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Oil sands projects face tougher tests Court verdict on Kearl oil sands greenhouse gas emissions, federal carbon capture and storage rules, expected to affect projects Gary Park For Petroleum News
Imperial Oil is suggesting that a court ruling relating to its huge Kearl oil sands project is little more than a minor irritant.
Others aren’t so sanguine, with one law firm concluding that proponents will be required to “provide evidence that each specific project effect will not result in significant adverse environmental effect.”
The firm of Osler Hoskin & Harcourt believes projects will now face more rigorous regulatory scrutiny and will have to pay much closer attention to their management of greenhouse gas emissions.
Landmark or not the Federal Court of Canada verdict March 5 lends further weight to the growing environmental pressures on a the oil sands.
Federal court Justice Daniele Tremblay-Lamer has challenged moves in Canada to tie greenhouse gas emissions to units of production — the so-called “intensity based” restriction — postponing absolute caps until later years.
Carbon capture and storage required Compounding the uncertainties is a Canadian government announcement March 10 requiring new oil sands operations to develop carbon capture and storage plans to take effect in 2018.
The rules, which will apply to all oil sands projects that start operations after 2011, are needed if Canada is to meet its goal of reducing greenhouse gas emissions by an “absolute” 20 percent below 2006 levels by 2020.
Environment Minister John Baird said the “tough measures” will put Canada on the path to meeting its GHG commitments.
The Canadian and Alberta governments estimate carbon capture and storage has the potential to capture up to 55 million metric tons of carbon dioxide a year by 2020, partway toward its estimated goal of 165 million metric tons of direct and indirect GHG reductions by 2020, which would be 21 percent below 2006 levels.
Baird said “we hope to have in place a mass-scale carbon capture and storage system before — well before — 2020.”
Stelmach welcomes decision Alberta Premier Ed Stelmach welcomed the federal government’s decision to follow Alberta’s lead by allowing ample flexibility in its approach and deadlines for regulations GHGs.
Alberta Energy Minister Mel Knight said “most industry players have already probably determined they will be capture-ready in any event, so long as we are able to get the infrastructure in place that we need.
That includes an estimated C$2 billion to kick start construction of a carbon storage network, including pipelines — a program that the industry argues requires a major government contribution, including a consumer-based carbon tax.
Pierre Alvarez, president of the Canadian Association of Petroleum Producers, said the new federal target is “clearly extremely ambitious. … This is a project that has not been attempted at this scale anywhere in the world.”
Tremblay-Lamer said in her ruling that even though Imperial — 70 percent operator of Kearl with sister company ExxonMobil Canada holding the remaining 30 percent — planned to reduce the intensity of Kearl emissions, it would still release 3.7 million metric tons a year of carbon dioxide, the equivalent of emissions from about 1 million cars.
“Given the amount of greenhouse gases that will be emitted to the atmosphere and given the evidence presented that the intensity-based targets will not address the problem of greenhouse gas emissions, it was incumbent upon (the joint federal-provincial environmental assessment) panel to provide a justification for its recommendation,” she said.
“The absolute amount of greenhouse gas pollution from oil sands development will continue to rise under intensity-based targets, because of the planned increase in total production of bitumen.”
So she ordered the panel to explain the rationale behind its decision.
Entire process not overturned But Imperial noted that Tremblay-Lamer did not overturn the entire approval process.
“As this error relates solely to one of the many issues that the (environment) panel was mandated to consider, I find that it would be inappropriate and ineffective to require the entire panel review to be conducted a second time,” Tremblay-Lamer said.
In that context, Imperial is continuing with front-end engineering and evaluation drilling of its Kearl lease and will make a decision within the next 12 months on whether to proceed with the project, which was originally due to come onstream in 2010 at 100,000 barrels per day and grow in two more stages to 300,000 bpd by 2018.
But the timing and cost estimates are being reworked.
The last cost projection, made when the regulatory application was filed in 2005, was C$5 billion-$8 billion for the first stage and almost certainly, given the history of budget overruns in the oil sands since then, will come in much higher.
Meanwhile, environmental groups, although not totally satisfied with Tremblay-Lamer’s ruling, think other mine applications by Total, Royal Dutch Shell and Petro-Canada and a thermal proposal by EnCana are among project applications that now face much tougher regulatory scrutiny.
Sean Nixon, an attorney for Ecojustice, a coalition that tried to scuttle the Kearl approval, said the significance of the federal court judgment will be determined by how the environmental review panel complies with the federal court and whether it is able to satisfactorily explain how intensity-based measures can lessen the impact of greenhouse gas emissions.
He believes there is also pressure on governments to rethink their intensity-based policies.
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