About Canadian Oil
About Canadian Oil
Crude oil - an unrefined fossil fuel used to make transportation fuels such as gasoline and diesel as well as plastics and lubricants - is found in a variety of forms across the country requiring different extraction methods. Most of Canada's oil comes from the oilsands in northern Alberta.
Types of Oil
Canada's crude oil resources are generally found in three main forms, categorized according to their density and how easily they flow:
- Light Crude Oil is a liquid with a low density that can freely flow at room temperature. Light crude oil extracted from rock formations using hydraulic fracturing techniques (see below) is commonly referred to as "tight" or "shale" oil.
- Heavy Crude Oil has a higher density and viscosity, and sometimes needs to be heated or diluted with lighter products in order to flow freely.
- Bitumen is an extra-heavy crude oil with the consistency of cold molasses. It is too thick and viscous to flow freely. Bitumen is found in oilsands, a naturally occurring mix of the extra-heavy crude oil, sand and water which also has significant levels of sulphur and other impurities. Because bitumen is too thick to flow through a pipeline, it is usually converted using one of two techniques[i]:
- Diluting. Raw bitumen is diluted with a lighter oil, resulting in a heavy crude oil known as dilbit (short for diluted bitumen). Dilbit can only be processed in refineries specifically equipped to manage heavy crude oils.[ii]
- Upgrading. An upgrader is a facility that transforms ("upgrades") raw bitumen into a synthetic crude oil (SCO) using chemical reactions at high temperatures. The SCO produced by an upgrader has characteristics similar to lighter crude oils and can be processed by virtually any refinery.[iii]
Crude oils can also include impurities such as sulphur and heavy metals in varying proportions, and are also categorized based on their sulphur content:
- Sour crude oil has high levels of sulphur (the threshold is typically anything over 0.5 per cent sulphur content).
- Sweet crude oil has low levels of sulphur.
Removing these impurities requires additional processes at the upgrading and refinery stage and adds costs, partly because sulphur degrades refinery equipment more quickly. Most transportation fuels are "desulphurized" to prevent air pollution and resulting human health issues.
Crude oils are extracted using either conventional or unconventional techniques:
- Conventional techniques usually involve a single well that uses naturally occurring underground pressure to push lighter, free-flowing crude oil to the surface.
- Offshore drilling involves drilling wells into rock formations below the sea bed. In Canada, only conventional techniques are used for offshore operations, but it is also possible to access offshore oil with unconventional techniques.
- Unconventional techniques are used to access difficult-to-reach light and heavy crude oils. The most well-known unconventional technique is hydraulic fracturing, a process by which water, sand and chemicals are injected at high pressure into long, horizontal, underground wells to extract the crude oil.
Bitumen is extracted from the oilsands using two main unconventional techniques:
- Open-pit mining. Oilsands are shovelled from an open-pit mine and sent for processing to separate the bitumen from solids and water. The leftover solids and water from these mining operations are called tailings and are stored in tailings ponds.[iv]
- In-situ recovery. Eighty-one per cent of Alberta's oilsands are too deep to be accessed from an open-pit mine. In-situ or "on site" extraction uses technologies, such as injecting steam to heat the bitumen and pump the oil to the surface, leaving most solids, like sand, behind. In-situ operations do not generate tailing ponds.[v]
Regardless of its source (oilsands, tight oil, offshore or conventional oil), every barrel of crude oil eventually finds its way to a refinery, where it is processed into different liquid products. These include transportation fuels like gasoline, diesel, marine oil and jet fuel, and other products such as naptha, which is used in the petrochemical industry (for example, to generate plastics).
In order to limit global temperature rise to safe levels, the world must reduce its use of fossil fuels, which will inevitably lead to significant changes in the global demand for oil in the next 50 years.
Best-case scenario to limit change to 1.5 degrees
The Intergovernmental Panel on Climate Change (IPCC), the leading scientific body studying climate change, suggests that an immediate precautionary approach is required to limit the rising global temperatures. The IPCC has developed several scenarios that use this approach.
