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November 24, 2005: Oilsands projects must be cleaner, pay higher royalties: Pembina Institute

Canada

Oilsands projects must be cleaner, pay higher royalties: Pembina Institute

 

James Stevenson

Canadian Press

Thursday, November 24, 2005

CALGARY (CP) - Increasing environmental damage in Alberta's oilsands needs to be mitigated by forcing new projects to meet performance hurdles and ending "incredibly low" royalty rates, the Pembina Institute said Wednesday.

The combined implications of about $100 billion worth of committed investment in northern Alberta's oilsands will have a severe effect on the boreal forest, the water and air quality, the environmental policy group said in a new report.

"We think Albertans haven't received a good picture about what are the full implications of developing the oilsands," said Chris Severson-Baker, a co-author of the report.

"The story tends to be dominated by dollar signs and growth potential."

The energy industry maintains that current environmental standards for new projects are already "very strict" while technology and innovation is enabling companies to continue reducing emissions and improve reclamation activities throughout northern Alberta.

The oilsands alone gives Canada the second-largest energy deposits in the world behind Saudi Arabia. Oilsands reserves cover 149,000 square kilometres in northern Alberta - a territory larger than the three Maritime provinces of Nova Scotia, New Brunswick and Prince Edward Island combined.

And with the price of oil remaining near record highs and concern growing over the security of supply, nearly every large energy company in Canada is building or expanding oilsands projects.

Production from the oilsands surpassed one million barrels per day last year, with that number expected to double within the next seven years.

But squeezing synthetic crude out of the gluey mud still requires huge quantities of energy and water, leaving expanding tailing ponds, dirty air and a growing scar in the once-pristine forest.

Findings in the Pembina report include:

-Natural gas consumption in the oilsands to triple current levels of 600 million cubic feet per day by 2012.

-Greenhouse gas emissions to double or triple over the next decade alone.

-Water requirements for current mining operations are approved to use 349 million cubic metres of water from the Athabasca River, three times more than the municipal requirements of the city of Calgary.

-Potential loss of habitat for boreal forest wildlife as service roads, infrastructure built for oilsands wells that use steam-assisted technology.

-Oilsands 'footprint' expected to grow from 400 square km of boreal forest in 2003 to 2,000 square km, including currently planned development.

The Pembina report also calls for an end to Alberta's royalty regime which allows energy companies to pay a one per cent royalty until all costs of their projects are recovered, at which time the rate rises to 25 per cent of net revenues.

"There's a need to start considering whether we have different rules for new oil from the oilsands versus old oil from the oilsands," said Severson-Baker.

"We're still seeing the new projects re-investing their profits in the oilsands and finding creative ways of preserving this one per cent royalty regime because it's so incredibly low, it provides so much revenue that they can work with and it's really driving the industry forward at this breakneck pace."

The Canadian Association of Petroleum Producers says oilsands barrels are needed for the global market, and development will continue.

The energy lobby group also said the royalty framework for the oilsands is not a subsidy, since it jumps up to the higher rate once payout has been reached.

Canada's largest oilsands project, the Syncrude Canada joint venture, expects to pay full royalties on its $8.3-billion Stage 3 expansion next year - around the same time the project is completed - as sustained high oil prices have paid-off most of the costs far earlier than expected.

"In aggregate over the life of these projects, the fiscal regime is not a subsidy," said Greg Stringham, CAPP's vice president of markets.

"And what it does do is allow the capital risk for these $8-$10 billion projects to go ahead in competition with all the other kinds of large projects around the world."

http://www.canada.com/businesscentre/story.html?id=a25f41f2-32ec-45bb-8200-525c0ac940eb

Topic(s): Energy News, Funding News, More Enviro News

Posted By EcoBC

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