The Oil Sands - Engaging Constructive Dialogue

Churches Doing Good Stuff Together - Annual Kairos Event

Presentation Notes

February 6, 2010
Our Lady of Grace Parish,
Calgary Alberta

Notes recorded for Kairos Calgary Committee by Jim Hillson. No representation is made or implied concerning the fullness or accuracy of the record. There has been an attempt to record faithfully the intent and direction of remarks, but the notes shall not be taken as an exact record.. jhh

Chairperson: Clint Mooney (CM), Chairperson, Kairos Calgary

Don Thompson (DT), President of Oil Sands Development Group. Talk entitled Oil Sands-For the Record

Andrew Nikiforuk (AN), Author Tar Sands: Dirty Oil and the Future of the Continent

Antal:

• Welcome to the parish and the day
• Opening Prayer

Ryan Anderson:

• Introduction to work of Kairos Calgary
• The Plan for the day
• The Form and Intention of Dialogue
  • Everyone listens
  • Actively seek to understand from the perspectives different from your own
  • Be open to having your perspective changed
  • practice charity
  • seek out questions and the openings they create

CM: I have heard both these speakers - separately - and at forums friendly to them. At both forums the questions were the same questions. How fortunate we are that they are both with us today!

DT: Mining, forestry, farming, fishing, oil and gas - these resources are the basis of Canada's export based economy. Thirty years ago, in Fort McMurray we were pioneers in solving technical problems to unlock the resource. Today Canada's oil reserves are second in the world to Saudi Arabia. Oil Sands are 46% of the world's accessible oil. If not from Canada, then from where? Iran? Iraq? Nigeria? Venezuela? How reliable? Other issues.

I am proud of what we have done in Ft McM. We worked hard at improvements in techniques for production, reclamation, tailings ponds decommissioning, reduction in operating costs, reducing environmental impact. We were so busy with those tasks that we forgot to tell our publics what we were doing. Doing good work is not enough. In situ technology has opened up 80% of the resource. Since 1990, the industry has Reduced its Green House Gas (GHG) intensity by 38%. Today in situ technology uses primarily saline water - no river water, but saline or non-potable ground water.

Tailings: Problem of fine suspended clays. How to remove water from fine clays. Several effective technologies have been developed and are in use. Suncor decommissioned its first pond in 2007. Other reclamation projects 2008 to the present. We keep raising the bar-business cannot thrive globally without getting better at all phases of the work we do.

We need a balanced dialogue - so we are setting the record straight. I have 30 years of living in Ft McM and in the industry. We are committed to continuing world leadership in solving tough problems. We do not want to lose our 'social license to operate.'

Oil sands, 80% of the reserve is too deep to mine. Mining is able to access only 20% of the resource and that is squeezed into only 2.5% of the surface area covered by the oil sands. The vast majority of the boreal forest is protected and will not be touched by mining activity.

They say it is Dirty oil. Well, all oil is dirty. Wells-to-wheels analysis puts the carbon footprint of oil sands oil in about the same category as other oil sources. Light sweet crude is in steep decline and increased volumes from this source are not available.

GHG: 80% of GHG comes from use of the product rather than production. We can't solve our GHG problems by concentrating only on the 20% related to production Š we all must do our part to reduce our emissions! 95% of Canada's GHG comes from sources other than oil sands. 1/1,000 of world GHG is oil sands related. Far bigger problem is coal - US coal, Chinese coal. On average Calgary air quality is 3 times worse than Ft McM. Ft McM airshed is monitored 24/7 and data is available on line real time. People are too willing to leap to negative conclusions: Remember the story of the two-jawed goldeye. It was just a dead fish half decomposed. Never had two jaws. No genetic mutation.

Athabasca River: Bitumen has been in the river for 100,000 years because Bitumen is in the landscape and every spring a certain amount finds its way to the river as the ice erodes into the cut banks of exposed ore along the river. The Athabasca is no where no near allocated as much as southern AB rivers. Low flow periods are capped. No river in AB has more protected low flow control as the Athabasca.

The industry is controlled. Project approval takes about 2.5 yrs. Every project's operating approval is subject to renewal every 10 yrs. Oil Sands dev is not out of control!

