this fall, with 2010 serving as the baseline year as producers “refine and advance” the program. The report will include data on environmental and social performance, and will be followed by a white paper in December 2010 based on an energy dialogue series in Canada and the United States.

The Oil Sands Leadership Initiative
One of the worst-kept secrets in the oilsands industry is under wraps no longer — that is, the Oil Sands Leadership Initiative (OSLI), a consortium of five major players with a self-described “laser focus” on improvements in environmental performance.

With a $10-million budget for 2010 (expected to double or triple in the coming years), Suncor, ConocoPhillips, Nexen, Statoil and Total have a mind to change the bitumen game.

Gordon Lambert, Suncor’s vice-president of sustainability, explains that OSLI has been up and running for about a year and a half, with 2010 as its first official operational year. He says that the group’s genesis was a recognition of the need to accelerate the pace of environmental performance measurement and improvement, while understanding that in order for continued success in this particular space, the needs of the whole outweigh the needs of each individual company.

“We compete in some areas of the business. We don’t compete in reducing our environmental footprint,” says Lambert. “We felt we could make more progress by working collectively than by working individually. The more ideas you get on the table, the better the chance of success.”

The OSLI charter outlines working groups designed to address water management, carbon management and energy efficiency, land stewardship, sustainable communities, technology breakthroughs and other focus areas as agreed on by its steering committee.

One of the first initiatives that OSLI is working on is a $2.5-million feasibility study into a potential new water distribution plan for the Athabasca oilsands region. Dubbed the Regional Water Solutions Study, Lambert says the idea is to work out whether it is environmentally and economically viable for oilsands producers in the area to reuse water left in mining tailings as steam generation source water for local in situ projects. The notion is not as “blue-sky” as it may sound — Suncor itself already uses its tailings water from mining operations to supply its Firebag steam assisted gravity drainage project. However, Lambert says applying it on a regional scale would require a broad consensus — the subject of the feasibility study.

Another key OSLI initiative is OSTECH, a “technology identification structure based on a web portal.” The group says that through this portal, inventors, entrepreneurs and the general public will be able to submit projects and ideas that can be further developed within OSLI. Lambert says it will be a one-window system for the member companies to share in evaluation of the new technology ideas that are presented to them, reducing duplication of due-diligence efforts.

“Innovation and the oilsands go hand in hand. It has always been that way,” he says. “New ideas are coming forward all the time.”

A key part of OSLI’s mandate is transparency around advancing its performance improvement efforts, which is one of the reasons it did not publicly herald its initial creation.

“We’ve been cautious of waiting to communicate on results and action versus intent,” says Lambert. “In 2011, you will see us stepping out more visibly.”

Waste to Wealth

Why waste management in the oilsands could better echo the mutually beneficial relationships in nature. This article appears in the August issue of The Oilsands Review.

By Peter McKenzie-Brown
Academics have developed a discipline known as industrial ecology to help explain the behaviour of the economic world, but you can do more than use this discipline to understand economics. You can use it for strategic planning. According to an influential group of thinkers headquartered in Alberta, the future of the oil sands lies in “industrial symbiosis” – a specialty within the field. It’s a simple idea, but it could have the power to transform the oil sands sector.

A few months ago I got an invitation to participate in a workshop developing this idea, with a key proviso: If I reported on the proceedings, I couldn’t attribute a quote to anyone without first getting permission. The point was to create a working environment in which no one felt constrained by the presence of a reporter. No problem: for this article, the ideas are more important than the industry, government, and university people behind them.

The workshop was jointly sponsored by ConocoPhillips and Alberta Innovates, an umbrella group of provincial agencies meant to be “catalysts of innovation” in the energy and environment, health, technology and bio sectors.

We met at the provincial government’s McDougall Centre in Calgary. While the topic was zero waste from the oil sands, participants produced the usual amount of think-tank rubbish in the form of Styrofoam cups and disposable plastics. Probably nothing was recycled – one of the easy forms of waste management.

The task set before the group was to brainstorm a plan for regional integration in the Fort McMurray area. Under this scheme, industry and government would look for ways to encourage the creation of waste-reducing business ties. Oil sands companies, other industries and municipalities in the region would share or co-locate infrastructure to reduce redundancy, harness waste energy and convert residual materials into value-added by-products.

The Big Word
To understand this, let’s get the big word out of the way. Symbiosis occurs when living things develop cooperative or dependent relationships with others so they can live longer or better and prosper. Familiar examples: people on the one side, cultivated plants and domesticated animals on the other. Each side needs the other to thrive.

Industrial ecology describes industries as ecosystems with behaviours somewhat similar to those in nature. Industrial symbiosis involves creating dependent or cooperative relationships within the sector. Done right, this approach can create more sophisticated, efficient and profitable businesses. It can also reduce the output of such industrial wastes as heat, carbon dioxide emissions, and other pollutants.

There are many instances of companies extracting by-products from a waste stream and then transforming them into money-making products. For example, Williams Energy Canada removes pentanes, butanes, propane and olefins from the off-gas stream at Suncor’s Fort McMurray operations. The company pipes the butanes and olefins to Redwater, where its 14,000-barrel-per-day plant further processes them into petrochemical feedstock. In May Williams announced a series of expansions to this system, including the construction of more processing facilities and a new pipeline.

