"We Were Canadians First"

With the news of former premier Peter Lougheed’s death on September 13, aged 84, an outpouring of grief began throughout Alberta – indeed, throughout Canada. Rarely has a politician ranked so high in the esteem of the people he or she has been chosen to lead. 

This article appears in the November issue of Oilsands Review 

By Peter McKenzie-Brown

The tributes and commentaries ranged from reflections by ordinary citizens to formal commentaries from the great and the good. One of Lougheed’s biographers, Alan Hustak, observed that he was “the architect of modern Alberta” who, among many other achievements, helped turn the province’s petroleum industry into a global powerhouse. Nothing you can say about this great man seems over the top.

Lougheed’s career in the provincial Legislature began in 1967 – coincidentally, the year the Great Canadian Oil Sands (Suncor) plant was commissioned. The convergence is compelling, since several of his greatest achievements were oilsands-related. Energy issues dominated his years in power (1971 to 1985), and he was a decisive figure in what became known as Canada’s energy wars.

Among governmental issues, oilsands remained a core interest to the end of his long life. As he said in an Oil Sands Oral History Project interview 18 months ago, “After I left government in ’85 I said to my successor, Don Getty, ‘Don, I will stay out of most things you’re doing… but the one thing I am going to stay involved in is the oilsands, because I am very interested in its evolution and its development.…’ Things happened so quickly [under] Premier Klein. I have stayed involved in the oilsands in a more public way and I have discussed it frequently with Premier Stelmach as well. Perhaps more than any other, that’s the one subject I have stayed involved in since I left government.”

The Energy Wars: Lougheed’s early political battles began with a shot across the bow from Prime Minister Pierre Trudeau.

Inflation had become a national problem, oil prices were rising, and on September 4, 1973, Trudeau asked the western provinces to agree to a voluntary freeze on oil prices. Nine days later, his government imposed a 40-cent tax on every barrel of exported Canadian oil. The tax equalled the difference between domestic and international oil prices, and the revenues were used to subsidize imports for eastern refiners. At a stroke, Ottawa began subsidizing eastern consumers while reducing the revenues available to producing provinces (mostly Alberta) and the petroleum industry.

This outraged Premier Lougheed, who understood how long and hard the province had fought for control of its natural resources; resource ownership had not been conferred upon the province until 1930. In response, Lougheed announced that his government would revise its royalty policy in favour of a system linked to international oil prices.

His timing was impeccable. Two days later, on October 6, 1973, the Yom Kippur War broke out – a nail-biting affair between Israel and its Arab neighbours. OPEC used the conflict to double the posted price for a barrel of Saudi Arabian light oil to US$5.14. The Saudis and the other Arab states then imposed embargoes on countries supporting Israel, and oil prices rose quickly to $12. These events aggravated tensions among provincial, federal and industry leaders.

The rest of the 1970s were marked by rapid-fire, escalating moves and counter-moves by Ottawa, the western provinces and even Newfoundland. From 1974 to 1985, Ottawa imposed an export tax on conventional crude oil – a move Lougheed called “the most discriminatory action taken by a federal government against a particular province in the entire history of Confederation.”

Lougheed strongly asserted and ultimately resolved, beyond question, Alberta’s ownership of most hydrocarbon and other mineral resources within its provincial borders, and he made it clear to industry itself that the government was in charge. “It was obvious that the oilsands were owned by the people of Alberta,” he explained in the Oral History interview. “We consistently and constantly made sure that the industry understood that the Government of Alberta was the owner, and we weren’t just there in a supervisory or regulatory way. We were extensively involved because we were the owners.”

Canada’s political conflicts over energy climaxed with the introduction of the National Energy Program (NEP) in 1980. Lougheed led negotiations on significant modifications a year later, mainly exempting “new oil,” but the contentious policy was not fully removed until 1986. As the policy collapsed due to severe recession and wrong assumptions about global oil prices, Lougheed played a key role in negotiating a new constitutional agreement for Canada, then retired from office.