Jobs: 465,000 Canadian jobs created by Oil Sands. 32,000 jobs in ON - as many as the auto industry. 15,000 jobs in PQ. Nothing provides dignity and self respect for an individual than a job.

Where to next? World pop is 7 billion people. 2.5 billion do not have electricity. The need for energy is going to grow. We are going to need energy for the foreseeable future - oil and gas, coal etc.

Energy Security. Economy. Environment. It is possible and in the best interests of AB and CAN to continue to develop the oil sands.

CM: Introductions: Group includes guests from Pembina Institute and APEGGA - Association of Professional Engineers, Geologists and Geophysicists of Alberta.

AN: I will speak of the Political, Fiscal and Environmental implications of this project - to help you pose better and sharper questions.

50 years ago Ivan Illich said, We need to move toward a low energy, low tech society because of the myriad of problems associated with high energy consumption.

We are a resource developing people. The history of Canada is a story of export of furs, white pine, uranium and now bitumen. In 1932 AB called this resource The Magic Sand Pile. The resource is dirty - that's why I call it tar instead of oil. Raw bitumen contains more than 50% pitch. It will not move through a pipeline unless diluted. You can't run a car on it without upgrading bitumen by taking out carbon and adding hydrogen. Synthetic crude still requires complex refining to remove sulphur and heavy metals. Canadian blended bitumen and Canadian synthetic crude is about the dirtiest oil in the world.

Capital intensity: As we run out of the light cheap stuff, business as usual is now gone. Example, One third of Shell total world reserves are in oil sands.

Two opposite views of the tar sands: Canada's new economic engine OR unsustainable and high cost resource with a dirty footprint. Karl Clark, a tar sands researcher once called the tar sands our second line of defence against peak oil. Oil has driven the population explosion of the planet. We are now into the second half of the age of oil. EG most of Norway's North Sea reserves are depleting rapidly. Also Mexico - about to become a net importer within 5 yrs. Canada is the number one supplier of oil to the US. More than half comes from the tar sands.

Alberta: Ralph Klein said we have energy to burn. I have never seen a pipeline I don't like. We give it away - 1% royalties. That's less than charged by most US states and oil producing countries. Giving away the resource has driven production in Alberta.

Now we face challenges:

• The Shale Gale: Shale gas has dropped gas prices. The AB revenue crisis is gas related - leading to a period of extended deficits.
• Canada: The petro dollar, moves up and down with the price of oil. By 2007 investments in tar sands has exceeded investments in our industrial sector. The Dutch Disease - the name given to the situation of dramatic loss of manufacturing employment. Manufacturers find it difficult to sell and export their goods as our dollar goes up. Tar sands drives up the dollar and drives down manufacturing investment.
• Rapid tar sands development has lead to overcapacity of pipelines to the USA and no oil security to the eastern half of the country! During its oil boom Norway saved $330 billion in 15 years. Alberta has saved $16 billion in 30 years. There is no sovereign fund in Canada. Why not?
• Oil hurts democracy over time. Alberta has become a one party petro state. The resource curse is the way oil revenue allows governments to own the networks of public discourse and buy public support.
• We have problems with water quality, air quality, tailings ponds seepage, etc. There is no effective monitoring or control. All water quality legislation in Alberta and Canada is systematically violated.
• We do this to ourselves and what do we get in return? The energy in / energy out equation has shifted. For conventional oil the energy return was 1 to 20. For a project to make energy sense it needs have an energy return of at least 1 to 3 - that is a minimum return needs to be a return of 3 barrels of energy for 1 barrel of energy in. But according to the federal government SAGD has an energy return of 1 to 1.4.
• Climate change. One third of Alberta don't believe in climate change. People of Saudi Arabian don't believe in Climate Change either. But the world will one day soon put a price on carbon.
• Peek Oil: What's ahead. Price volatility. The Deutsche Bank predicts that oil demand will peek demand in about 2016 and price volatility will reduce demand. As happened with whale old in the 19th Century.

St. Francis: Start by doing what's necessary. Then do what's possible. Pretty soon you are doing the impossible.

We need a national carbon tax. We need a carbon budget. And we need an air quality board ala CA. We need hard targets for renewable energy. China is moving faster than Canada. We need to reform the ERCB - they NEVER SAY NO!

We all want progress, and sometimes progress is turning around and going back.

