Canada's economy is changing.
To have a good conversation about what happens next,
we need to start with the facts.
Learn more about Canada's oil
Canada's oil sector is complex - with many types of production, and many types of oil. As the world adopts measures to deal with climate change, this sector of our economy will also change. This section provides an overview of common vocabulary, and the projected changes to global demand.
In 2018, Canada exported 3.7 million barrels of crude oil per day, and imported 600,000. All in all, the oil and gas sector represents 5.5% of Canada's GDP. However, as infrastructure ages and retires, and world markets adjust to climate change, liabilities will be of increasing concern. Learn more about how Canada's oil is valued, our place in the global oil market, and the liabilities we face.
Mining, quarrying, and oil and gas extraction combined formed the third largest contributor to our national wealth in 2018, after real estate and manufacturing. The entire sector represented eight per cent of Canada's gross domestic product (GDP). While the oil and gas sector alone represented 5.5%, its bottom line is expected to be increasingly impacted by financial and carbon liabilities.
How the oil and gas sector impacts Canada's economy
- In 2018, the oil and gas sector represented 5.5 per cent - $107 billion - of Canada's GDP, which totals $1,948 billion.
- Of that, oilsands extraction represents $53 billion of Canada's total GDP, while other oil and gas extraction accounts for an almost equal $55 billion
- The oil and gas sector's share of GDP grew from $78 billion in 2007 to $107 billion in 2018, a growth of 38 per cent. During that same period, the share of Canada's GDP that relies directly on oil and gas extraction grew from 4.8 per cent to 5.5 per cent.
- In 2018, crude oil extraction alone accounted for 2.8 per cent of Canada's GDP. Government revenues from the energy industry - which includes oil and gas, coal, electricity and renewable resources - totaled $16.8 billion on average per year between 2013 and 2017. Energy revenue comprises land sales, income taxes, indirect taxes and royalties (which made up 51 per cent of government revenues from energy).
- While the oil and gas industry plays an important economic role in Canada, there are also significant - and sometimes hidden - financial costs associated with the sector.
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- Clean-up costs: There is evidence that the financial liabilities generated by oil and gas activities - that is the cost to clean up operations when production has ceased - have been largely underestimated. The official government figure for Alberta's oil and gas liabilities is $59 billion, however investigative reporting in 2018 revealed internally estimated costs could be as high as $260 billion. Meanwhile, only $1.6 billion is currently held as security for clean-up costs.
- Social cost of carbon: In addition to financial liabilities, the oil and gas industry is responsible for an increase in what is known as the social cost of carbon, which refers to the financial impacts of coping with the effects of carbon pollution and climate change.
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- Greenhouse gas emissions cause global warming, leading to extreme weather events (e.g. wildfires, flooding, droughts, storms), sea level rise, increased food insecurity, and the spread of disease. These have a costly impact on our societies in terms of health care, destruction of property and food prices.
- The social cost of carbon is a measure of the economic harm caused by climate change expressed as the dollar value of these impacts per one tonne of carbon dioxide emitted into the atmosphere.
- The Government of Canada estimates the social cost of carbon at $41 per tonne of CO2 eq in 2016, while a number of economic analyses estimate this cost to be in the hundreds of dollars per tonne.
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- Another economic factor at play are direct and indirect subsidies to Canada's oil and gas industry. A 2019 report estimates $2 billion in direct transfers, royalty programs and fiscal policies that benefit and support the oil and gas industry in Alberta.
Sources
[ii] https://www.nrcan.gc.ca/energy-and-economy/20062
[iii] https://wayback.archive-it.org/7084/20170506183554/http:/ec.gc.ca/cc/default.asp?lang=En&n=BE705779-1
[iv] https://www.nationalobserver.com/2018/11/01/news/alberta-regulator-privately-estimates-oilpatchs-financial-liabilities-are-hundreds
[v] https://aer.ca/providing-information/news-and-resources/news-and-announcements/news-releases/public-statement-2018-11-01
[vi] https://www.edf.org/true-cost-carbon-pollution
[vii] https://d36rd3gki5z3d3.cloudfront.net/wp-content/uploads/2019/02/EDC_IISD_AlbertaFFSReportFINAL.pdf
Last updated: October 2019
Alberta's heavy oil sometimes sells at a discount because it is a relatively lower grade of crude oil, it has to travel long distances through limited pipeline networks to be processed at complex refineries, and, finally, a significant increase in U.S. production of closer-to-market, easier-to-refine, light sweet crudes makes Canada's heavy crudes (which account for nearly half of Canada's oil resources) less competitive.