Another example is the fertiliser plant at Syncrude, which helps the oil sands giant comply with environmental regulations. Marsulex Inc. owns and operates the plant which, using technology the fertiliser company developed, employs waste ammonia from Syncrude to help clean up sulphur emissions from bitumen processing and upgrading. The value-added by-product from the operation is ammonium sulphate fertilizer.

Similarly, Shell strips feedstock from the hydrocarbon stream at its oil sands upgrader at Scotford. The company pipes those by-products to its nearby petrochemicals plant for feedstock.

Looking into the future, Edmonton-based Titanium Corporation has developed an entire business plan based on processing waste oil sands material into valuable products. The company has developed technology that can recover both heavy minerals (zircon and titanium) and bitumen from tailings ponds at Fort McMurray-area plants.

There are economic and environmental benefits to this approach. Companies can generate profits for their shareholders. The environmental footprint is smaller, because symbiosis enables industrial players to manage emissions and other waste streams better. And there are improvements in the economics of transforming low-cost bitumen into higher-value products. It seems like a no-brainer.

The Toilet and the Tailings Pond
Over two days, workshop discussion was thoughtful and varied, and it included colourful one-liners enlivening subtle and colourful ideas. One person summed up a complex discussion with an on-the-spot maxim: “Don’t connect the toilet to the tailings pond.” The idea is that the plumbing should be designed to easily redirect plant by-products (including waste heat) to new facilities as money-making uses for them are found.

Co-author of an executive primer titled Discovering Industrial Ecology, the University of Alberta’s Dr. Stephen Moran suggested that companies should “assign to each major waste a product number, then assign a product manager to it.” An important outcome of that perception-altering idea would be the creation of markets for valuable wastes. Syncrude’s waste ammonia is one good example. Another: the propane and heavier hydrocarbons which Suncor used for plant fuel until Williams began to extract them for feedstock.

At the other end of the feedstock spectrum, consider that ERCB regulations now require the companies drilling Steam-assisted gravity drainage (SAGD) oil sands wells to send all materials from the well, including oil sands from the horizontal legs, to a secure landfill. Why not treat that material as oil sands ore and ship it instead to a mining operation for processing?

According to Bob Taylor – formerly Alberta’s Assistant Deputy Minister for Oil and now a consultant who specializes in energy systems innovation – all manner of coordination is possible. If several facilities coordinate their waste management operations, there will be fewer garbage trucks barrelling down the road. What about gasifying solid waste produced by field camps along with suitable regional waste, including slash from woodland operations? He also suggests a regional water strategy that “seeks to utilize this limited resource to support a much higher level of development and production than if we continue down the current path.” Taylor sees co-generation as another important area of opportunity. For example, waste heat from generating electricity could produce steam for cyclic steam stimulation (CSS) or SAGD operations.

There are also opportunities in assets external to the oil sands – infrastructure like roads and highways, the power grid and an often-discussed railway link to Fort McMurray. According to Taylor, “engaging parties beyond our normal spheres of influence (will help us) realize (symbiotic) opportunities that will enable our industry to better meet social and profit expectations alike.” The ideas got increasingly complex, and it quickly became clear that the potential is huge.

Triangles
One appeal of waste management through industrial symbiosis is that it contributes positively to three of society’s broadest concerns: economic growth, stewardship of the environment and efficient energy consumption. Take the Williams off-gases project, which strips heavier hydrocarbons from Suncor’s fuel stream. This industrial magic enables the plant to operate more efficiently, reduces Suncor’s carbon dioxide emissions and provides feedstock to the petrochemical industry. Not a bad outcome for a single piece of innovation.

A participant noted with some surprise that the environmental footprint is triangular in shape, with its three sides consisting of land, air and water. “What you do to change results in one of these areas affects results in the others.”

In that context, the goal of zero waste from the oil sands can act as a principle to help the industry overcome the public perception of the industry’s behaviour by directly addressing the issue. It will also provide guidance to the build-out of the industry. Forecasts suggest that three quarters of the plants that will dot the oil sands in 2030 are yet to be built. These facilities are still at the concept or design stage, and they represent the biggest opportunity to embrace industrial symbiosis. Notably, they will be receiving the greatest scrutiny from regulators and a public demanding “greener” energy.

Another triangle is driving oil sands development. Its three sides are social attitudes and demands; regulatory and industrial codes; and technical skills and operating environments. As in the case of the footprint triangle, what you do to change results in one of these areas affects results in the others. In the area of technical skills and operating environments, there’s a triangle of areas where industry players need to look for improvements.

According to Dr. Doug James, who with Bob Taylor facilitated the workshop, one is “inside the plant fence.” Individual operations need to seek out better processes for cleaning up or eliminating waste generation. These could include capturing and using waste heat, for example, and using waste materials for gasification. Joy Romero, Canadian Natural’s vice president of bitumen production, cited a process at Horizon which “purchases waste CO2 to add to our tailings. This undoes the effect of caustic soda, allowing fines and clays to settle, and water is released for reuse almost immediately from the tailings ponds.”

There are also “across the plant fence” opportunities, by which different companies work together to make their combined operations more efficient. For example, they could build joint facilities for water treatment and waste water handling or develop joint hydrogen production facilities – perhaps using gasification of coal and biomass – for use in upgraders.

