CANADA: As companies flock to abundant resources, groups raise concerns about environment

More and more oil companies are diving into Canada's oil-soaked sands, eager to capitalize on vast resources in a stable country that welcomes outsiders. In 2007 alone, Royal Dutch Shell, Marathon Oil Corp. and BP increased or established positions in the sands, either to extract the thick, tarlike oil or work with a Canadian producer to refine it in the United States.

They joined the slew of Canadian producers as well as ConocoPhillips, Chevron Corp., Exxon Mobil Corp., Devon Energy and others that have sands operations or joint ventures.

Moratorium suggested

But environmental concerns about increases in emissions and possible toxic chemical releases into waterways are growing along with the oil action.

Some environmental groups advocate a pullback or a moratorium on new projects to address those concerns, while others are pushing for the industry to take the lead in a greener approach.

"We know that the tar sands are an important part of the oil supply to the United States, but it needs to be done responsibly," said Gary Stewart, a senior adviser to the International Boreal Conservation Campaign.

Earlier this month, a report from Toronto-based advocacy group Environmental Defence charged that oil sands operations have turned Canada into "the world's dirty energy superpower."

"It's time to clean it up or shut it down," Rick Smith, the group's executive director, said in the report, which calls for government to crack down on polluters.

Plan to cut emissions

Jim Law, a spokesman for Alberta Environment, an agency of the province's government, said monitoring and enforcement are extensive, although officials are well aware that increased production means more potential for pollution.

Reducing emissions during such a growth spurt is far from easy, he said. But the government last month unveiled the beginnings of a plan to cut emissions in half by 2050 through increased efficiency, capturing carbon dioxide emissions and permanently injecting them underground and requiring that all new operations incorporate that technology into their building plans.

"We understand the importance of the oil sands, and the international attention that's being focused on them," Law said. "In the short term, we are honest enough to admit that our emissions will rise as we bring more operations on stream. But we will see a turning point."

Expensive operations

Canada's oil sands industry is at least 40 years old. But growth was slow until recent years when high oil prices justified the expensive operations.

At a recent conference in Houston, ConocoPhillips Canada President Kevin Meyers compared the tarlike bitumen far underground to a hockey puck at room temperature. It must be melted by injected steam before it can be pumped to the surface, an energy-intensive process that consumes a lot of natural gas.

Once retrieved, it must be diluted to be transported by pipeline. Then it requires much processing to convert the heavy oil into usable refined products, so production costs can be four to five times as high as conventional light oil production.

But Canada has 179 billion barrels of proven oil reserves — second only to Saudi Arabia. And though Alberta increased its royalties last year, the country's "come on in" attitude has encouraged an influx as access shrinks in other resource-rich countries less willing to allow outsiders to control operations, such as Russia and Venezuela.

Of the 9.9 million barrels a day in total crude imports to the United States as of November, 1.9 million came from Canada. Saudi Arabia was second at 1.5 million barrels.

Canada's oil sands now produce about 1.3 million barrels a day, and that could ramp up to 3 million barrels a day by 2015, according to the Canadian Association of Petroleum Producers.

"This is a strategic resource not just for North America, not just for Canada, but for meeting global oil demand," Meyers said.

Stewart, the conservationist, acknowledged that Canada's current and potential output clearly illustrate that the boom will continue. But he hopes the U.S. players, many of whom are already involved in other environmental initiatives, will reduce emissions and police possible water contamination without waiting for Canadian government orders to do so.

"We're not trying to exclude the industry. That's not what we're talking about at all," said Stewart, who lives about 275 miles south of Fort McMurray, Alberta, the hub of much of the oil sands activity. "We're talking about doing it right. "

Going the extra mile

Greg Stringham, vice president of CAPP, said regulations governing sands operations are fairly strict. "But they're not necessarily enough," he said, adding that some companies do the minimum they think they can. Others, though, are stepping beyond those regulations to do more, he said.

For example, Oklahoma City-based Devon Energy satisfies the need for water in its bitumen operation by drilling into a deep underground aquifer that contains saltwater, much like brine, rather than siphoning freshwater supplies. Once the water is used to heat and melt bitumen, it is treated and returned to the aquifer.

Devon spokesman Chip Minty said that when the company was drilling for water sources, it initially hit a reservoir that contained borderline drinkable water.

"Instead of using that, we spent another $1 million or $2 million to drill another well and go farther to get the stuff that was really bad. We wanted to ensure we were not tapping into water that could have any use for any other purpose," Minty said.

Stringham said other Canadian companies, including Syncrude and Suncor, have sought to increase efficiency by finding ways to get bitumen out of the ground using less natural gas to heat steam. Techniques they are studying in newer developments include using water that isn't superheated, and perhaps as cool as room temperature, to melt and move bitumen.

"The lower the temperature of the water, the less amount of fuel has to go into it," Stringham said. "It saves them money and saves on emissions."

Meyers, of ConocoPhillips, said at the recent conference that oil sands operations clearly "have a significant environmental footprint" with emissions, water use and intense use of natural gas. "We have to do more" to decrease emissions per barrel of production, he said.

"How are we going to do that? Technology," Meyers said.

The Alberta government has a similar view, and is relying heavily on encouraging study and implementation of carbon capture and storage technology.

Carbon capture

The oil industry is well-acquainted with injecting CO₂ into the ground to force oil and natural gas out of underground formations. But the concept of capturing millions of tons of the greenhouse gas to combat climate change and then transporting it to distant oil and gas reservoirs or brine formations is in its infancy.

Law, of the Alberta government agency, said the industry has dedicated $500 million to carbon capture and storage research. In addition, the province will assemble a council of government and industry representatives to develop a plan to use that technology to cut emissions in half.

First they need the technology and infrastructure to make it work. "We expect to have a strategy after the fall of this year," Law said.

Source: Houston Chronicle|By KRISTEN HAYS