Oil prices
Three main factors typically affect the price of crude oil[i]:
Quality. This refers to crude oil's most important characteristics, whether it is light, heavy or extra heavy, and whether it has a high or low sulphur content. Alberta's oilsands account for 64 per cent of Canada's oil production, delivering two types of marketable products with different qualities: diluted bitumen (a heavy crude oil with high-sulphur content) and synthetic crude oil (a sweet light crude oil).[ii]
Marketability. This refers to the supply and demand dynamic based on quality. Refineries procure crudes based on their characteristics; for example, only certain types of refineries are equipped to process the heavy, high-sulphur diluted bitumen produced by the oilsands. In contrast, higher-quality crudes (such as sweet, light oil) are processed by simple "topping" refineries, which means Canada's lighter crudes can be processed virtually anywhere.
Logistics. This refers to transportation and access to refineries. Most of Canada's oil resources are landlocked in Alberta, without direct access to tidewater and, therefore, the global market. This has always been identified as a challenge for the Canadian oil sector, although the world's largest market for heavy oil - Canada's primary oil production - is located on the U.S. Gulf Coast.
The rapid rise of unconventional oil production across North America over the past decade (including oilsands in Alberta and tight oil in the United States) has created a supply glut that cannot be handled by existing pipeline infrastructure. In this shifting landscape, Canada's oil resources are located farther from the market (refineries) than the rising oil production in the United States. This shortage in pipeline capacity has led some companies to ship oil to market by rail, but about two thirds of Canada's exports are still shipped to the North American Midwest by one pipeline (Enbridge Mainline).
Although refineries located in Eastern Canada could technically process Canadian oil produced in the West, this option is expensive and impractical. Refineries located in Atlantic Canada have access to other sources of oil that are usually cheaper when factoring in the shipping cost. For example, Canada's largest refinery, located in New Brunswick, is 1,000 km further from Alberta than from the market on the U.S. Gulf Coast. Meanwhile, the recent surge in tight oil production in the U.S. has led refineries in Eastern Canada to prefer importing large quantities of that oil.[iii]
Discounts
Alberta's heavy crude oil sometimes sells at a discount for several reasons:
- it is a relatively lower quality of crude oil;
- it has to travel long distances through limited pipeline networks to be processed at complex refineries; and
- a significant increase in U.S. production of closer-to-market, easier-to-refine, light sweet crudes makes Canada's heavy crude oil (which accounts for nearly half of Canada's oil production) less competitive.
Not all oilsands products sell at a discount. Synthetic crude oil (bitumen that has been upgraded), for example, typically sells on par with the U.S. benchmark, a medium, sweet crude oil known as West Texas Intermediate.[iv]
Why don't we upgrade more oilsands bitumen in Canada?
Upgrading a larger portion of the heavy oil produced in Canada's oilsands would create more value for Canada's resource, as well as free up some pipeline space. However, upgraders are very costly, require long-term investment and are also quite energy and greenhouse-gas-intensive to operate. In addition, in the 2000s, the United States refinery sector made large investments in equipment specifically designed to process heavy oil produced in Alberta and Venezuela, creating a market for Canadian heavy oil.
Canada exports far more oil than it imports.