And there are opportunities from “across-the-region coordination” – the construction of common pipelines and other transportation infrastructure. One possibility would be regional landscape planning with Alberta-Pacific Forest Industries, which has forestry rights covering most of the oil sands area. This “might reduce the joint forestry-SAGD footprint by 30%,” said James.

Tragedy of the Commons
In a presentation, Dr. Eddy Isaacs of Alberta Innovates described a 90-year pattern of oil sands development. His essential argument was that oil sands development periodically goes into crisis before being rescued by a visionary. Sunoco Chairman J. Howard Pew saved a floundering Suncor, for example, and Frank Spragins, the first president of Syncrude, brought that project back from a near-death experience.

The oil sands are now in crisis because of public perceptions. According to one academic, “Perception is reality and the perception is that you guys are making a mess up there. You’ve got a problem.” Dr. Soheil Asgarpour, president of the Petroleum Technology Association of Canada, agreed. “We aren’t communicating what we are doing properly,” he said, “and we aren’t doing enough.”

According to facilitator Bob Taylor, industrial symbiosis is a key part of the solution, since it harnesses economic forces to reduce waste and save energy. The best part of this system, though, is that it develops naturally. Symbiotic relationships began forming long before the idea was coined.

In Alberta, the classic example is the Industrial Heartland, north of Edmonton. That industrial region has grown organically since the late 1940s, when Imperial Oil brought a tin-pot World War II refinery down from Whitehorse in response to the discovery of oil near Edmonton. Not until recently was the idea of industrial symbiosis even whispered there. Now reflecting more than $25 billion in investment, this 582-square-kilometre region hosts forty large companies and many small ones. Together they operate numerous refineries and plants, pipelines, fabricating facilities, service companies and other interdependent businesses.

For the oil sands, there is no reasonable alternative to greater and continually evolving industrial symbiosis. In a background document, Bob Taylor and Doug James suggested that the extreme alternative to a sensibly industrial ecology is reflected in a notion known as “the tragedy of the commons.” The phrase was first articulated in an influential 1968 article by the late Dr. Garrett Hardin, an academic whose First Law of Ecology proclaims, “You cannot do only one thing.”

In his famous article, Hardin described a situation in which individuals act independently and rationally in their own self-interest. Collectively, however, they deplete a shared, limited resource even when it is clear that it is in no one’s long-term interest to do so.

To illustrate his point, Hardin proposed a hypothetical and simplified situation based on land tenure in medieval Europe. The picture he drew was one of herders sharing a common pasture for their cows. It is in each herder’s personal interest to put the next (and succeeding) cows he acquires onto the land, even if this means exceeding its carrying capacity and temporarily or permanently damaging the land. The herder receives all of the benefits from an additional cow, while the damage to the common is shared by the entire group. If all herders make this individually rational economic decision, the common pasture will be depleted to the detriment of everyone.

Society is now much more complex than in medieval times, of course, and today’s petroleum sector clearly understands that permission to produce Alberta’s resources requires public approval. Oil sands people at the workshop frequently mentioned the need to “preserve your social license.”

“The implication for the oil sands industry,” wrote the two workshop facilitators, “is that, in the absence of a higher guiding principle, each company will tend to act in its own interests, ultimately resulting in degradation of the environment. Of course, the government through regulations imposes such higher guiding principles. However, it appears at this time that the rapid expansion of the industry operating on an individual basis reaches sub-optimal results regarding environmental stewardship.”

One way for industry to demonstrate better stewardship is to collectively develop good will by sharing new, lower-waste technologies. It is important for companies to secure intellectual property rights for their ideas. If they didn’t, someone else could secure the patent and demand royalties on the technology. However, producers have little reason not to share them within the oil sands community. After all, said Doug James, “in the oil sands once you acquire your land the competition is over. Compared to the revenue stream from oil sands production, any income you might derive from licensing production technology is peanuts.”

Moving toward zero as a goal will reduce waste products, he said, but it will also reduce “wasted opportunities, wasted human capital, wasted funds and wasted reputations.”

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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Books on the Oilsands: A new cottage industry

Books about the oil sands were once few and far between; today they are part of a cottage industry, and often written by people with an axe to grind.

Such is the case with the latest installments, each of which boasts a green theme. However, it would be difficult to imagine three more diverse approaches to such a challenging topic.

• Alastair Sweeny, Black Bonanza: Canada’s Oil Sands and the Race to Secure North America’s Energy Future John Wiley & Sons Canada Ltd., 2010
• Satya Das, Green Oil: Clean Energy for the 21st Century? Sextant, 2009
• Gordon Kelly, The Oil Sands: Canada’s Path to Clean Energy? Kingsley Publishing, 2009

This article appears in the August issue of Oilsands Review

By Peter McKenzie-Brown

Black Bonanza
For a rollicking good read with a clearly defined message, Sweeny’s Black Bonanza really hits the mark. To get the flavour of his offering, consider two of many questions he raises in his preface. “Why are millions of people obsessing about carbon dioxide, a trace gas in the atmosphere, 3 percent of which is due to human emissions?... Why are government officials demanding that billions of dollars be spent to control this gas that is so essential to plant growth, while real pollution concerns cry out for solution and scores of our fellow citizens starve to death or die from preventable diseases?”

A historian by education and a writer by occupation, his chapters on the development of the oil sands are particularly worth reading. He captures people’s lives well, and has quite the instinct for the compelling quote.

