Canadian Underwriter

Canada’s oil sands face risks potentially greater than those in the Gulf of Mexico oil spill: Ceres report

May 17, 2010   by Canadian Underwriter

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Canada’s oil sands “face significant financial and environmental risks” at least as great as those of the Deepwater Horizon spill in the Gulf of Mexico, according to a new report commissioned by Ceres.
Ceres is a coalition of investors, environmental groups and public interest groups working with companies to address sustainability challenges such as climate change.
Ceres commissioned RiskMetrics Group to author the report, entitled Canada’s Oil Sands: Shrinking Window of Opportunity. The full report is available at:
“The risks for companies involved in developing Canada’s oil sands are arguably greater than those in the Gulf of Mexico,” says Ceres president Mindy Lubber in a press release announcing the report. “The energy- and water-intensive nature of oil sands, combined with climate change regulations, permitting obstacles and other challenges, are a recipe for diminishing revenues and returns if not properly managed.”
Alberta’s oil sands are the world’s largest energy project, with $200 billion in funds committed from the world’s leading oil producers, including BP, ExxonMobil and Shell, the report says.
“However, these producers face numerous environmental, production and distribution challenges that will grow as the oil sands industry pushes to boost production amid tighter regulations and resource constraints,” the authors say. “Oil sands companies in Alberta are already producing 1.3 million barrels a day, and their goal is to triple production by 2030.”
The report says many risks arise from the high financial costs and the impact on the environment of transforming highly viscous bitumen into synthetic crude oil — a process that requires vast amounts of energy and water.
“Oil sands production is highly water intensive, with up to four barrels of freshwater consumed for every barrel of oil produced from surface mining extraction,” the authors say. “Water withdrawals from the Athabasca River watershed are already restricted during winter months to protect fish habitat.
“If oil sands production volume grows according to companies’ estimates, some oil sands mining operations could exceed their wintertime allowances as early as 2014, causing possible production interruptions. Climate change may also exacerbate this situation; glaciers feeding into the Athabasca River watershed are already shrinking.”
Also, after 40 years of production, no oil sand companies have yet fully reclaimed the extensive tailings ponds used for holding polluted wastewater, the report says. This is because the fine tailings in these ponds take decades to settle out.
“These tailing ponds, already covering an area the size of Washington D.C., pose risks of contaminating adjoining lands and water resources and present health problems in downstream communities,” the report says. “Alberta’s Directive 74 requires oil sands miners to speed up remediation of existing ponds — an order that creates especially large liabilities for the industry’s legacy miners such as Suncor and Syncrude.”

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