In 2018, Canada exported 3.7 million barrels of crude oil per day and imported only 600,000 barrels per day; U.S. crudes represented 65 per cent of Canada's imports. Other import sources included Saudi Arabia (18 per cent), Azerbaijan (5 per cent), Norway (3 per cent) and Nigeria (2 per cent). The remainder comes from the United Kingdom, Algeria, Colombia, Ivory Coast, the Russian Federation and Libya.[v]
Sources
[i]https://www.oilsandsmagazine.com/market-insights/crude-oil-pricing-differentials-why-alberta-crude-sells-at-deep-discount-to-wti
[ii] https://www.nrcan.gc.ca/crude-oil-facts/20064
[iii]https://www.oilsandsmagazine.com/market-insights/crude-oil-pricing-differentials-why-alberta-crude-sells-at-deep-discount-to-wti
[iv]https://www.oilsandsmagazine.com/market-insights/crude-oil-pricing-differentials-why-alberta-crude-sells-at-deep-discount-to-wti
[v]https://www5.statcan.gc.ca/cimt-cicm/topNCountries-pays?lang=eng&getSectionId()=0&dataTransformation=0&refYr=2018&refMonth=1&freq=12&countryId=0&getUsaState()=0&provId=1&retrieve=Retrieve&country=null&tradeType=3&topNDefault=250&monthStr=null&chapterId=27&arrayId=0§ionLabel=V%20-%20Produits%20min%20raux&scaleValue=0&scaleQuantity=0&commodityId=270900
Last updated: October 2019
Throughout its history, a total of 450,000 oil and gas wells have been drilled in Alberta, along with the construction of eight oilsands mines. There is evidence that the costs to clean up operations after oil production has ceased have been largely underestimated. The official government figure for Alberta's total oil and gas liabilities is $59 billion; $30 billion for oil and gas wells, facilities and pipelines, and $28 billion for other operations including oilsands. However, investigative reporting in 2018 revealed an estimate from the Alberta Energy Regulator (AER) stating that total liability costs could be as high as $260 billion to clean up all wells, oilsands, mines and associated infrastructure. As of September 2019, $1.6 billion is being held as security for the cleanup.
Facts
As of 2017, 450,000 oil and gas wells have been drilled in Alberta, representing one well for every 1.4 km2 in the province, and are at various stages of their life cycle.[i] Of those wells, 109,000 have ceased production, have been decommissioned, and the land has been reclaimed.[ii]
Of the 340,000 producing and non-producing wells in Alberta that will one day need to be reclaimed, as of 2017, 185,000 are active.[iii] This number will increase as more new wells are drilled.
As of 2017, another 155,000 wells are sitting inactive, meaning they are not producing oil or gas and are waiting to be further decommissioned or, as is sometimes the case, made active again.[iv]
- Of the inactive wells, 3,370 have been left behind by bankrupt companies and are now managed by the Orphan Well Association (see below).
- As of 2019, 77,000 inactive wells are considered "abandoned," which means that while the well has been sealed off, the land has yet to be reclaimed and is therefore still unusable.[v]
- Of the abandoned wells, 2,518 have been left behind by bankrupt companies and are also managed by the OWA, to be decommissioned and reclaimed at a later date (this is the stage after a well has been suspended but before work to remediate and reclaim the well site has begun).
Inactive wells, especially those that have not been sealed, pose risks for communities and the environment, including farmland and drinking water. Risks include soil and water contamination, release of uncontrolled air pollutants and greenhouse gas emissions.[vi]
Figure 1: Lifecycle of a well
In Alberta, timelines are not imposed for well cleanup. Once a well stops producing, a company must suspend it. A suspended well can be brought back online or be abandoned (meaning the well is sealed off and readied for reclamation).
- Regulations in Alberta allow companies to indefinitely "suspend" their assets, with no timeline to properly complete the abandonment and reclamation process. As a result, companies have been slow to clean up their inactive assets.
- Abandonment, which refers to the act of plugging the well with cement, is a key step before the well site can be reclaimed and remediated. There is no legislation imposing a timeline in which a well must be abandoned after it is suspended. As a result, many wells may sit suspended indefinitely.
If a company goes bankrupt, its wells may become "orphans" if there is no other entity to care for the site. In this case, the management of the well is transferred to the Orphan Well Association (OWA), an organization that aims to reclaim every well site in its inventory.