Sweeny is on a mission, however. His message is that the oil sands present a tremendous strategic advantage to North American energy security, and they should be developed immediately. Canada would benefit enormously as it became an energy superpower, and North America would remain an ascendant geopolitical entity as it used a combination of crude oil security, economic strength and technical expertise to develop the inexhaustible energy of the sun. While the text is riveting, as the book winds up its message begins to fall apart. To make his case convincing, Sweeny must destroy the foundations of the climate change and peak oil debates.

He does pick holes in the conventions of climate change theory. Some of his arguments are historical: the Little Ice Age of around 1600, which followed the Medieval Warm Period of a millennium ago – and neither of which was connected to greenhouse gases. Others are statistical: carbon dioxide makes up 391 parts per million of atmospheric gases, of which 12 parts per million come from human activity. Other arguments use conspiracy theories to explain the sources of public concern: to a certain extent, he pooh-poohs climate change science as the work of people with vested interests in government grant machines. This is not exactly respectful of the scientific method and scientists, who together have contributed so much to contemporary civilization.

Sweeny’s efforts to dismiss peak oil are equally dicey. The gist is that there is plenty of oil in the world’s unconventional oil deposits, which of course is true. The point at issue is whether those deposits can be developed in time to replace depleting supplies of conventional production. On that question, the jury is still out.

The author successfully argues that Alberta’s oilsands have been demonized because environmental NGOs need easy, controversial targets to use in their annual fund-raising campaigns. Similarly, celebrities and politicians know they can get press by visiting Fort McMurray and proclaiming that the mines and plants look like something out of J.R.R Tolkien’s fictional Mordor, so they do.

The statistics Sweeny uses to defend the oil sands from the critics are compelling. He claims that each year America’s single-biggest coal-fired electrical generating plant spews forth 25.3 million tons of carbon dioxide contaminated with sulphur dioxide. That compares to about 40 million annual tons of relatively clean CO2 emissions from the Athabasca oil sands. Furthermore, Canada – the world’s poster child for dirty oil and GHG emissions – is responsible for 1.9% of global greenhouse gases. By comparison, green Europe emits 13.8%, the US 20.2% and China 21.5%. And so the argument goes.

Sweeny’s book is worth the read. As a gadfly, he counterbalances much of today’s conventional wisdom. Of equal interest for the bookworm, it’s an entertaining read from start to finish. The same cannot be said of the effort by Satya Das.

Green Oil
“Beyond a few purblind ravers,” says Das, “no rational person denies the reality of climate change.” Given the author’s background in journalism (notably with the Edmonton Journal), this mess of a book is particularly surprising.

He does not have a coherent message. In the absence of such a message, he parrots endless buzz-word laden passages from provincial government and ENGO reports – mostly on the importance of provincial stewardship of its resources, and strategies for governmental success. Painful to read, this book offers little except a sense of what higher-echelon bureaucrats conclude in their strategic planning meetings.

Self-published by the consultancy Das helped to found, this book’s main purpose is probably to drum up business. In fact, it is only in the context of his understanding of the roles of the public and private sectors that this publication makes much sense. “The principal role of government is to set a strong and effective policy framework,” he proclaims. However, “in every instance, the private sector role is to proceed robustly and vigorously to create wealth and value within the direction set by government.” As a private-sector entity advising government on policy issues, it’s safe to assume his firm is proceeding robustly and vigorously in the aforementioned direction.

This book is a stinker. Buyer, beware.

The Oil Sands

Gordon Kelly’s book is long, sometimes dry and technical, occasionally rambling. However, it’s also the most comprehensive and current study of the oilsands available. For anyone wanting a crash course in the oilsands, it’s a godsend. For anyone wanting a complete and current reference, it’s the only game in town.Kelly draws deeply from technical reports without taking shrill or ideological positions. For the most part he reflects the industry’s collective wisdom about the state of the oil sands. Fortunately, he also offers innovative ideas worth serious consideration.

Well into his 70s, Gordon Kelly had a long and diverse career in the petroleum industry – much of it as an ex-pat – and still works as a consultant. An engineer with an MBA by training, his understanding of the petroleum sector runs deep. It is therefore worth noting that his review of peak oil is comprehensive, and that he takes the issue quite seriously.

“A major theme of this book,” he says, “is that the world could run short of oil before new sources of mobile power are available. That is why the oil sands are needed and why it is important that Canada start the search for new alternative power sources now.”

Unlike most peak oil advocates, Kelly doesn’t see a probable decline in oil production as a function of scarcity. Rather, he sees it as a social problem. “Environmentalists are becoming more aggressive against oil and nuclear power because they really believe biofuels, windmills and solar panels can save the planet from GHG climate change. Politicians demand GHG curtailment because it makes them look ‘green’” he writes, “but it adds to the cost and time to build projects. Adding ‘Cap and Trade’ penalties to curb GHG emissions has reduced the money available for adding more capacity in Europe and may be expanded to North America. Project approval hearings drag on for months or years. Court challenges add to the delay....The world has lots of oil, but politics (will) block the (industry’s) ability to develop it fast enough.”

When we pass the peak in oil production (Kelly guesses the year will be 2015), “the shortages will be only a small percentage of demand, but for those who do not get the oil, it will be a crisis. History suggests it will be the poorest countries.”