Syncrude: One of the positive developments of the energy wars era was the rescue of Syncrude in 1975. The oilsands project’s costs had soared, and one of its partners had pulled out. To a certain extent, that rescue involved a different way of looking at royalties. Lougheed’s interest in petroleum royalties began early in his years in power, before the events of the early 1970s embargo drove oil prices to historically high levels. “We were in a fairly experimental period with the oilsands,” he said, “we had the Great Canadian Oil Sands [project] which was struggling. When Syncrude came along and we got into the negotiations, it was clear we could not approach [the owner’s share] from the perspective of gross revenue….We had inherited from [Ernest Manning’s] Social Credit Government, a good system of royalties for the conventional oil and gas system, which was a percentage of gross revenue. We modified it from time to time in government, but the conventional oil and gas business was based on a percentage of the gross revenue.”

The oilsands were a different kettle of fish. Lougheed continued, “Right from the start it was clear that it wasn’t really fair because of the risk element that came with being involved in such a new process. You know, a lot of people wondered, was it going to work? Would it be economic?” All of those questions led to a discussion between the owner – the Government of Alberta – and Syncrude. ‘What kind of royalty scheme should we have?’ [The discussion] evolved into the whole question of a net profits approach. It was completely different than [the policy used for] the conventional oil and gas industry.”

The 1975 Winnipeg Agreement, which saved the Syncrude project, was one of the few moments of cooperation among governments during the energy wars. Always a savvy negotiator, during those 12 hours of meetings on February 1st, Lougheed committed the province to take a 10 per cent interest in the project for the then-mind-numbing sum of $200 million (about $1 billion in 2012 dollars). Alberta would provide loans that the province could convert into equity, would construct no-risk utilities for the project, and would purchase an ownership interest for cash. This proved to be an extraordinary investment for the people of Alberta, “the owners of the resource.”

AOSTRA: Through the formation of a government agency, Peter Lougheed created a scientific and technical environment that unlocked the secrets of producing bitumen from the deposits too deep for mining, and fundamentally transformed the industry itself.

At the time, work on the deeply buried oilsands reservoirs, which represent about 90 per cent of the resource, had stalled. Imperial had made progress on the Cold Lake deposit, but there were no demonstrated technologies that could commercially unlock deep oil from the Peace River, Athabasca or Wabasca (now seen as an extension of Athabasca) deposits. At the time, there was little likelihood things would improve. Few companies were actively developing oilsands leases outside the mineable area.

Originally called “Project Energy Breakthrough,” the idea was to speed up the development of new in situ oilsands technologies. When legislated into existence in June 1974, the Alberta Oil Sands Technology Research Agency (AOSTRA) became one of the largest research and development programs ever launched in Canada. The act originally limited AOSTRA’s activities to oilsands, but an amendment to the legislation soon gave the agency the authority to fund heavy crude oil research. In 1979, the Crown corporation’s mandate was expanded again to include enhanced recovery of conventional crude. Over its lifetime, AOSTRA funded about $1 billion (1980 currency) in oilsands extraction research.

Initially, the Alberta government agreed to invest $100 million in this technology development fund. During the active life of the corporation, however, AOSTRA spurred the petroleum industry to undertake numerous demonstration projects, representing some $2 billion of research and development spending. In most cases, the authority essentially agreed to match the amount of money a company or industry partnership was willing to invest in oilsands projects.

During the AOSTRA years, the industry launched in-situ demonstration projects in all the major oilsands deposits. These included cyclic steam stimulation (CSS); steam flooding; forward combustion; reverse combustion; and combined forward combustion and water injection (COFCAW). However, AOSTRA’s crowning achievement occurred 25 years ago, when its Underground Test Facility proved the effectiveness of steam-assisted gravity drainage (SAGD.)