- The annual budget for the OWA is $45 million[vii], funded primarily by a levy on the oil industry, but also supported by the Alberta and federal governments.[viii]
There are various estimates on the financial liability of Alberta's oil and gas industry, which range from $59 billion to $260 billion.
- The AER officially estimates the combined liability of the province's oil and gas activities (wells, pipelines, oil and gas facilities and other operations, including oilsands) at $59 billion. This estimate is split almost equally between liability costs to reclaim well operations ($30 billion) and liability for non-well operations, such as oilsands ($28 billion).
- However, in an internal presentation, the AER warned that total cleanup for the oil and gas industry could be as high as $260 billion. Oilsands mining represents nearly half of the revised cost.[ix]
- The Alberta Liabilities Disclosure Project, a coalition of former regulators, researchers and landowners, estimates liability costs to reclaim well operations range from $40 billion to $70 billion.[x]
As of September 2019, $1.6 billion, or 2.7 per cent of the AER's official estimate, is being held as security for the cleanup.[xi]
Sources
[i] https://www.cdhowe.org/sites/default/files/attachments/research_papers/mixed/Commentary_%20492_0.pdf
[ii] https://www.cdhowe.org/sites/default/files/attachments/research_papers/mixed/Commentary_%20492_0.pdf
[iii] https://www.cdhowe.org/sites/default/files/attachments/research_papers/mixed/Commentary_%20492_0.pdf
[iv] https://www.cdhowe.org/sites/default/files/attachments/research_papers/mixed/Commentary_%20492_0.pdf
[v] https://www.cdhowe.org/sites/default/files/attachments/research_papers/mixed/Commentary_%20492_0.pdf
[vi] https://thenarwhal.ca/the-story-of-albertas-100-billion-well-liability-problem-how-did-we-get-here/
[vii] https://www.alberta.ca/upstream-oil-and-gas-liability-and-orphan-well-inventory.aspx
[viii] https://www.orphanwell.ca/wp-content/uploads/2019/07/OWA-2018-19-Ann-Rpt-Final.pdf
[ix]https://www.nationalobserver.com/2018/11/01/news/alberta-regulator-privately-estimates-oilpatchs-financial-liabilities-are-hundreds
[x] https://www.aldpcoalition.com/news
https://www.aldpcoalition.com/research
[xi] https://www.nationalobserver.com/2018/11/01/news/alberta-regulator-privately-estimates-oilpatchs-financial-liabilities-are-hundreds
Last updated: October 2019
Oil and gas extraction has significant impacts on the environment. The extraction process for oilsands uses considerable freshwater, which cannot then be returned to the ecosystem, but must be collected in tailings ponds. There are currently 1.18 trillion litres of tailings. Additionally, the sector is both the largest and fastest growing source of emissions. Find out more about the oil and gas sector's impact on emissions, water and human health.
The oil and gas sector is the highest and fastest growing source of emissions in Canada, currently accounting for 27 per cent of our national emissions. (Figure 1)
The latest data, from 2017, shows that the sector emits 195 megatonnes of greenhouse gas (GHG), up from 106 million tonnes (Mt) in 1990. Oil and gas emissions are projected to continue increasing; if Canada reaches its 2030 commitments under the Paris Agreement, they will make up 41 per cent of Canadian emissions in that year.
Figure 1 - Breakdown of Canada GHG emissions per sector in 2017 (in Mt CO2e)
Source: ECCC
Emissions per barrel
Emissions intensity refers to the amount of emissions produced per barrel of oil. The average carbon intensity of Canadian oil production has gradually increased from 65 kg CO2e per barrel in 1990 to 69 kg CO2e per barrel in 2005, and 71 kg CO2e per barrel in 2016.[i] The higher emissions intensity is the result of a shift in Canadian oil production from conventional to unconventional oilsands production and, within oilsands operations, a shift from mines to in-situ projects.
Shifting emissions offshore
Oilsands production has improved its emissions intensity, but this is entirely due to refining and upgrading (where bitumen is upgraded into a synthetic, lighter crude oil) being moved to different countries, effectively moving the associated emissions "offshore". Because non-upgraded oilsands production has increased seven times faster from 2010 to 2016 than upgraded oilsands exports, those emissions are assigned to export markets, primarily the United States.