Besides acknowledging peak oil as a reality, Kelly sees climate change from greenhouse gases as a threat. In that context, he puts forward some refreshing proposals on making Canada a leader in alternative energy.

In effect, he argues in his concluding chapter that Alberta should diversify from an energy-based economy into an energy-based economy. The oilsands and Alberta’s existing energy infrastructure provide a formidable base from which province and country can constitute a global clean energy superpower.

Concerned about the need to develop new sources of energy, Kelly conjures up the ghost of a creation of Alberta’s Lougheed years. Introduced in 1975, the Alberta Oil Sands Technology Research Authority invested $670 million over a 15-year period – all of those funds matched by private dollars. “AOSTRA was not government research but private research supported by the Alberta government,” says Kelly. “There is a big difference between the two. The private sector (had) to be willing to invest 50% of the cost in a project before Alberta (would commit) to the investment.”

According to Kelly, the program was so successful that it led to the construction of more than $100 billion in oilsands plants, so far. That is a stretch, perhaps. However, even if he is off by 75% (with rising commodity prices and associated inflation being mostly responsible for Alberta’s recent oilsands investment), the province’s AOSTRA investments generated highly leveraged results.

Today, he says, the province should introduce an AOSTRA-style program (Kelly calls it the Alberta Energy Research Project, or EARP) to encourage investment in alternative energy, arguing that research incentives could take advantage of the province’s existing expertise to create next-generation technologies. This is not far-fetched, he argues. BP is already “a large supplier of solar energy, while Chevron is the largest supplier of geothermal energy. Shell has a hydrogen division. Suncor has windmills and a biofuel operation.”

If you are interested in Alberta’s and Canada’s energy future, this is a fine tome. It’s too long, perhaps, and in some places could use a bit of cosmetic surgery. Even so, it is worth the time you invest in reading it.

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Colossal Chore

 

Even government computers are strained by oilfield waste

This article appears in the May 2009 issue of Alberta Oil Magazine

by Peter McKenzie-Brown

The story of petroleum is a story of waste.

Consider the volumes involved: At perhaps 3.5 million barrels per day, Canada is the world’s seventh-largest oil producer, and at 16.9 billion cubic feet per day, the third-largest natural gas producer. Add in the gas liquids and related products and the sheer volume of fossil fuels that flow out of the Canadian soil starts to become astronomical.

And these numbers measure “spec” oil and gas – products that are clean enough for pipeline transport. Consumers rarely consider the huge amounts of waste created as the industry brings its output up to spec.

At every stage, considerable volumes of waste need to be treated. Consider the sources of upstream oilfield waste. Seismic surveys, wellsite construction and drilling produce wastes ranging from bush cuttings to rock chips to drilling and fraccing fluids. Production wastes include salty byproduct water, gunk in tailings ponds, contaminants like carbon dioxide and hydrogen sulfide, and soil contaminated with sulfur. Once a plant needs to be decommissioned or a well shut in and abandoned, the producer creates more wastes that need to be carefully managed.

How much waste is involved? In Alberta, the Energy Resources Conservation Board regulates oilfield wastes. After a lengthy explanation of the limitations of the board’s computer system, Susan Halla, a regulatory manager, says, “We’ll be able to give you exact information in 2011.” In the meantime, she won’t even guess.

Even when detailed data are available, it will be incomplete. The reason is that most wastes from oil sands mining operations are not considered oilfield wastes. They are classified as “industrial wastes” and regulated by Alberta Environment rather than the ERCB.

Petroleum waste only begins in the “upstream,” exploration and production side of the industry. Once spec products flow through the pipeline into the “downstream,” refining and distribution processes produce wastes of their own. Like waste from oil sands mining, they are classified as “industrial wastes” and regulated by Alberta Environment.

By far, however, the largest volumes of physical waste occur in the distant downstream end of the petroleum products life cycle. Many items – plastics and chemicals, say – end up in landfills and dumps, unregulated incinerators, beaches and worse. Equally important, consumers burn natural gas and refined products to generate energy, thereby yielding carbon dioxide, nitrogen oxides and a variety of other unsavory incidentals. As emissions, however, they are technically not considered “wastes.”

The seriousness of upstream waste management did not become clear until the 1980s. An ERCB chairman of the era, the late Vern Millard, once explained, “We used to think Earth could absorb any amount of human waste without a problem. It has now become clear that it can’t.”

In an effort to obviate official regulation, the old Canadian Petroleum Association – the forerunner to today’s Canadian Association of Petroleum Producers – created an industry-wide voluntary code of waste management practices. Although regarded as a good stop-gap measure, the CPA guidelines didn’t last. Governments soon took over the job of regulation.

The ERCB’s role in waste regulation began in the mid-1980s, when the industry began to recognize that oil could be recovered from oily leftover materials in tank bottoms, separator sludge, flare pits and so on. Facilities known as reclaimers began to emerge in active oil- and gas-producing areas. At first, the board’s regulation of these facilities was aimed at making sure volumes of recovered oil were accounted for properly. Spurred by the federal government’s 1986 proclamation of dangerous goods transportation regulations, though, the board became heavily involved in oilfield waste management, regulation and inspection.