The most stringent of these scenarios strictly limits global temperature rise to 1.5 degrees Celsius.[i] This scenario assumes the minimum use of technologies that have not yet been deployed at scale, and focuses instead on significant reductions in coal, oil, and natural gas production and use. The result is the immediate reduction of global oil demand from 2010 levels by 37 per cent in 2030 and 87 per cent in 2050. Reducing oil demand achieves a safe, immediate result.[ii]
IPCC: Another IPCC scenario assumes the use of a significant number of negative emission technologies such as carbon capture and sequestration (CCS), where carbon dioxide emissions are captured rather than being released into the atmosphere. This scenario would result in the reduction of global oil demand from 2010 levels by only 3 per cent in 2030 and by 81 per cent in 2050.[iii]
However, there are several problems with relying on CCS. Many other solutions, including renewable energy technologies such as wind and solar, electric vehicles, biofuels, and increasing energy efficiency, can already outperform the cheapest fossil fuel projects on cost,[iv] while CCS adds to the costs of coal or natural gas plants. Other challenges include how to implement CCS on a large scale, a lack of a legal and regulatory framework, and the challenge of gaining public acceptance of the technology.
Industry modelling: By contrast, the oil industry proposes scenarios that attempt to show that growing fossil fuel demand is compatible with safe temperature increases. The International Energy Agency's flagship report, World Energy Outlook, is one example. The 2018 edition prominently featured a "New Policies Scenario" that depicted a growth in oil consumption occurring at the same time as the implementation of a more sustainable energy pathway.[v] However, independent analysis has found that this scenario would actually lead to 2.7 to 3.3 degrees Celusius of warming, leading to catastrophic impacts of climate change.[vi]
The Paris Agreement is a landmark global agreement to fight climate change finalized in December 2015. More than 190 countries, including Canada, made legally binding commitments to take action on climate change through a combination of reducing greenhouse gas emissions, adapting to the impacts of climate change, and-for the industrialized countries-providing financing and clean technologies to poorer, developing nations to assist them in their efforts.
Given Canada's commitment under the Paris Agreement, Canada's carbon budget for 2030 is 512 million tonnes of CO2e. A carbon budget is the total allowable amount of greenhouse gases that can be emitted, usually expressed as tonnes of carbon dioxide equivalent or CO2e. It can be expressed over a time period of one year, many years (e.g. 10 years) or the total remaining budget.
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. (Figure 4.2).
- 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 (Figure 4.1). 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.
- 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 (see section 5).
- 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.
- 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.
- 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.
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.
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]
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]
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.
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 (OWA, 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, see Figure 1).
Figure 1. Life cycle of a well
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]
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]
The oil and gas sector is the highest and fastest growing source of emissions in Canada, currently accounting for 27% of our national emissions.
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.
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. 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 too conservative, since research demonstrates that methane emissions from upstream oil and gas have been systematically underreported. This includes methane emitted from both conventional oil production [Greenpath/Elementa] and unconventional oilsands operations.[vi]
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.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.[vii] (Figures 3 and 4)
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 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.[i]
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.[ii]
- 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.[iii]
- In 2015, Canada announced its aspiration to achieve an 80 per cent emissions reduction by 2050 from 2005 levels.[iv]
- In 2018, Canada joined the Carbon Neutrality Coalition, an international group of nations aiming to develop plans to become carbon-neutral.[v]
Figure 1 - Breakdown of Canada GHG emissions per sector in 2017 (in Mt CO2e)
Figure 2 - Breakdown of emissions associated with oil extraction and processing in Canada in 2017 (in Mt CO2e)
Figure 3 - Greenhouse gas emissions intensity of different sources of crude oil (in kg CO2e per barrel)
Figure 4 - Greenhouse gas emissions intensity of a number of crude oil (in kg CO2e per barrel)
Note: oilsands crudes are indicated in dark blue.
[vii] 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.
GHGs in Context
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.
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. (see figure 1) [i]
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]
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. (See Figure 2.1) [v]
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. (see Figure 3) [vi]
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 (Figure 6). [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. (Figure 6) [xii]
Figure 1. Canadian oil production by type
Figure 2 Carbon intensity of Canada's oil products in 2017 (kg CO2e/bbl)
Figure 3. Breakdown of the oil and gas sector's carbon emissions by province in 2017 (Mt CO2e)
Figure 4. Carbon intensity of global oil production in 2015
Figure 5 Emissions per capita across Canada in 2017 (t CO2e per capita)
Figure 6. Share of the oil and gas emissions in Canada's carbon budget
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 6.1)
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] (see Section 2)
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. (see Section 2)
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 6.1)
Figure 6.1. 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.
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] This water typically comes directly from nearby freshwater bodies.
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 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]And once used, much of this water cannot be returned directly to ecosystems, but instead winds up in tailings ponds
[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
As of 2017, oilsands operations have produced 1.18 trillion litres of tailings, and the volume continues to grow each year.