It is very likely that these emission figures are underestimated, since research demonstrates that methane emissions from upstream oil and gas have been systematically underreported. This includes methane emitted from both conventional oil production[ii] and unconventional oilsands operations.[iii]
Assessing carbon intensity: "well to refinery gate" or "well to wheel"
Carbon intensity can be calculated by assessing extraction and processing only, a "well to refinery gate" determination, or by assessing from the point of extraction all the way through to burning the fuel in a vehicle, a "well to wheel" assessment. In addition, variations in how oilsands bitumen is extracted and processed, combined with differing resource quality and characteristics, results in a wide range of emissions intensities for different types of extraction and processing. (Figure 2) A small number of oilsands projects combining more recent technologies with greater resource quality produce diluted bitumen with a carbon intensity in the same ballpark as that of the average barrel of crude oil refined in the U.S. However, diluted bitumen will still require more energy to refine than this average barrel - due to the heavier nature of the oilsands bitumen - leading to more emissions per barrel on a well-to-wheel basis. Regardless of the type of extraction and processing method, most oilsands products are among the most carbon-intensive crudes produced globally.[iv] (Figure 3)
Figure 2 - Breakdown of emissions associated with oil extraction and processing in Canada in 2017 (in Mt CO2e)
Source: ECCC
Figure 3 & 4 - Greenhouse gas emissions intensity of different sources of crude oil (in kg CO2e per barrel)
Figure 4
Methane
While carbon dioxide is the most well-known GHG, it is not the only one produced by oil and gas activities. The sector also generates large quantities of methane (CH4), which, over a 20 year period, is over 80 times more potent than CO2 in terms of its global warming impact. These methane emissions, whether intentionally vented into the atmosphere or not, represent 20 per cent of the oil and gas sector's emissions.[v]
International commitments
Canada has signed a number of international commitments aimed at reducing its carbon pollution:
- In 2009, Canada signed the Copenhagen Agreement, and set a target of reducing GHG emissions by 17 per cent by 2020 from 2005 levels. This target is now out of reach.[vi]
- In 2015, Canada signed the Paris Agreement, with a target of reducing emissions by 30 per cent by 2030 from 2005 levels. A recent report from the Government of Canada shows the country is not on track to achieve this objective.[vii]
- In 2015, Canada announced its aspiration to achieve an 80 per cent emissions reduction by 2050 from 2005 levels.[viii]
- In 2018, Canada joined the Carbon Neutrality Coalition, an international group of nations aiming to develop plans to become carbon-neutral.[ix]
Sources
[i]https://unfccc.int/documents/194925
[ii] https://www.methanealliance.com/caseStudiePublicationFiles/LA6VbCgHBqV8tKiKkU0ohZmGbUJ8QzKltFMVd8lu.pdf
[iii] Liggio, J. et al. (2019, April 23). Measured Canadian oil sands CO2 emissions are higher than estimates made using internationally recommended methods. Nature Communications, 10, Article number 1863.
[iv] https://oci.carnegieendowment.org/#total-emissions
[v]https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/inventory.html
[vi]https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/projections-2018.html
[vii]https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/projections-2018.html
[viii] https://publications.gc.ca/site/eng/9.825953/publication.html
[ix] https://www.carbon-neutrality.global
Last updated: October 2019
As Canada works to reduce carbon pollution and meet international climate commitments, the proportion of emissions generated by the oil and gas industry - to extract, transport, process and refine hydrocarbons - continues to grow. This means that as Canada continues to reduce its emissions in other sectors, the oil and gas industry accounts for more and more of the country's carbon budget.
