The Environmental Sustainability of the North American Resource Revolution
Recent years have witnessed an upsurge in the volume of recoverable hydrocarbon resources across North America. The combination of technical advances and high oil prices has supported the economic viability of developing oil sands, which has significantly increased estimated reserves and production in Canada. In 2013, established oil sands reserves, meaning total economically and technically recoverable resources independent of development projects, amounted to an estimated 168 billion barrels of reserves and, according to the IEA, oil sands output is expected to nearly triple to 4.3 million barrels a day by 2035. Canada also has an estimated 573tcf of recoverable shale gas resources and 8.8 billion barrels of shale oil, although low natural gas prices in the US are holding back investments in the development of these.
In the US, technical advances in horizontal drilling and hydraulic fracturing have made it economically viable to develop natural gas from shale formations throughout the country. The EIA estimates that the lower 48 states have a combined total of 482 tcf of technically recoverable shale gas resources;47 between 2000 and 2010, production of natural gas in the US increased from 0.4 tcf to 5 tcf.48
In the US, the revival of domestic production and the low price of natural gas have had an important economic impact. Between 2006 and 2010, the price of natural gas in the US declined by 36%, lowering the cost base for industry and thus reviving energy-intensive industries such as manufacturing, especially in industries like rubber and plastics. Similarly, in the Province of Alberta – which holds 98% of Canadian oil sands reserves – the energy sector contributed over 22% of GDP.49
Developments in Canada and the US have also had a significant impact on the region’s energy security. Although Canada held conventional reserves prior to the development of oil sands, its production was in slight decline by 200250. The impact of shale discoveries in the US has been even greater, with the IEA estimating that continued production from both natural gas and light tight oil could make North America energy independent by 2020. The IEA also expects that the US will be a net exporter of natural gas by 203551, with 28 applications to export LNG from the US at various stages within the approval process.
The significant reserves of the US and Canada have positively impacted the economic and energy security landscape of the two countries; however, oil sands and shale gas developments are highly controversial due to the environmental impact of the production processes involved. These challenges include impacts on air quality, water and land.
- Air: Large amounts of energy are used to produce the steam required for in-situ production or the hot water for bitumen and sand separation in oil sands mining operations. The energy intensive process contributes to Canada’s national air emissions portfolio. According to Environment Canada’s Facility Greenhouse Gas Emissions Reporting Program (GHGRP) in 2011 greenhouse gas emissions from unconventional oil extraction totalled 49Mt CO2 –eq. While this represents a significant increase from emissions reported by the sector over the past decade, highlighting the growth of unconventional developments in Canada, the carbon intensity of the sector (emissions per barrel of oil) has decreased 26% since 1990 levels as a result of industry action52.
- Water is a key environmental factor in the development of both shale and oil sands. In hydraulic fracturing, millions of gallons of water and chemicals are injected into the shale formation at high pressures. The management of flow-back water (which returns from the well mixed with chemicals, sand and fossil fuel products) and concerns over the contamination of water supplies are critical issues for the industry. Significant amounts of water are also used in the extraction and processing of oil sands, with mining having significantly higher water requirements than in-situ extraction. According to IEA production estimates, and accounting for the shift in favour of in-situ extraction over mining, water withdrawal for oil sands developments will grow from about 220 million cubic metres (mcm) in 2010 to about 520 mcm in 2035. However, water requirements are increasingly sourced from saline aquifers, rather than freshwater sources, reducing the impact of oil sands on the fresh water reserves of the region. Furthermore, an estimated 80%-95% of water used by oil sands developers is recycled. Nonetheless, according to Natural Resources Canada contaminated water resulting from oil sands mining extraction is often stored in tailing ponds, raising concerns over leakages into the region’s freshwater reserves. Industry is working to develop effective solutions to manage these tailing ponds. One such solution is the concept of dry stackable tails which offers great advantages to current technologies as it can reduce the amount of water required by half and allows for quick reclamation of disturbed land.
- In terms of land use, oil sands reserves cover an area of approximately 142,000km2 and their development has, to some extent, impacted land and forestry – most notably through mining extraction methods. However, 80% of oil sands reserves are estimated to be recoverable through in-situ extraction, which uses considerably less land than mining extraction53. In the US, land use for shale development is driven by the significantly higher number of wells required for production compared to conventional developments.
With the expected increase in production from unconventional sources, Canada and the US face challenges in ensuring the sustainability of their energy sectors. In response, various industry and government-led initiatives are identifying new ways to drive environmental performance through technology and regulation.
Policy regulation in the US: Since the rapid development of shale gas began in the US, federal, state and local regulations have emerged to help manage the environmental impact of production (especially of water consumption in hydraulic fracturing). Although US federal regulation does not specifically cover hydraulic fracturing, broader oil and gas regulation (e.g. the Clean Water Act and the Pollutant Discharge Elimination System permit programme) covers water disposal. State-level policies play a more significant role in managing the local environmental challenges of hydraulic fracturing. Most shale gas-producing states have implemented regulation (of varying stringency), especially regarding disclosure of fracking fluids, proper casing of wells and management of wastewater. Carbon legislation is less widespread, limited to Clean Air Act enforcement and green completion (restrictions on methane venting during well completion) regulations in some locations, although this is becoming best practice without regulation.