Premier Lougheed got excited when he talked about SAGD.  “I think SAGD…should be encouraged by the owner and is being encouraged by the owner. It’s the longer-term asset for the province. Surface mining has its limitations, and involves more environmental and water concerns. So, there is a clear and important distinction when you get into oilsands and that’s what the Alberta Oil Sands Technology and Research Authority had been focusing on….Throughout all of our discussions here, let’s make sure that we are drawing a distinction between SAGD and in situ [those words can be used interchangeably] and surface mining.” Lougheed served on the board of MEG Energy, which was one of the first companies to develop a commercial SAGD operation.

Ideal Model: AOSTRA spurred oilsands experimentation and development, although prospects for further development diminished in early 1986 when a precipitous collapse in oil prices, once again, threatened commercial development. While AOSTRA did not have a mandate to undertake projects on its own, in the 1980s it took a significant risk by constructing the now-legendary Underground Test Facility. The UTF proved steam-assisted gravity drainage (SAGD), which has since emerged as the most important system for developing deep underground oilsands reservoirs.

A noteworthy footnote to this discussion is that the 2009 Summit of the Americas held AOSTRA up as an ideal model for energy development. According to the Centre of International Governance Innovation (CIGI), which sponsored the summit, AOSTRA “engaged the private sector and the university research community in developing technology related to the oilsands, while the government retained the rights to the technology.” A government endowment allowed the organization “to function independently of the electoral cycle. A dedicated expert and respected seven-member board of directors helped secure the private sector’s buy-in.” In addition, “control by the government helped maintain continuity over downturns in the economic cycle.”

CIGI also noted with approval that, before AOSTRA determined its goals, “it conducted two years of extensive consultations with many stakeholders. Only after determining exactly where the technology gaps existed did AOSTRA put out a call for proposals.” Furthermore, “aside from successfully developing new technology, AOSTRA fostered and financed a new generation of academic and scholarly expertise in many aspects of oilsands development. The investment in human resources is often discounted, but has been fundamental for the sector’s success in Alberta.”

Afterword: Much has been said about Lougheed’s impact on the province of Alberta. However, out of the seemingly endless stream of tributes that followed his death came this from former Prime Minister Brian Mulroney, whose government finally dismantled the National Energy Program. “Peter built the modern Alberta: schools, universities, hospitals, highways and whole communities [like modern Fort McMurray]. He always defended Alberta’s interests brilliantly around the federal-provincial table. At the same time, he would be the first to say…‘We were Canadians first.’”

Saving Money with Monster Trucks

HOURGLASS: Lessons from the Oil Sands Oral History Project

Three stories tall, these trucks now seem like an obvious approach to 

ore delivery. That wasn't the case in  the beginning.

Retired Syncrude COO Jim Carter describes an oilsands mining technology revolution.

This article appears in the December Oilsands Review

By Adriana Davies

The haul trucks used in today’s oilsands mining industry are some of the biggest in the world—1.4-million-pound, 20-foot-tall, multi-million dollar behemoths ferrying 400-tonne loads of bitumen ore from the hydraulic shovel to the crusher at top speeds of 40 miles per hour. And this is the more agile and economic option.

In the 1980s, trucks and shovels began to replace burdensome and even more costly bucket-wheel and dragline equipment. The new system was first incorporated into overburden removal, and then for the ore itself—enabling oilsands mining producers to operate and expand in a more cost-effective and selective manner. One of the key people recognized for driving this revolutionary technology change is Jim Carter, former president and chief operating officer of Syncrude Canada Ltd.

Jim Carter was a graduate of mining engineering from Nova Scotia Technical College when he heeded the call to “go west, young man.” He had gotten a taste for mining work through summer jobs in Ontario while in high school, and his first job after graduation was with the Iron Ore Company of Canada in Labrador City, N.L. In 1974, Carter was enticed to move to Alberta by a former colleague. He went to work for Smoky River Coal Limited in Grande Cache, rising from mine foreman to mine manager and finally, mine superintendent.

It was when he headed up a provincial study examining mine lighting that he met Dennis Love, general manager of mining at Syncrude. Carter recalls Love’s comment to him about the operation: “Jim, we’ve got a bit of a challenge here with our mine plan. It’s not quite working the way we’d thought. We’re going to have to move to truck and shovel stripping of the overburden, and move our draglines and buckets onto oilsands.” It was an opportunity that the 29-year-old couldn’t pass up. In 1979, Carter went to work for Syncrude as manager of overburden operations.