Facts
Canada's oil, overall, was found to be 70 per cent more carbon intensive per barrel than the global average in 2015. According to a 2018 Stanford University study that evaluated the carbon-intensity of 98 per cent of global oil production, Canada produces the fourth most carbon-intensive oil in the world, just after Algeria, Venezuela and Cameroon. (Figure 1) [i]
Figure 1. Carbon intensity of global oil production in 2015
Source: Masnadi et al
The carbon intensity of Canada's oil streams varies widely: oilsands crude is at the highest end of the spectrum at 79 kg of CO2e per barrel, with offshore oil at the lowest end at 25 kg CO2e per barrel. (See Figure 2) [ii] [iii]
Figure 2: Carbon intensity of Canada's oil products in 2017 (kg CO2e/bbl)
Source: CER (2019), ECCC (2019) Note: offshore oil includes the limited volumes of crude oil produced in the Northwest Territories.
Fastest-growing source of Canadian oil: Alberta's oilsands are the fastest-growing source of Canadian oil and are expected to remain so until 2040. In 2017, they produced about 2.8 million barrels per day; 98 per cent (162 billion barrels) of Canada's oil reserves are found in the oilsands. Business-as-usual trajectories that do not account for further action on climate change or technology change predict production could reach almost 4.5 million barrels per day, a 58 per cent increase, by 2040. [iv]
- In contrast, crude oil production from other sources of Canadian oil - such as conventional light oil, offshore drilling or tight oil - has been relatively stable over the past decade, holding at about 1.5 million barrels per day, and is predicted to remain so throughout 2040. (Figure 3) [v]
Figure 3. Canadian oil production by type
Source: https://www.nrcan.gc.ca/crude-oil-facts/20064
Canada's GHG emissions: In 2017, Canada's total greenhouse gas (GHG) emissions, from all sources, were 716 Mt CO2e. Carbon emissions from the oil and gas sector - including emissions from production, transportation and processing - were 195 Mt CO2e or 27 per cent of Canada's overall emissions. Of Canada's overall emissions from the oil and gas sector, Alberta's emissions account for 71 per cent. (Figure 4) [vi]
Figure 3. Breakdown of the oil and gas sector's carbon emissions by province in 2017 (Mt CO2e)
Source: ECCC
Per capita emissions in Canada: Because of significant oil and gas operations, Alberta and Saskatchewan have the highest emissions per capita in Canada - more than triple any of the other provinces and territories. (Figure 5) [vii] [viii]
- Alberta generates 38 per cent of national emissions - representing 273 Mt out of a total of 716 Mt in carbon pollution in 2017. [ix]
- Currently, the oil and gas sector accounts for a quarter of Canada's total emissions; by 2030 it will account for 41 per cent of Canada's total carbon budget (211 Mt out of 512 Mt) as per our international commitment. [x]
- Based on official emissions forecasts, the oilsands industry will account for 106 Mt in 2030, or 21 per cent of Canada's total climate budget. [xi]
- If Canada follows through on its commitment to reduce emissions by 80 per cent by 2050, oilsands emissions frozen at 2030 levels would then account for 72 per cent of Canada's total emissions budget. [xii]
Figure 5. Emissions per capita across Canada in 2017 (t CO2e per capita)
Source: ECCC, StatCan
Sources
[i] https://science.sciencemag.org/content/361/6405/851.summary
[ii] https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/inventory.html
[iii] https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/inventory.html
[iv] https://www.cer-rec.gc.ca/nrg/ntgrtd/ftr/2018/index-eng.html
[v] https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/inventory.html
[vi] https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/inventory.html
[vii] https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/inventory.html
[viii] https://www150.statcan.gc.ca/n1/pub/12-581-x/2018000/pop-eng.htm
[ix] https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/inventory.html
[x] https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/projections-2018.html
[xi] https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/projections-2018.html
[xii] https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/projections-2018.html
Last updated: October 2019
In 2016, the Alberta government passed the Oil Sands Limit Act, which establishes a firm limit on oilsands carbon emissions. The cap puts an annual 100 megatonne (Mt, 100 million tonnes) limit on emissions, but it does not limit oilsands production, instead encouraging the industry to decrease emissions per barrel through innovation.
