The US and Canada are among the top ranking countries in North America; although their performance is strong in the energy security and economic growth and development indicators, both countries receive their lowest performance in the environmental sustainability dimension of the energy triangle. In regards to their unconventional resource wealth, both countries face increasing pressure to address and mitigate the environmental impact of these.

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.