Canadian joint government and industry-led initiatives: A priority for the Canadian federal government is the development of carbon capture and storage (CCS) technology to mitigate the impact of emissions from its oil sands industry. The Province of Alberta has committed CAD$ 170 million for 2013 and 2014 – and a total of CAD$ 1.3 billion over 15 years – to fund two large-scale CCS projects that will help reduce CO2 emissions from oil sands refining.54 The two projects, Shell Quest and the Alberta Carbon Trunk line, are expected to reduce Alberta’s GHG emissions by 2.76 million tonnes annually from 2016.55 A further element of the government’s strategy is the roll-out of policies to drive the largest oil sands operators to seek efficiency and emission-abatement programmes as conditions of their permits.
In Canada, operators representing 90% of oil sands production formed the industry group COSIA56. Its mission is to accelerate improvements in oil sands operations’ environmental performance by exchanging best practices and technologies for emission abatement and land and water use. To date, COSIA members have shared 446 distinct technologies and innovations, demonstrating how industry can cooperate in the pre-competitive space – environment in this case – to tackle common goals.
Technology and innovation: The invention and deployment of new technology plays an instrumental role in the sustainable development of unconventionals. Regardless of regulatory pressure, there are economic benefits to reducing the water intensity of shale operations due to the rising cost of water sourcing, transportation and disposal. In US shale operations, a range of low-water fracking and water-recycling technologies are being developed and deployed in the field and offer the potential to significantly reduce water intensity in hydraulic fracturing. The reduced water transport activity will also have a positive impact on carbon intensity.
In oil sands, in-situ recovery technologies such as steam-assisted gravity drainage (SAGD) and cyclic steam simulation (CCS) – have delivered step changes in water, energy and emission intensity of oil sands recovery over mining; the Canadian Energy Research Institute estimates in-situ technologies have delivered efficiencies and cost savings reducing production costs from $68/barrel to $48/barrel. A number of other advancements such as improvements in well design, solvent injection, air injection, dynamic thermal stripping, and non-aqueous extraction are continuing to be developed to bring about further improvements in the fields of energy, emission and water intensity in oil sands production. The trialling of a number of technologies are a positive indicator demonstrating the market pressure for alternatives.
Although unconventionals have some inherent environmental intensity disadvantages compared to traditional upstream activities, environmental regulation and new technologies are already being rolled out to mitigate the environmental impact of unconventional oil and gas production in the US and Canada. As North American unconventional production continues its unprecedented growth, the ability to reduce their intensity will be critical to managing their negative environmental impact on the energy landscape.
External Perspective: Stewardship and Resource Development Fit Together
Honourable Alison Redford
Premier of Alberta
Honourable Alison Redford
Premier of Alberta
We believe we can have it both ways. The reality is that resource development and environmental protection are inseparable, not incompatible, and we have built Alberta’s entire system around that premise.
Developing Alberta’s vast natural resources is essential to the province’s economy and its residents’ well-being: resource development creates jobs and generates the government revenues needed to pay for important public services such as health and education, not only in Alberta but across Canada. Plus, Alberta has established itself on the world market, supplying energy and resource-based products.
We realize development is about more than economics. Alberta is a land of great natural beauty, and Albertans cares for its environment. That is why we take a holistic approach to our land and resources that includes the creation of seven comprehensive regional land-use plans that aim to balance the competing demands on our landscape. These plans are a blueprint for long-term responsible growth to balance our economic, environmental and social needs. The first plan is already in place and covers the oil sands-producing region in the north-eastern part of the province.
To achieve our environmental goals, we need to know what the specific effects of development are. We need the facts so that we can take the right steps to minimize adverse effects and undertake future improvements. An independent, arms-length environmental monitoring agency will provide those facts through a comprehensive and credible science-based monitoring system.
The agency’s work will be open and transparent as its activities and data will be shared publicly through an open data portal – in fact, oil sands environmental data is already being shared today. The sharing of open and transparent data helps steer the discussion about oil sands towards science and facts.
The facts show that we are doing well. Air in the oil sands region is rated at the highest air quality level 97% of the time. Oil sands facilities adhere to some of the most restrictive water use rules in the world as all existing and approved oil sands projects withdraw less than 1% of the average annual flow of the Athabasca River. Land is reclaimed throughout a mine’s life cycle. By the end of 2012, more than 77 square kilometres of previously disturbed lands were either permanently or temporarily reclaimed.
However, Alberta still has challenges that need to be met by investment in technology and through on-going innovations from researchers, engineers and scientists.
Investment in technology is a key commitment under Alberta’s Climate Change Strategy – and that investment has achieved real results. Alberta was the first North American jurisdiction to put in mandatory reduction targets for large emitters and a price on carbon. Those who fail to reduce must purchase offset credits or pay CAD$ 15/tonne over the limit. Revenues collected through this are deposited into a clean energy technology fund that has already collected CAD$ 398 million, of which CAD$ 212 million has been invested into 51 clean energy projects. Since 2007, greenhouse gas emissions have been reduced by 40 million tonnes from business-as-usual.
Innovation, technology and research are at the forefront of Alberta’s environment story. We also see in our advancements the opportunity to share best practice and knowledge with the world.
Alberta will continue to produce the energy the world needs while Albertans continue to enjoy this province’s abundant natural beauty, clean air and clean water.