How Alberta's emissions cap works
Under the Oil Sands Limit Act, emissions from oilsands extraction and upgrading cannot exceed 100 Mt of CO2e per year, with an additional provision of 10 Mt for newly built upgraders.[i]
In 2017, oilsands extraction and upgrading emissions were estimated at 81 Mt CO2e.[ii]
As of December 2017, the Alberta Energy Regulator had granted approvals that cumulatively add up to annual emissions of 131 Mt if all projects proceed. The annual emissions total rises to 167 Mt when projects still seeking approval are included. Most analyses suggest the oilsands emissions limit will be reached between 2025 and 2030.[iii] (Figure 1)
Putting the limit in context
Based on official emissions projections, the oilsands industry will account for annual emissions of 106 Mt CO2e in 2030, or 21 per cent of Canada's emissions budget of 512 Mt set to meet climate targets.[iv]
If Canada follows through with its commitment to reduce emissions by 80 per cent by 2050, annual oilsands emissions frozen at 2030 levels would account for 72 per cent of Canada's total emissions budget.
Enforcing the emissions limit
As of October 2019, it remains unclear whether the new Alberta government will create regulations to enforce the Oil Sands Limit Act.
In 2019, the federal government passed Bill C-69, legislation modifying how major infrastructure projects are reviewed and approved in Canada. The law will require that all new energy projects go through an updated environmental assessment. Proposed in-situ projects are exempted from this regulation, provided annual emissions generated remain below Alberta's 100 Mt CO2e limit.[v] The Canada Energy Regulator (previously the National Energy Board) estimates that in-situ projects are likely to be the source of most of Canada's new oil production through 2040, with a risk of going over the limit if the carbon intensity of existing technologies is not tangibly decreased.[vi] (Figure 1)
Figure 1. Oilsands emissions relative to 100 Mt cap
Note: This analysis assumes emissions intensities of oilsands in-situ and mining technologies remains at 2017 levels throughout 2040.
Sources
[i] https://www.qp.alberta.ca/documents/Acts/O07p5.pdf
[ii]https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/inventory.html
[iii] https://www.pembina.org/reports/2018-08-31-teck-hearing-submission.pdf
[iv]https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/projections-2018.html
[v] https://openparliament.ca/bills/42-1/C-69/
[vi] https://www.cer-rec.gc.ca/nrg/ntgrtd/ftr/2018/index-eng.html
Last updated: October 2019
A lot of water is needed for the production of bitumen in the oilsands. It takes three to four barrels of water to produce one barrel of oil from mine operations, while in-situ operations need, on average, 0.4 barrels of water per barrel of oil.[i]
In the case of the Athabasca River, though water removals never exceed 3 per cent of its flow, with growing production comes growing water usage: in 2011, the amount of water withdrawn from the Athabasca River exceeded the annual water usage of the City of Toronto.[ii]
Impact of water usage
Scientists are concerned that this level of water usage is unsustainable, that it has impacts on aquatic ecosystems such as wetlands and rivers, and that it affects wildlife habitat far downstream in the Mackenzie River basin.[iii]
Sources
[i] Natural Resources Canada. "Oil Sands: Water Management." https://www.nrcan.gc.ca/energy/publications/18750
[ii] Struzik, E. (2013). Yale School of Forestry and Environmental Studies. https://e360.yale.edu/features/with_tar_sands_development_growing_concern_on_water_use
[iii] Ibid.
Last updated: October 2019
As of 2018, oilsands operations have produced 1.25 trillion litres of tailings, and the volume continues to grow each year.[i]
Tailings are a waste product from the process of extracting bitumen, an extra-heavy crude oil, from oilsands, the mixture of sand, clay and bitumen that make up oil deposits. The oil industry uses hot water and chemicals to separate bitumen from the other materials in the oilsands. The bitumen is then skimmed off and the remaining waste is pumped into artificial lakes known as tailings ponds.
The federal and Alberta governments have proposed new regulations that would allow the treatment of liquid tailings-a mixture of sand, silt, clay and residual bitumen, including toxins found in tailings ponds-and their release into the Athabasca River. This is likely to be controversial because it would change the current regulatory framework that prohibits wastewater releases into freshwater bodies. Draft regulations have not yet been released by the federal government, and it may take years to finalize them.