He says, “The original plan had the dragline sitting on top of the overburden and then digging it and putting it into the pit all at the same time as casting up the oilsands. What happened was that the overburden would not stay at a steep angle. It wanted to go flat, and it contaminated the oilsands, therefore rendering that mine plan inoperative.”

These were the very early days of Syncrude, when various theories not only to do with the mining operations but also the chemistry of extracting the oil from the sand were being tested on an industrial scale rather than in the lab. Carter notes: “The whole industry was really viewed as a bit of a curiosity in those days. Nobody really believed that we were going to be successful with this very complex business of mining the oilsands and extracting the bitumen, then taking this very, very heavy oil and upgrading it to a light, sweet crude that was then usable in refineries to turn into gasoline and diesel fuel, propane and whatever. The world didn’t know much about the oilsands. Certainly, even in Edmonton it wasn’t really that well-known. Calgary, it wasn’t well-known. Toronto, they didn’t know about it at all. So, if you were going to get involved in something that was really a pioneering endeavour of the highest order, this was it.”

The other issue was the link between the oil business and mining; this was not a natural match. To merge the two operations, as was happening north of Fort McMurray, Alta., was viewed with great skepticism. But they were doing it, and in driving the shift to trucks and shovels, Carter was set to play a pivotal role.

His first big challenge was sizing up the geotechnical issues associated with the soft landscape.

“Because the oilsands are soft to traffic on, there wasn’t a lot of aggregate material around for building the roads, and yet we had to move these high volumes. I wanted to use the 170-tonne trucks because those were the largest in the industry at the time, and I knew that the unit cost per tonne-mile of moving a tonne with those was going to be lower than, say, an 85-tonne truck or a 50-tonne truck, even though the conditions were very soft,” Carter explains.

“The biggest challenge I had initially was convincing people there that we could do this successfully. Great Canadian Oil Sands at the time had tried the big 150-tonne trucks, and they didn’t have much success with them. They were switching their fleet back down to 85-tonne, mechanical-drive trucks. There was a lot of skepticism to overcome, shall we say. But we persevered on that and ended up being very successful.”

If existing trucks couldn’t do the work required, then, they would need to be redesigned. In Labrador City in the iron ore business, Carter had used a particular brand of 170-tonne truck called the Terex, which was made by GM in London, Ont. It worked well in severe conditions and had a robust drive system. Carter had actually spent time with the manufacturer in their engineering offices and noted that they used the same drive motors in this truck as they did in their railway locomotives—a technology that could help move across the soft oilsands mine floor.

“The locomotive, when it goes to get started, starts off with the electricity going to the motors in series, and then it switches to series parallel, and then to parallel once it gets rolling and gets its speed up. I had thought this would be a great advantage to use in the oilsands because the trucks normally have power going to the wheel motors in parallel.” He and other Syncrude representatives asked GM whether they could do the series parallel arrangement on the trucks, and GM agreed.

The result was a design that enabled the operator to switch from parallel into series when he got on the waste dump, when the rolling resistance was really high in the soft conditions. Carter says, “It increased the torque to the rear wheels by about 45 per cent, so it made a tremendous advantage for getting across these soft waste dumps. Now, of course, whenever you do that, you’re putting more horsepower into the components, so we needed to build a bigger axle, a larger-diameter axle, which became known as the tar sands axle on those trucks. It gave them the capacity to haul a 200-tonne payload across the soft conditions. It was really then that we realized we could make these trucks work, and we used radial tires. Radial tires tend to have a greater footprint, so they got the ground-bearing pressure lower, and that enabled them to traffic over the softer conditions.”

Carter says that once the Syncrude team started using trucks and shovels for overburden removal, other opportunities for the system presented themselves.

