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.”

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.

Waste to Wealth

Cleaning up after fossil fuels is a thriving enterprise, recession or not.

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

By Peter Mckenzie-Brown

Oil and gas fields, like homes, never stop generating trash. The difference lies in the volume and nature of the rubbish. From exploration through production and eventual abandonment of wells and plants after fossil fuel reservoirs deplete, energy waste management has grown into an industry in its own right.

Common oilfield wastes include oceans of brackish “produced water” that flow to the surface in volumes measured in millions of barrels and have to be separated from oil then put into safe disposal. There are other oil-contaminated materials that can be solid or liquid. The process of completing wells alone generates respectable volumes of drill cuttings and other solids that can no longer be left lying around.

Over the last 25 years, waste regulations have become steadily tougher, encouraging growth of a disposal business that has outlasted boom-and-bust cycles of energy prices and spread across the countryside in tandem with exploration and production operations. Since 1998, the number of producing wells across Western Canada has more than doubled to about 226,000.

Deepwell Energy Services is considered a small newcomer in the field but already has four facilities in Alberta, including a large new waste treatment facility south of Calgary, near Claresholm. Last year, the company acquired a 50 per cent interest in a water disposal facility near Midale, Saskatchewan, as the celebrated Bakken oil drilling play expanded across the southeastern reaches of the province.

Built upon assets that have been around for a while, three-year-old Deepwell organized itself as an income trust and went public just before a federal government decision dubbed by investors as the Halloween Massacre of 2006 to start taxing trusts in 2011. “Everyone in the trust system is now trying to figure out how to reorganize,” says Bob Ritchie, a veteran of more than 25 years in the industry who was Deepwell’s president until March 23.

The biggest players in oilfield waste have already made their moves: Newalta Inc. has reverted to the traditional corporate model. With the help of a large hedge fund sponsored by investors from the United States as well as Canada, CCS Corporation turned itself into a private company in 2007. For its part, Deepwell is using a five-year transition period allowed by the government to decide upon its next move.

Licensed to deal only with “upstream” exploration and production materials, Deepwell typifies the independent specialist in oilfield waste management operations. “It’s up to the producer to characterize and classify their wastes. Our facilities can accept a lot of waste streams, but some materials are not on the list of acceptable materials,” Ritchie explains. Lubricating oil used in exploration and production machinery, for instance, has to go to another specialist as a refined product. Production companies are responsible for tracking and reporting their waste streams to Alberta’s Energy Resources Conservation Board.

The watchdog agency keeps a close watch on waste disposal. “All our Alberta sites are ERCB-approved,” Ritchie says. “We use compacted clay liners, concrete berms, groundwater monitoring, water run-off and run-on systems – it’s all self-contained. The facilities are inspected quite often and very rigorously. It’s completely random. ERCB inspectors are out there at least once a quarter.”

Deepwell vice-president Brian Johnson describes how the company deals with basic waste streams in its Alberta facilities. “We purify produced water as much as we can, then inject the cleaned-up water down our disposal wells,” he says. These are drilled into secure underground formations of porous sedimentary rock capped or surrounded by harder stone, in structures that can be used as natural vaults for permanent storage.

Crude oil waste that has value is also scoured out of industry equipment. The material comes “from such sources as tank bottoms we clean up and dry up and either credit back to our customers, keep for our own account, or do a bit of both,” Johnson reports. The recovered oil must satisfy standard quality specifications before it can be put into pipelines. Cleaned-up solids like sand used in well “fraccing” or fracturing operations are shipped off to sanitary landfill sites.

While Deepwell is a small player in the sector, CCS Corporation is big. It has 48 facilities across Canada, from northeastern British Columbia to Manitoba, plus operations in Louisiana and Texas. Greg Dickie, a senior manager, reports that CCS deals primarily with dangerous materials.

“Wastes coming into our facility are called dangerous because they have a flashpoint, and they have a flashpoint because they contain hydrocarbons. The ERCB defines oilfield wastes, and there’s a clear line between hazardous wastes and dangerous wastes, and between dangerous wastes and not-dangerous wastes, and they fall within different jurisdictions,” Dickie says.