In 1990, Alberta began consolidating existing environmental acts and regulations into a comprehensive document that eventually became known as the Environmental Protection and Enhancement Act. This and other environmental measures slice and dice provincial wastes in a number of ways. They can be classified as oilfield wastes or industrial wastes, and those wastes can be hazardous, dangerous or not-dangerous. Alberta Environment regulates hazardous and industrial wastes. The ERCB regulates oilfield wastes.

As waste regulation evolved, it became apparent that reclamation or recycling services could no longer be permitted to operate without regulation. After all, they were reclaiming wastes that were potentially dangerous, and sometimes hazardous. Hazardous oilfield wastes include hydrocarbons with low flashpoints; highly acidic or alkaline chemicals; and such volatile organic compounds as benzene, toluene, ethylbenzene and xylenes, which collectively go by the acronym BTEX.

After these products had been defined as hazardous, the board gave the owners of the province’s reclaimer operations a simple choice. Transform their facilities into high-standard waste management facilities or, in the words of CCS Corporation’s Greg Dickie, “clean them up and shut them down.” Most chose to convert to quality waste management operations.

With oilfield waste facilities not allowed to handle hazardous materials, the province badly needed a large disposal facility. Accordingly, Alberta developed a “special waste treatment center” northwest of Edmonton at Swan Hills to deal with hazardous oilfield wastes and also carcinogenic PCBs, which are primarily a waste product from electric transformers. Owned by the province but operated by the private sector, Swan Hills is primarily a specialized, high-temperature waste incinerator. The oilfield wastes that require incineration there include spent filters, oily rags and specialized high-BTU wastes.

As the 1990s wore on, regulators developed rules covering everything from the construction of landfills to deep well injection of liquid wastes. Those rules and the constant changes to them are available in a glut of guidebooks, information letters, directives and interim directives – all of which have been posted online by the agencies responsible.

Practice Run

H2S re-injection a rehearsal for carbon storage program

This article appears in the May 2009 issue of Alberta Oil Magazine

by Peter McKenzie-Brown

Once an obscure part of waste management, the injection underground of unwanted gases will soon become a huge part of Western Canada’s business. The industry has had plenty of practice at disposing of nastier materials than carbon dioxide.

Oil and gas operations produce two kinds of acid gases – hydrogen sulfide (H2S) and carbon dioxide (CO2). The former is usually stripped from the gas stream and converted into sulfur. Tom Byrnes, a reservoir engineering manager at the Energy Resources Conservation Board, says the sulfurous impurity is sometimes just stripped from the gas and re-injected underground. “It’s usually an economic question. There may be small volumes of H2S in the gas stream, or the infrastructure [to strip out sulfur] may not be in place to make it practical.” In Alberta, the board regulates all disposals through disposal wells and first approved an H2S re-injection project in 1989.

Both of these acid gases are routinely stripped from natural gas for re-injection, as appropriate. “But the smaller the concentration of H2S or CO2 there is in the gas stream, the more expensive it is to get it out. It’s a problem of diminishing returns,” Byrnes says.

If H2S can have commercial value as a source of sulfur, CO2 is frequently injected into operating oilfields to stimulate production. This is not new. Carbon dioxide has long been used for enhanced oil recovery, to urge additional barrels out of elderly oilfields. One such project has been operating in the 50-year-old Weyburn oilfield in southern Saskatchewan for nine years.

The project uses a 330-kilometer pipeline to transport carbon dioxide captured at the Great Plains Coal Gasification plant, which manufactures methane from coal near Beulah, North Dakota. As it keeps oil flowing from this aging field, each year the EnCana-operated project disposes of about 1.5 million tonnes of carbon dioxide emissions. This is environmentally beneficial, since CO2 is both an acid gas that can acidify water and a greenhouse gas that can trap heat within Earth’s ionosphere.

While EnCana’s Weyburn project is profitable in its own right, most industrial operators would find it economically prohibitive to strip CO2 from industrial processes for sequestration down disposal wells. Those economics changed profoundly last July when Alberta Premier Ed Stelmach announced a $2-billion commitment of government assistance to advance carbon capture and sequestration (CCS) technologies in the province. Provincial authorities are now sifting through a dozen applications for funding, and will announce the successful projects as decisions are made.

Alberta’s involvement follows a gestation period of deep study, including a provincial policy paper which observed that “Alberta has a unique opportunity to implement carbon capture and storage to substantially reduce our greenhouse gas emissions. CO2 emissions can be captured where they are produced, transported and stored in geological formations (such as depleted oil and gas reservoirs, coal beds and deep saline aquifers) that may be located hundreds of kilometers away.

Ultimately, CO2 capture and storage technologies provide the province with the greatest potential to substantially reduce greenhouse gas emissions while, at the same time, retaining our ability to produce and provide energy to the rest of the world.”

According to that policy paper, Alberta is counting on CCS to meet 70 per cent of its long-term greenhouse reduction targets. If the five provincially subsidized projects – likely to cost a billion dollars each–all go into operation, they would collectively reduce emissions by up to five million tonnes annually. That is likely just the beginning for large-scale underground carbon sequestration projects in the province.

While five million tonnes annually of sequestered CO2 may seem like a large number, it’s barely a whiff of what’s possible. Over four decades, Alberta’s greenhouse gas emissions plan targets a 200-million tonne cut in emissions, but only compared to a do-nothing scenario. That volume is a bare indication of the huge volumes of waste – solids, liquids, effluents and emissions – generated by one of the world’s leading petroleum producers.

