Canadian Association of Petroleum Producers

Environment, Safety and Technology: Key Factors to Sustained Economic Growth

A primary role of the Canadian Association of Petroleum Producers is to enhance the economic sustainability of the Canadian petroleum industry while at the same time separating truth from myth regarding what has often been categorized as a dirty industry.

For many years now, CAPP has implemented constructive communication with the federal and provincial/territorial governments as well as members of the public who are either directly or indirectly affected by oil and gas exploration projects of all magnitudes.

According to CAPP, their member companies’ account for about 90 per cent of Canada’s natural gas and crude oil, which is a $110-billion-per-year industry that provides essential energy products to Canadians and populations around the globe.

There are, however, a number of domestic opponents, including as many as 61 First Nations communities in British Columbia. Most recently there has been the vociferous public discord about another CAPP-advocated project, the Northern Gateway, intended to permit shipping of high-carbon Canadian crude over ecologically sensitive rivers and waters to carbon-uncontrolled countries including India and China. There has also been a public dispute originating from the Alberta Federation of Labour regarding allegations of public communications about shale gas extraction.

As part of the federal budget delivered on March 29, Finance Minister Jim Flaherty announced major changes regarding environmental assessment timelines, which comes as welcome news to oil and gas producers. No longer will such assessments be permitted to endlessly drag on, as has occurred in some high-profile cases. The new law stipulates a final decision must be made within two years; the project is either accepted or rejected. Some environmental groups were caught by surprise when it was additionally announced these new regulations are retroactive to include projects still in limbo – such as the much-publicized Northern Gateway pipeline project.

Expansion Potential

CAPP VP Markets and Oil Sands, Greg Stringham realizes the need for open dialogue with everyone directly impacted by the industry in order to achieve future advancement, which must start with an improvement to the acrimonious relationship between the two sides. He also welcomes the announcement by the Finance Minister during the reading of the budget.

“One of the real key priorities for us is making sure that the investment can continue because the oil business right now is doing quite well, although there are challenges in front of us and one of those is market access and the other is environmental performance,” Stringham says. “In talking to all stakeholders about that, I think there’s a real need for a broad-based good understanding of the economics of what’s going on in the oil and gas industry in Canada, the environmental foundation on which that is built; which is environmental performance and improvement in technology and of course the broader education and understanding of where that is going from a perspective of where are we getting the gas from.”

Canada is a grandiose supplier of oil and gas not only domestically, but we are seen from a global perspective as being one of the few countries with an ability to grow its supply. It’s also regarded as a reliable and friendly democratic supplier to a vast global market. Such a solid reputation bodes well for this country when it comes to greater expansion into such markets such as Asia, with China being at the top of the wish list. It is by far the most exorbitant energy-consuming country in the world but it precariously relies on far less stable countries such as Iran and Sudan. But despite this vast global potential, Stringham says the Canadian industry can find new markets both near and far.

“Asia is clearly one of the markets we are looking at with pipeline access to the west coast – but also the United States with expansion into new markets such as the U.S. Gulf Coast which is backing out supplies that are coming from Venezuela and Mexico and other places that are going into decline,” Stringham declares. “But also Atlantic Canada to meet domestic needs. Right now we important a significant amount of oil to the eastern part of our country.”

All three of these new markets are on the radar screen when it comes to the energy security discussion with Canada viewed as a capable, reliable supplier.
With the third-largest oil reserves in the world, Canada continues to aggressively expand its potential market base. The U.S. makes for an excellent main trading partner, but the economics of moving into other countries opens up fabulous new opportunities.

“As your business readers will well know, market diversity is an important part of their business, as it is ours,” Stringham says. “That diversity not only includes moving more into Atlantic Canada and backing up foreign oil there, but also expansion into the U.S. and western markets and Asia and India. Once you get to the east or west coast, you have the ability to reach those global markets.”

Unbeknownst to many, a pipeline already extends from Ontario to Montreal. It was built in the 1970s, tasked to move the oil further east for security of supply reasons. Because of market changes it was then was reversed, carrying foreign oil from Montreal back to the Ontario market. There is now a proposal for it to be reversed yet again in an easterly direction. A hearing is set for this fall to make the determination.

Stringham also shares the opinion of many other experts within the industry, who believe that the roadblocks put up for projects such as the Keystone XL pipeline project will be temporary, leaving an optimistic tone that a resolution will be forthcoming.

“Cleary there is a very hot political environment in the United States right now as they run up to the election so we have to make sure we get through that political debate,” Stringham notes. “As the White House said when it was delayed, they said it wasn’t based on the merits of the pipeline, it’s based on the political legislation the other party painted us in to. So that gives us hope there will be a resolution to this shortly after the election, because the merits of the pipeline and the rerouting that is being done right now should address the issues that were raised as part of the very long but comprehensive hearings down there.”

Environment and Technology

For all the negative attention it’s been known to draw, the oil and gas industry is Canada’s biggest investor in terms of research and development when it comes to methods to protect the environment.