Hazco, a CCS subsidiary, operates a network of industrial landfills, bioremediation facilities and hazardous waste transfer stations. Hazardous wastes are regulated by Alberta Environment and mostly treated at the special treatment facility near Swan Hills. “Our business is to recover hydrocarbons from the wastes and then deal with the byproducts,” Dickie says. “The solids go to landfill, while the liquids go to deepwater disposal. We separate oil from water at our sites.” CCS also has terminals. “We are connected to a pipeline. We receive a producer’s oil, clean it up and send it through the pipeline.”

As economic recession slows down drilling and development across Western Canada until energy prices and bank credit make comebacks, is waste still a growing business? The consensus among the specialists is yes. At Deepwell, Ritchie says: “Last quarter we saw a downturn in exploration activity, and that is not likely to be good for the industry. Having said that, we do get a significant portion of our business from production, and production tends to continue even in a low commodity price environment.”

At CCS, Dickie says: “Up until most recently business was growing – right through 2008, in fact. We believe our industry will continue to grow even as the conventional industry begins to deplete. The types of services we offer through our operations are services that assist people in cleaning up, remediating and managing depleting assets. We believe our business will continue to grow even if the oil industry has the occasional decline.”

In the long run, conventional oil and gas production are in decline in Western Canada as geological reservoirs deplete naturally. Does that mean there will be less oilfield waste?

At Deepwell, Johnson isn’t so sure. “The lines between conventional and nonconventional production are beginning to disappear,” he says. “More and more effort is being put into making unconventional wells produce economically. As we use more unconventional resources, there will be greater volumes of waste. It is a growth sector.” He adds that as fields age, they tend to produce more water, and the need for water disposal will continue to grow.

Dickie sees additional opportunity within areas where there is still some infill drilling to be done. “As the percentage of oil in production goes down, the percentage of water and other materials, including emulsions and some solids like silts, goes up. That’s where our facilities become valuable to producers,” the CCS executive says. Emulsions or streams of mixed liquids and solids need to be treated as oilfield wastes.

Much water is also produced with some of the newer oil discoveries including Saskatchewan’s Bakken formation. Sometimes the water is used to maintain reservoir pressure. Sometimes it’s simply re-injected into a deep rock formation, to prevent surface- and groundwater contamination. Whatever the case, the volumes are increasing, and the job of getting rid of the stuff is requiring more effort.

At the ERCB, regulatory manager Susan Halla flags another reason the waste management business is going to continue to grow. Reading from the regulations, she describes oilfield waste as “an unwanted substance or mixture of substances that results from the construction, operation, abandonment or reclamation of a facility, wellsite or pipeline.”

Based on that definition, the industry creates wastes at all stages of operation – from construction to decontamination and reclamation. So there will be wastes to manage whether an operation is in the stage of development, oilfield decline, closure, abandonment or surface land reclamation.

Environmentalism is a growth force, says Ritchie, who saw the effects of public demand for cleaner industry first-hand as a project manager for TransCanada Corp. as well as during his tenure at the helm of Deepwell. “The movement to be environmentally responsible has continued to advance. Over time it’s likely to become more stringent, and that is actually likely to help us.”

It is a widespread industry consensus that western Canadian waste management regulations are among the most stringent in the world. “Over the last 15 years Alberta has been at the forefront of waste management, even compared to Louisiana and Texas. I don’t know of another regulator that has taken the same initiative as Alberta in developing waste management regulations,” says Dickie. Where CCS operates, “the ERCB is the leader. Saskatchewan and British Columbia are close behind, and Western Canada is at the front of the pack.”

At the ERCB, Halla stresses that Canadian regulators work with each other to make sure their regulations march in step. “We work with Alberta Environment to harmonize waste management practices within the province. We also have committees to harmonize practices in Western Canada, and also we are involved in national harmonization.”

Ritchie says there is momentum for improvements within the private sector. Annual inspections of facilities became routine at Deepwell, he recalls. “I think the whole industry has a heightened awareness of the need to meet or exceed regulations. Everyone is conscious of environmental stewardship. I see the whole industry trying to advance their performance.”