The Case against Dirty Oil

This article appears in the February 2009 issue of Oilsands Review; graphic taken from here.

By Peter McKenzie-Brown

“Two wars, a planet in peril, the worst financial crisis in a century.” In his victory speech in November, with those words Barack Obama summed up the challenges his new administration would face.

The phrase “a planet in peril” was, of course, shorthand for climate change and other environmental troubles. For those in the oilsands industry, it seemed to threaten lost market share. After all, during the campaign Senator Obama promised to ban imports of dirty oil – that is, oil that releases a great deal of CO2 during production and upgrading. At present, the United States is the only market for Alberta’s bitumen and upgraded oil.

This article suggests that the US market for oilsands producers may not be as secure as Canadian producers may hope. Canada can compete in the market, but it may increasingly be at the expense of other global oil producers as this continent’s energy mix changes. There are a lot of caveats to that theme – not least of which is that the drive to greener bitumen production is now an almost unstoppable force. In Canada’s traditional export market, the greenest producers may become the most successful players.

American legislators have already begun to target it as an easy way to reduce emissions without hurting American voters. For example, Congress has already passed a law banning federal government agencies from directly promoting energy projects that will emit greater greenhouse-gas emissions over their entire life cycle than conventional oil. A section of the US Energy Independence and Security Act of 2007 prevents federal agencies such as the military from entering into fuel contracts that directly encourage unconventional energy development. This could include the oilsands.

For its part, California has passed regulations requiring fuel suppliers to reduce the emissions from the fuel they sell – and to account for those emissions right back to the original source of production.

Energy calculus of this kind is unprecedented, and if followed to its logical conclusion could be devastating for Canada. The world’s largest per capita consumers of energy, Canadians are also the world’s largest per capita producers of CO2. Regulations that limit the carbon quotient in other imported goods could shut a variety of Canadian products out of American markets. Whether or not such rules will ever apply to other commodities, for oilsands producers these developments are immediate matters of deep concern.

Will President Obama, who often used green rhetoric on the campaign trail, continue down that road? “No”, according to Murray Smith – a one-time provincial energy minister who until recently served as Alberta’s representative in Washington, D.C.

“(Obama) was trained in the very tough political environment of Chicago. In order to operate inside today’s political conditions,” Smith said, he “must govern from the centre. From November 4th to the 5th, his move from the political spectrum of the left to the political spectrum of the middle was virtually instantaneous. So presidential candidate oratory that mentioned the oil and gas sector as a target for higher taxes, promises to increase environmental efficiency and to take other measures for energy efficiency measures are either already law or just promises.”

Smith added that the president is a “former senator from an important coal-producing state, a state that relies almost exclusively on coal for electricity generation. In fact, he sponsored an important coal-to-liquids bill” – albeit one that didn’t make it out of the Democratic caucus. In Smith’s view, “energy and environment will drop to tertiary issues as the USA digs itself out of the economic hole that the mortgage and housing crises dug.”

As if in support of this view of the world, in one of his first radio addresses after his win the president-elect put his energy program in the context of infrastructure projects. “We’ll put people back to work...building wind farms and solar panels; fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.”

Unwilling to take a chance, the day after the election prime minister Stephen Harper proposed a joint US-Canada pact on climate change which would exempt production from Alberta’s oilsands from import controls on the grounds that it could contribute to Obama’s goal of making the US independent of Middle East sources of supply.

The Tar Sands Controversy: In Canada, the dirty oil question became a high-profile public issue with the publication of a rambling, ideologically incoherent and highly inaccurate book on the oilsands. Author Andrew Nikiforuk and his publisher promoted the book well, and environmental issues surrounding oilsands production got a great deal of play in the media. This touched raw environmental nerves across the continent.

Consider some of his statements, however. “Many tar sand projects puff out nearly a million tons of carbon dioxide a year.... A million tons – a megaton – is enough lethal carbon dioxide to fill one million two-storey, three-bedroom homes and suffocate every occupant.” Where do you start with such a statement? CO2 is no more lethal than water, and far less likely to become a disagreeable or life-threatening localized pollutant. Like water, it is essential for life.

Nikiforuk’s sloppiness is extraordinary. For example, his diatribe on carbon capture and storage (CCS) stumbles from technical blunder to unsubstantiated claim and shows no comprehension of the economics of the concept. Then, astonishingly, he pronounces the whole idea – a demonstrably safe (though expensive) system of pollution reduction already being used around the world – to be “morally bankrupt.” This seems an absurd term to apply to technologies that remove pollutants.

Straightening out the endless errors in this book would be a thankless and time-consuming job, but let the following illustrate Nikiforuk’s efforts to, apparently, deliberately mislead. “The average Canadian burns twenty-five barrels of oil a year,” he claims. “The average Albertan burns sixty barrels, due to an above-average use of fossil fuel toys such as ATVs, trucks and SUVs.”

In fact, Alberta’s energy use is higher than the national average because its industry is heavily focused on the energy-intensive businesses of producing and processing energy – including growing volumes of unconventional oil and gas, which are especially energy intensive. Consumer toys have almost nothing to do with it. The author of a book on the oilsands would surely know this.