What is in a tailing pond?
There are many chemicals present in tailings ponds,[ii] including:
- lead, which can permanently impair children's brain and nervous system development;
- mercury, which can have damaging impacts on the nervous, immune, and digestive systems and harm children's development and
- arsenic and benzene, well-established sources of cancer in humans.
These chemicals are among the World Health Organization's "ten chemicals of major public concern."[iii]
Leakage
Canadian government research has determined that tailings ponds are seeping into groundwater and the Athabasca River.[iv] An Environmental Defence analysis of industry data calculated that the ponds are leaking 11 million litres per day, equivalent to nearly 70,000 barrels, but also noted that this data is likely conservative.[v] Environment Canada scientists have highlighted research showing that a single pond can leak 6.5 million litres per day.[vi]
Impact
Studies show that leaks from tailings ponds are harming the health of communities that rely on local rivers, fish and wildlife, such as First Nations living in Fort Chipewyan, located 200 kilometres downstream from oilsands development sites.[vii] In 2010, researchers found that levels of mercury, lead and other pollutants were higher downstream from oilsands mining sites than recommended under federal and provincial guidelines for the protection of aquatic life.[viii] In 2014, studies commissioned by the Canadian and Alberta governments[ix] found unusually high rates of cancer among the community of Fort Chipewyan.[x] Researchers determined that consumption of traditionally caught fish and meat by members of the Fort Chipewyan community was linked to these high cancer rates.[xi]
Sources
[i]https://www.aer.ca/documents/oilsands/2018-State-Fluid-Tailings-Management-Mineable-OilSands.pdf
[ii] https://environmentaldefence.ca/report/albertas-tailings-ponds/
[iii] https://www.who.int/ipcs/assessment/public_health/chemicals_phc/en/
[iv] Weber, B. (Feb. 20, 2014). "Federal study says oil sands toxins are leaching into groundwater, Athabasca River." The Globe & Mail. Retrieved from: https://www.theglobeandmail.com/news/national/federal-studysays-oil-sands-toxins-are-leaching-into-groundwater-athabasca-river/article17016054/.
[v] Price, M. (Dec. 2008). 11 Million Litres a Day: The Tar Sands Leaking Legacy. Environmental Defence. Retrieved from: https://environmentaldefence.ca/report/report-11-million-litres-a-day-the-tar-sands-leaking-legacy/.
[vi] Flanagan, E. (March 4, 2014). Study draws attention to tailings seepage in the oilsands. Pembina Institute. Retrieved from: https://www.pembina.org/blog/783.
[vii] NRDC. (Feb. 2014). Tar Sands Crude Oil: Health Effects of a Dirty and Destructive Fuel. pp. 3-4. Retrieved from: https://www.nrdc.org/sites/default/files/tar-sands-health-effects-IB.pdf.
[viii] CBC News. (Aug. 30, 2010). "Oilsands mining linked to Athabasca River toxins." Retrieved from: https://www.cbc.ca/news/technology/oilsands-mining-linked-to-athabasca-river-toxins-1.877292.
[ix] NRDC. (Feb. 2014). Tar Sands Crude Oil: Health Effects of a Dirty and Destructive Fuel. pp. 3-4. Retrieved from: https://www.nrdc.org/sites/default/files/tar-sands-health-effects-IB.pdf.
[x] Lamoureux, M. (May 19, 2015). "The Alberta Doctor Who Claimed Tar Sands are Connected to Cancer Was Fired." Vice. Retrieved from: https://www.vice.com/en_ca/article/alberta-doctor-who-claimed-tar-sands-connectedto-cancer-fired.
[xi] Lewis, R. (July 8, 2014). "Canada tar sands linked to cancer in native communities, report says." Aljazeera America. Retrieved from: https://america.aljazeera.com/articles/2014/7/8/canada-oil-cancer.html.
Last updated: October 2019
Oil had undoubtedly greatly impacted Canadian society. Explore this section to learn more about impact of the industry on our democratic institutions and public life.
In this section, you will find important stats and figures and frequently asked questions.