“The first year that we had the fleet running, it was designated as a six-million-cubic-metre-a-year fleet, and we actually moved 10 million cubic metres within the first year, so it was a great success. It was the initial success of that particular fleet that enabled us then to really look at trucks and shovels on a go-forward basis. It meant that we weren’t going to be limited to bucket-wheel excavators and conveyors and draglines. So that opened up opportunities for other technologies to be introduced into the mining system.”

By the late 1990s, the truck and shovel system was well underway in replacing draglines and bucket-wheels in the oilsands industry, a technology change that has enabled the cost-effective expansion of mining operations. Syncrude retired its last bucket-wheel and dragline in 2006.

Carter steadily rose through the ranks at Syncrude, eventually taking on the role of president and chief operating officer in 1997, which he held until retiring in 2007.

This article is one in a series reflecting information from the Petroleum History Society’s Oil Sands Oral History Project, which is recording the stories of oilsands pioneers in their own words. As with the society’s previous oral history projects, transcripts and recordings will reside in Calgary’s Glenbow Archives. Adriana Davies is part of the team of researchers/writers behind the project.

How Public Money Saved Syncrude

This article appears in the August issue of Oilsands Review. 

A quarter-century after Peter Lougheed retired as Alberta’s first Progressive Conservative premier, he is sitting in Calgary’s historic Lougheed House (a mansion built by his grandfather a century ago), reflecting on his government’s impact on the oil sands.

By Peter McKenzie-Brown
Lougheed won a seat in Alberta’s Legislature in 1967, the year the doors opened on the Great Canadian Oil Sands (now Suncor) mine and upgrader; he became premier four years later. During 14 years at the helm, he took an active role in oilsands development. “It was obvious that the oil sands were owned by the people of Alberta,” he says. “We consistently and constantly made sure that the industry understood that the Government of Alberta was the owner and we weren’t just there in a supervisory or regulatory way. We were extensively involved because we were the owners.”

Fast-forward to 1974, when the province’s resource ownership and its commitment to play an active role in development helped revive Syncrude during a near-death experience.

The project had received regulatory approval in 1968, but by 1974 the projected cost of the plant had more than doubled to $2 billion. At year-end Atlantic Richfield Corporation, which was developing its Prudhoe Bay assets, sent its partners a telegram saying that effective January 1st they were pulling out. The remaining participants – Cities Service Canada, Imperial Oil and Gulf Canada – were paying $666 per minute for an increasingly dicey-looking project.

Energy Shock and Energy War
The world’s first energy shock was in high gear. During the previous three years, global oil prices had more than tripled to $11.50 per barrel. While this should have created an energy boom, in Canada it didn’t.

The environment in 1973 was one of high inflation and rising oil prices, and in September Prime Minister Pierre Trudeau asked the western provinces to agree to a voluntary freeze on domestic prices. Nine days later, his government imposed a $0.40 tax on every barrel of exported oil. The tax equalled the difference between domestic and international prices, and the revenues were used to subsidize imports for refiners in eastern Canada.

Outraged that Ottawa would tax a provincial resource, Alberta retaliated in early October. The province cancelled the Alberta Oil Revenue and Royalty Plan effective at yearend, eliminated maximum royalty provisions in all leases and introduced a price-related royalty system. Days later came the Arab/Israeli Yom Kippur War and an embargo by Arab states on oil deliveries to the US and Western Europe. As international prices skyrocketed, so did Ottawa’s export tax. For the rest of the 1970s, OPEC sat in the oil price driver’s seat.

In December Trudeau announced a National Oil Policy “designed to reach Canadian self-sufficiency in oil and oil products before the end of this decade.” Among other measures, this policy added fuel to the crude oil firestorm by making royalties a non-deductible expense for corporate income tax calculations and putting price caps – euphemistically called “made-in-Canada prices” – on oil production for domestic use. Alberta responded with plans to implement a 65% surroyalty on oil. The 1974 Liberal budget made some concessions but retained in principle the right of the federal government to tax provincial royalties.