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, 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."[i]
Canadian government research has determined that tailings ponds are seeping into groundwater and the Athabasca River.[ii] 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.[iii] Environment Canada scientists have highlighted research showing that a single pond can leak 6.5 million litres per day.[iv]
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.[v] 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.[vi] In 2014, studies commissioned by the Canadian and Alberta governments[vii] found unusually high rates of cancer among the community of Fort Chipewyan.[viii] Researchers determined that consumption of traditionally caught fish and meat by members of the Fort Chipewyan community was linked to these high cancer rates.[ix]
[ii] 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/.
[iii] 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/.
[iv] Flanagan, E. (March 4, 2014). Study draws attention to tailings seepage in the oilsands. Pembina Institute. Retrieved from: https://www.pembina.org/blog/783.
[v] 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.
[vi] 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.
[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] 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.
[ix] 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.
Academic research found that fossil fuel interests, led by oil and gas companies and industry associations, had 11,000 meetings with the Canadian government between 2011 and 2018. [i] That's almost four meetings per day every single day of the year for almost a decade.
Impact on legislation
- Canadian Environmental Assessment Act: In 2012, the Canadian Environmental Assessment Act, which governs how proposed industrial projects are assessed, was replaced with a new version known as CEAA 2012. Under this new assessment act, thousands of proposed industrial, infrastructure and other projects no longer needed to undergo a federal assessment, and those few projects that were assessed received much less scrutiny.[ii]
Access to Information requests show that in December 2011, four oil and gas industry associations sent a letter to the federal government asking that six environmental laws that govern the oil and gas sector be reformed to encourage petroleum development.[iii]
- Impact Assessment Act 2019: Federal environmental assessment laws were again updated in 2019, resulting in the Impact Assessment Act (IAA 2019). In the final bill, certain high carbon projects will be entirely exempted, including gas fracking and in situ oil sands projects-the two main ways oil and gas companies will increase their carbon emissions.
Lobbying records show that industry representatives met meet 945 times in 12 months with government officials on the new Impact Assessment bill.[iv] When the bill went to the Senate, some amendments used exactly the same language as amendments proposed by oil companies or industry lobby groups.
- Carbon Pricing: Access to information documents also show that in 2013 showed that the oil industry successfully delayed,[v] and then killed, proposed carbon pricing legislation.
- Methane reductions: In 2016, the federal government proposed regulations to reduce methane leaks from the oil and gas sector, to be implemented in 2018 and 2019. The federal regulations were finally passed in April 2018, but not before the oil and gas lobby successfully delayed implementation of some regulations until 2020, and others until 2023. Taken together, the delays and cuts will lead to an estimated 55 million tonnes in additional GHG emissions by the time the regulations fully come into force in 2023.[vi]
[i] Riley, S. J. and S. Cox. (June 13, 2019). "Industry responsible for 80 per cent of Senate lobbying linked to Bill C-69." The Narwhal. Access at: https://thenarwhal.ca/industry-responsible-for-80-per-cent-of-senate-lobbying-linked-to-bill-c-69/
[ii] Ecojustice. (2012a). "Legal Backgrounder: Canadian Environmental Assessment Act (2012) - Regulations." Accessed at https://ecojustice.ca/wp-content/uploads/2015/03/August-2012_FINAL_Ecojustice-CEAA-Regulations-Backgrounder.pdf
[iii] Paris, M. (Jan. 9, 2013). "Energy industry letter suggested environmental law changes." CBC. Accessed at: https://www.cbc.ca/news/politics/energy-industry-letter-suggested-environmental-law-changes-1.1346258
[iv] Heydari, A. (Jun. 13, 2019). "Changes to Bill C-69 'unprecedented' says Alberta senator, but energy industry isn't placated." CBC. Accessed at: https://www.cbc.ca/news/canada/calgary/senate-changes-c69-unprecedented-1.5173985
Riley, S. J. and S. Cox. Op. cit. 11.
[v] McCarthy, S. (Nov. 8, 2013). "Oil industry successfully lobbied Ottawa to delay climate regulations, e-mails show." The Globe and Mail. Accessed at: https://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/oil-industry-successfully-lobbied-ottawa-to-delay-climate-regulations-e-mails-show/article15346866/
[vi] Calculated by the Pembina Institute using the Environment and Climate Change model.