Technology has been the key to unlocking the development of oil and gas in Canada, starting with the early days in Ontario, but really that technological advancement has gone from developing technology that is to extract the resource in a more productive and environmentally sensitive manner to singularly focusing on ensuring the environmental performance is in place and up to world-class standards.

As a sign of further ongoing commitments in this regard, the governments of Canada and the province of Alberta recently announced an enhanced level of environmental monitoring in the parts of northern Alberta where the oil sands are being developed.

“It will make that area, which is already intensely monitored, probably the most intensely monitored environmental area in the world and we are completely open to that because we think transparency is a big part of that,” Stringham says.

Looking at the broader overall picture, there are a number of groups and individuals who have raised a number of concerns about the industry’s pollution and the near-term and long-term effects to the environment. CAPP has always taken a staunch position that it’s more than willing to refute any public misconceptions or misinformation that surfaces within the realm of the general public.

“The real key when it comes to the environmental aspects is to be transparent,” Stringham states. “Not many countries in the world are as transparent as we are here in Canada. We think that’s a double-edge sword because it demonstrates our commitment to environmental performance but it also brings in a number of people who want to criticize it because they can get easy access to that information.”

The executives at CAPP take the approach that the best way to separate truth from myth is to better educate the public, allowing for an accelerated understanding of the industry as a whole. Trumpeting the progress and achievements in pollution-cutting methods, be it through technology or otherwise, is another avenue Stringham says his organization strongly pursues.

Clearly the biggest international discussion has focused on greenhouse gas emissions.

“When you take a look at the oil sands sector in Canada, right now we’re about 6.5 per cent of Canada’s total greenhouse gas emissions,” Stringham reveals.

“We know in order to grow we’ve got to continue to drive down our energy intensity. Like many other Canadians, we’re looking at energy conservation and efficiency. If we can do it for less greenhouse gas emissions, it means less energy, which for us is lower costs but also has the environmental benefit of not having the same increase in greenhouse gas emissions.”

The industry has been focusing on what can be done to use less energy and still get the thick, heavy oil out of the ground and to the market. Stringham says there has been a great deal of success in that area.

“Since 1990 we’ve actually been able to reduce the amount of CO2 we omit per barrel of oil produced by 29 per cent. And realistically, there hasn’t been a silver bullet. It’s been a number of very intense, energy-efficient technologies that have been put in place. Those kinds of things along with water reduction – we’ve been able to increase the amount of production to 1.6 million barrels a day coming from the oil sands. We’ve been able to do that, especially on the mining side, by not increasing the percentage of water we pull out of the Athabasca River. For many projects in the range of 80 per cent of the water is recycled and for some of the drilling projects that are deeper underground we’re at the range of 90 to 95 per cent recycle.”

There has also been an orchestrated effort to shift away from water that has been available on the surface such as rivers and ground water for drilling projects. Stringham says such water sources have been replaced to a large extent with saline water or water that wouldn’t be deemed fit for other uses because it’s deep underground.

“We’re able to use those alternatives to generate steam and not tap into the surface or ground water and that’s been a real significant shift over the last decade,” he says.

In order to meet worldwide public demand, energy production – including the oil sands – will require continued expansion. Of its 34 members, Canada is the only large nation from the Organization of Economic Cooperation and Development with growing oil production.

“There are small countries in the OECD that have the potential to grow, but from an oil perspective we are currently the sixth largest producer in the world, but we have the third-largest reserves after only Saudi Arabia and Venezuela, so if you look at OECD countries that would put us very near the top,” Stringham reveals. “If you look at natural gas, we’re the third-largest producer in the world. Those things have brought a great deal of international attention and a great deal of environmental scrutiny. That has forced our hand to make sure we are working hard on technology to continue to be world class. Things like the announcement of the Canadian Oil Sands Innovation Alliance has brought companies together to drive that innovation to maintain that world class stature.”

Emergency Response Plans

Safeguarding the public is another main facet of CAPP. Such regulations within the industry cover health, safety and environmental aspects. On the production side, both oil and natural gas has a long list of strict regulations as a project matures. The governments for the most part own the resource and set the rules on how it can be developed, with regulators in place to provide direction and ensure the resource is not squandered or developed inappropriately.

They also set rules on the environmental conditions under which it can be developed, be it land, air, water or biodiversity. There’s also the requirement of a regulatory permit process for exports moving out of the country, so there’s no shortage of government regulation associated with the health and safety of the product.

Projected Effects on National GDP

The economic impact of the oil and gas sector with respect to our gross domestic product is astounding.

If just singling out the oil sands alone over a 25-year period, from 2010 to 2035, the Canadian Energy Research Institute carried out a comprehensive study that concluded of all the investment that goes in, the economic impact generated for Canada over that 25 years is $2.1 trillion dollars. Employment projections go from 75,000 to over 900,000 people by the time we reach 2035. Of that total number, it generates just over $300 billion in federal tax and just over $100 billion in both provincial tax and royalties.