As Canadians worried about the country “running out of oil,” the producing provinces felt hoodwinked and betrayed. In effect, they argued, the feds were arrogating the fiscal benefits of rising oil prices unto themselves and encroaching on provincial resource ownership. These moves precipitated the bitterest intergovernmental conflicts in Canadian history. The first of two political wars had begun, and battles would rage for a decade.

The political environment was toxic, and it remained so during the Syncrude crisis. According to Hans Maciej, who at the time was the Canadian Petroleum Association’s technical director, “The first energy war did not end until the end of 1975 after the federal government introduced price increases for crude oil and natural gas and, most importantly, recognized the role of royalties paid prior to the price upheaval as a legitimate business expense.”

An Early Thaw
At the beginning of the Syncrude crisis, the consortium created two management teams – one team of executives to plan ways to deep-six the project; another to find ways to keep it alive. In addition to two top executives from each of the three partners, the life-support team included an executive vice president from Cities Services, Calgary-based Bill Mooney. According to Lougheed, “Everybody knew Bill and he just had a way with him of getting people involved and he’s one of the funniest guys I’ve ever met. Mooney played a major behind-the-scenes role in getting people together.”

Though the political environment was toxic, these men had the task of getting government participation in the Syncrude project. Absent other industry partners, public money was the only alternative to a shutdown. The team of seven made a dozen cross-country trips in 17 days. One breakthrough came toward the end of January, when Mooney walked unannounced into Minister of Energy, Mines and Resources Donald Macdonald’s office suite. Hearing that Macdonald was too busy to see him (meetings all day), Mooney decided to wait him out.

When Macdonald returned from Cabinet, Mooney accosted him: “I’ve got to see you.” During a brief meeting the minister outlined the concessions the federal government was willing to make. As Mooney was leaving, Macdonald said “If you tell anyone about this I’ll call you a goddamned liar.”

The Winnipeg Agreement of February 3, 1975 was the outcome of the Syncrude rescue team’s countless phone calls and meetings, and it represented an early thaw in the political climate. The participants in the 12-hour session convened to reach consensus included many of Canada’s key decision-makers. The chairmen of Cities Service, Imperial, Gulf and Shell were there, along with other executives from their companies. Three provincial ministers accompanied premier Lougheed: energy minister Bill Dickie, intergovernmental affairs minister Don Getty and attorney general Merv Leitch. Ontario Premier Bill Davis also brought key ministers to the negotiations. Federal players included Macdonald and Jean Chretien, president of the Treasury Board.

There was give-and-take from everyone except the Shell delegation, which stormed out of the meetings after an hour. They would have considered taking an equity stake in the project, but CEO Bill Daniel first wanted a government-guaranteed base price for production. His team went home empty-handed.

Many people remember the Winnipeg Agreement as a successful effort to replace with government money the 30% equity vacuum created by the departure of Atlantic Richfield: Ottawa took 15%, Alberta 10% and Ontario 5%. The private partners agreed to take a $1.4 billion interest in the project, but Cities Service and Gulf gave Alberta the option to convert a $200 million loan into equity. The province also agreed to construct a pipeline and a power plant, which were risk-free.

Particularly innovative was a royalty structure reflecting technological risks. “When Syncrude came along and we got into the negotiations,” according to Lougheed, “it was clear we could not approach (royalties) from a gross-revenue point of view. It wasn’t really fair because of the risk element involved in such a new process.”

It took eighteen months to prepare legal documentation for the Winnipeg Agreement, and signing took two days. The second day of signing, for dignitaries, was planned for the Saskatchewan Room in Edmonton’s Westin Plaza hotel. For the occasion, Bill Mooney used a pair of table knives to pry off the room’s nameplate. He replaced it with the one that said The Alberta Room.

This article is the first in a series which reflect information from the Petroleum History Society’s current Oil Sands Oral History Project, which is recording the stories of oilsands pioneers in their own words. As with the society’s previous oral history projects, transcripts and recordings will reside in Calgary’s Glenbow Archives. Peter McKenzie-Brown is a member of the team of researchers/writers behind the project.

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.”