The oil and gas industry has long been considered a stable source of employment for Canadians in general and Albertans in particular. However, while Canadian oil production continues to increase, the oil and gas industry's share of the labour force, and the number of jobs per barrel produced, are decreasing. This is due to factors such as sustained low resources prices, increased output from existing projects rather than the creation of new projects, and the increase in automation.
Changes to the labour market over time
- The number of people employed, directly and indirectly, by the oil and gas sector has fallen from 432,680 in 2014 to 318,235 in 2018. This represents a decrease of 26.5 per cent.[i] Over the same period, Canada's oil production has increased from 3.8 million barrels per day to 4.6 million barrels per day, an increase of 22.16 per cent.[ii]
- Job numbers in oil and gas extraction, support activities for oil and gas extraction and pipeline transportation have all started to increase since the downturn in oil prices from 2014 to 2016. However, engineering construction jobs, which accounted for 57 per cent of all oil and gas jobs on average between 2014 and 2018, have continued to decrease rather than recover.[iii] (Figure 1)
- A number of companies are investing in automation rather than hiring labour.[iv]
- Despite the loss of jobs due to the recession and automation, new opportunities are arising in the oil and gas sector that may create new streams of employment:
- Smart fields. The convergence of the oil and gas sector with information and communication technologies, big data, automation and blockchain is already resulting in new jobs
- Capturing methane. The need to measure methane, find leaks, develop technologies to capture methane and export technologies and expertise would result in job creation.
- Decommissioning and reclaiming inactive infrastructure. Alberta has a growing list of inactive wells due to a regulatory loophole that allows owners to "suspend" assets indefinitely. Properly decommissioning this infrastructure and reclaiming the land could create tens of thousands of jobs.[v]
Figure 1: Jobs from oil and gas in Canada
By the Numbers
- Oil production in Canada grew by 75 per cent from 2000 to 2016.[i]
- Alberta's oilsands are the fastest-growing source of Canadian oil. In 2017, they produced about 2.8 million barrels per day. Trajectories that don't account for further action on climate or technology change predict production could reach almost 4.5 million barrels per day by 2040, a 58 per cent increase.[i]
- As oil and gas production has increased in the last five years, carbon emissions from the oil and gas industry have also increased, and now represent 27 per cent of Canadian greenhouse gases.
- Alberta generates 38 per cent of national emissions, representing 273 million tonnes (Mt) out of a national total of 716 Mt in carbon pollution in 2017.[ii]
- By 2030, the oil and gas sector will account for 41 per cent of Canada's total carbon budget (211 Mt out of 512 Mt) as per our international commitments (Table 9).[iii]
- If Canada follows through on its commitment to reduce emissions by 80 per cent by 2050, oil sands emissions at 2030 levels would account for 74 per cent of Canada's total emissions budget; total oil and gas emissions at 2030 levels would use up more than Canada's total carbon budget (Table 9).[iv]
- According to a 2018 Stanford study that evaluated the carbon intensity of 50 oil producing countries, Canada produces the fourth-most carbon-intensive oil in the world, just after Algeria, Venezuela and Cameroon, on average 70 per cent more carbon-intensive oil than the global average.[v] Forty-six countries produce oil that has a lower average carbon intensity.[vi]
- In 2017, oil and gas companies operating in Canada made a combined $46.6 billion in net profits.[vii]
- Between 2000 and 2017, corporate taxes paid on drilling and refining in Canada have declined by more than 50 per cent while royalties paid to governments have dropped by more than 60 per cent.[viii]
- The royalties accumulated by the Alberta government from both conventional oil and unconventional oilsands production between 1970 and 2005 are about $105 billion, less than half of the province's accumulated liabilities.[ix]
- Jobs: Almost 30,000 jobs have been cut in the oil industry between 2014 and 2018,[x] with another 12,000 expected to be cut in 2019.[xi]
- Only 0.1 per cent of the land in Alberta disturbed by oilsands mining has been reclaimed, certified and returned to the province.[xii]
- In 2017, out of the 450,000 oil and gas wells drilled in Alberta, 185,000 are active and producing oil and gas; 155,000 inactive wells are waiting to be fully decommissioned (or made active again); and another 109,000 have been properly decommissioned and reclaimed.[xiii]
- Of the inactive wells, 3,370 have been left behind by bankrupt companies and are now managed by the Orphan Well Association
[i] Hughes, D. (2018). Canadaʼs Energy Outlook." Accessed at: https://ccpabc2018.files.wordpress.com/2018/05/cmp_canadas-energy-outlook-2018_full.pdf
[vii] Kornik, S. (Nov. 12, 2018). "Don't worry about Canada's big oil companies, they're doing just fine: report." Global News. Accessed at: https://globalnews.ca/news/4643295/canada-big-oil-company-profits-report/
Frequently Asked Questions
How many people does the oil and gas industry employ in Canada?