The Princeton Wedges: At one end of the climate change spectrum are demagogues like Nikiforuk. At the other are those who say the issues are imaginary or, since they are unsolvable, irrelevant. A more pragmatic part of this latter group are those who, like St. Augustine 1500 years ago, ask to be granted “chastity and continence, but not yet.” Although concerned about the challenge, they hope CO2 emissions will be rendered “tertiary issues” because of the world’s financial meltdown or lack of political will, so they can postpone the cost of action.

In the centre are those concerned about the scientific consensus on climate change and global warming, and they are the group who will ensure the issue does not go away. Dirty oil became a campaign issue in Obama’s dignified presidential campaign because it is now a mainstream concern. That is unlikely to change.

A few years ago, physicist Robert Socolow and ecologist Stephen Pacala from Princeton University wrote that “Humanity already possesses the fundamental scientific, technical, and industrial know-how to solve the carbon and climate problem for the next half-century…. Although no element is a credible candidate for doing the entire job (or even half the job) by itself, the portfolio as a whole is large enough that not every element has to be used.” The world of environmental politics took note, and the concept of stabilization wedges – commonly called the “Princeton wedges” – was born. The wedges represent emissions that can be taken out of the world’s growing volumes of pollution by different techniques. In many quarters, they revolutionized thinking about greenhouse gas emissions.

Socolow and Pacala identified 15 strategies that could reduce business-as-usual increases in emissions by 25 billion tonnes of emissions over a 50-year period. They include using more efficient vehicles, developing more efficient buildings, and using natural gas instead of coal. Each stabilization wedge would lower the angle of the line representing carbon-emissions growth; together, they would reduce CO2 emissions enough to stabilize its concentration in the atmosphere. To put the magnitude of the problem in perspective, human activity is now adding 7 billion tonnes into the atmosphere annually. Unchecked, that figure will double in the next half century.

Each Princeton wedge is a steel-jacketed bullet in the struggle against CO2 pollution. For the issue of CO2 pollution as a whole, there are no silver bullets – especially since 85 per cent or more of CO2 emissions from oil come out of the consumer’s tailpipe.

For the oilsands industry, however, one bullet is at least a silver alloy. The province is counting on CCS to meet 70 per cent of its long-term GHG reduction targets. Compared to a “business-as-usual” case, the province’s climate change strategy has targeted annual reductions of 200 million tonnes of CO2 per year by 2050 – compared to that slippery “business-as-usual” case, a 14 per cent reduction from 2005 levels. Of total reductions, 139 million tonnes would come from CCS. Not bad for a morally bankrupt strategy.

Back to the Future: However, the real risk to the oilsands market may not arise directly from environmental issues. Perhaps the new American administration will take action to back out crude oil demand by frog-marching a shift to electric and natural-gas fuelled vehicles. Such a development would have mixed implications for the petroleum sector.

In a recent presentation to the Canadian Society for Unconventional Gas, ARC Energy’s Peter Tertzakian proposed that rapid change in the transportation fuel mix could represent opportunity for gas producers. “We are in a period that is very 1973-ish,” he said. “Things have to change. About 60 per cent of our energy comes from coal and oil, and they are disadvantaged fuels” for several reasons. Both commodities present serious environmental problems. Oil prices in general are volatile, and Middle Eastern oil also carries a lot of geopolitical baggage. In the US there is a strong sense that the country has to stop importing oil from Persian Gulf suppliers.

According to Tertzakian, “There are policies coming at us,” and they will lead to fundamental changes to North America’s energy mix. “The two opportunists are renewables and natural gas, and I’m here to tell you that renewables are winning.”

To prosper in the changing environment, he said, the gas industry needs to think strategically. “Gas is a clean fuel. It’s plentiful and scalable. It’s time this industry took control and said this fuel is the fuel of the future. If we don’t, we’ll remain hostage to a situation in which all we do to market our (natural gas) production is to sit around the table waiting for the weather report.”

For the oilsands sector, strategic thinking needs to take different forms. By year-end 2009, supply from the oilsands is likely to increase by 150,000 barrels per day, and that supply is going to be competing in a recessionary market. Looking to the longer term, the new US administration and state governments will likely find additional ways to discourage the consumption of oil and the shift to other fuels.

A pipeline to the Pacific is in order, and Enbridge has already begun to develop its Gateway project. One appeal of this line is that Canadian producers would get bids on their crude oil from other markets than the United States. Also, of course, pipeline costs would be less. The downside is that it may come too late to avert a near-term supply glut.

If crude oil demand is going to continually shrink in North America, suppliers to the diminishing market will have to compete on geopolitical, economic and environmental terms. This will involve the continuation of advertising campaigns like those of PetroCanada, Husky Energy, Shell, BP and other integrated firms, which paint the corporation green. More importantly, it will require measures which, like carbon capture and storage, directly reduce emissions.

To win the battle for hearts and minds, both industry and government will need to fight the perception that oilsands production is “dirty oil.” At present, 20 companies – including oilsands players Canadian Natural Resources, ConocoPhillips, Shell and Petro-Canada and coal-fuelled electricity producers Epcor and TransAlta – are vying for a $2 billion pot the province has made available to kick-start CCS within Alberta. As those projects go into operation, Alberta will become a global leader in this technology. The province has also put aside $2 billion to promote public transit.

To make the province’s oilsands production more marketable, provincial strategy is clearly to build a greener image. A three-year, $25 million public relations initiative to improve Alberta’s image is a tiny part of a much larger package.