The oil and gas sector represents 1.7 per cent of total employment in Canada.[i] Canada's entire oil and gas sector, including conventional oil production, unconventional oilsands production, petroleum refining, services provided to oil and gas production, oil pipelines and natural gas pipelines, represents 7.0 per cent of the Canadian economy.[ii]
Nearly half of total employment in the oil and gas industry are time-limited jobs in engineering and construction, which don't last the lifetime of the project. Once a project is operational, the number of jobs it provides decreases significantly, and therefore job growth in the sector relies primarily on ongoing expansion.[iii]
Will the global demand for oil increase in the next 50 years?
Oil demand will not increase indefinitely. If the world is to avoid catastrophic climate change, the average rise in global temperature will have to be limited to 1.5 to 2 degrees Celsius.[iv] The lower limit of 1.5 degrees is highly desirable given the very significant impacts on food security, water availability, poverty and biodiversity that occur as the temperature warms above that level.[v]
All the global economic scenarios that allow the world to realistically limit temperature increases to this range project a significant decline in oil demand. The scenarios that strictly limit temperature increases to 1.5 degrees forecast a decline in oil demand of 50 to 87 per cent by 2050, and all require some reliance on negative emissions technology.[vi] Even a scenario that includes a 2 degree Celsius increase forecasts a 55 per cent reduction in global oil demand.[vii]
Is Canada's oil environmentally better than other sources of oil?
Emissions intensity of oil sands crude is high. In a scientific study of the different types of oil produced around the world, the average Canadian crude was ranked the fourth highest,[viii] and oilsands crude produces higher emissions per barrel than the Canadian average. Emissions from producing oilsands crude are likely higher than this ranking implies, given that a scientific study found that measured emissions were on average 30 per cent higher than emissions reported using international standards.[ix]
Are environmentalists singling out Canadian oil for protests?
Environmentalists are targeting oil production and infrastructure like pipelines everywhere. Canada's oilsands are far from unique in getting attention from climate activists. Those who want to see greater climate action are fighting against the expansion of coal, oil and natural gas everywhere, including infrastructure projects such as oil pipelines. Famous examples include the Adani coal mine in Australia,[x] the Dakota Access Pipeline,[xi] and many more.
The Lofoten Declaration calls for no new exploration or expansion of fossil fuels, and a transition away from those energy sources.[xii] The list of signatory organizations include groups from all over the world working to keep fossil fuels in the ground, and is an indication of the opposition to projects in countries as varied as the United Kingdom, Norway, Argentina, Brazil, the United States, China and Canada.
Environmentalists do not want to shut down oil overnight, but think the industry is big enough.
It is impractical to think that Canada could phase out the oil and gas sector immediately, or even over a few years. But allowing increased expansion is also a bad idea. Canada's oil and gas industry, like other fossil fuel sectors, will have to be phased out over the next few decades if the world is to avoid dangerous climate change impacts.
There is already enough fossil fuel infrastructure in the world to take the planet beyond the 2 degrees Celsius threshold, and well beyond 1.5 degrees.[xiii] That means that to address climate change fossil fuel projects need to be retired early, rather than continuing to build oil, coal, and natural gas projects that will further increase greenhouse gas emissions.[xiv] If those projects are built, they will either take the world past safe climate limits, or they will become stranded assets.
Is Canada doing its fair share to combat climate change?
Canada is a top 10 global carbon polluter in absolute terms. Canada has the 38th largest population in the world but is the 9th in current contributions to the pollution that causes climate change.[xv] Canada emits more carbon pollution per person than every other G20 country.[xvi]
Despite the fact that the Paris Agreement is the fourth global climate pact Canada has entered into since 1992 (promising to reduce carbon emissions in every one), our emissions have increased 17 per cent since then. There are 195 signatories to the Paris Agreement; if Canada were to be absolved of responsibility, 186 countries that have lower emissions would need the same consideration.
[ii] Energy Exchange. "Energy and Canada's GDP." https://www.energy-exchange.net/fuel-electricity-canadian-gdp/