RESPONSE, DT

• It wasn't oil that led to the loss of manufacturing.
• Energy exports bring in $170,000,000 per day. What would replace this part of our economy?
• Canada is an efficient emitter of GHG's - 1.7% of the globes GHG's and 2.7% of the globes GDP.
• Low energy and low tech life style would reduce GHG and change our lives and our economy.
• The post Copenhagen discussion needs to be about energy and not just about oil sands.
• We need renewable energy sources. If oil sands is the second line of defence, then certainly also need renewables as the third line of defence.
• Governments cannot respond to increased demand for services without increased revenues.
• The sulphur in the northern AB airshed probably comes as much from MB mines and smelters as Ft McM mines.
• Cancer: The story of cancer in Fort Chip is serious, but far from clearly connected to Oil Sands development in Ft McM. We need to dig further to know what's going on and the industry has always supported further study of this issue.

COMMENTS AN

• Fast Food, Winter holidays in the Caribbean etc have been the product of hydrocarbon exploitation
• The message of Bitumen is a warning: your time is running out. You need to make important decisions on how your society does business. You cannot go from conventional to unconventional and ignore the fact that a huge change has occurred and more change afoot.
• Petro dollar has changed the economy and dramatically affected manufacturing base of Ontario and Quebec.
• As high carbon emitters we have a moral obligation. The carbon economy has made us fat and lazy. The Middle East is also fat and lazy with foreign workers doing nearly all the work in the emirates.
• Cancer, Ft Chip If there is an environmental link to cancer rates in Ft Chip, then we also need to know the sources: run off from abandoned nuclear mines, pulp and paper mills, and more. We need to get to the bottom of these issues.
• David Schindler studies: much of the data challenging Schindler is not publicly available or subject to public review. The Govt has not been proactive, but remains reactive to the impact of massive development
• Author Jeff Rubin: Why Your World Is About to Get A Whole Lot Smaller: When you need to schlep 2 barrels of sand to get 1 barrel of oil you know you are in the bottom of the 9th inning.!

CM: Is constructive dialogue possible? Can the dialogue lead to policies? Table assignment: Discover pertinent questions. Come at it this way: Why would a reasonable intelligent person hold the view I am completely opposed to?

QUESTIONS

• Is the ERCB an adequate regulator of the industry? DT. Yes. Recognized around the world as a premier leader. And yes applications are approved because the applicants have invested a lot into getting it right in the first place. Alberta can be proud of its regulatory processes and the people who run them. AN It is a political organization responsible to the minister. It needs to be responsible to the legislature. It is way to friendly to industry - like similar commissions all over US and the world.
• Given that Oil Sands produces less than 5% of Canada's GHG - is the focus on the correct levers? AN The tar sands will be responsible 15 - 16% by 2020 - this makes it the fastest growing source of GHG. We cannot blame oil companies for the entirety of this problem. We need a tax on carbon. Carbon Capture and Storage makes no sense. DT We will only know if CCS is doable and affordable if we build it - that is why the govt has kicked in the first $2 billion.
• Who should be addressing social questions arising from rapid development? DT Social issues need joint response. Industry interest is to make sure Ft McM is an attractive place to live and work and raise families.
• Where does R&D come from? DT. Roles for both govt and industry. We need more R&D in tailings pond technology. AN. VESTAS (Denmark) has a higher R&D than practically any oil sands company in Alberta. We need more research in renewables - solar, geothermal, wind. Hydrocarbons have dwarfed everything else.
• Are there any "sinless" tar sands plants. No. There are no sinless plants. And there are no sinless consumers.
• Corporate welfare. AN. Oil Sands plants need to pay full price for natural gas.
• Current status of reclamation. What constitutes reclamation? AN Most industry and govt reports say they are uncertain about ability to reclaim. Wetlands cannot be reclaimed. It will not be the same landscape. It will have to be more salt tolerant and drought resistant and we are not setting aside enough money for reclamation and plant decommissioning. Science on end pit lakes is very uncertain. A lot of this area will be a sacrifice zone. DT I wish I could show you reclaimed lands. I have confidence that if I could show you would have more confidence than any photograph can show. Audience member described the predevelopment planning process.
• What Is The World Coming To? AN The age of oil will slowly come to an end. We will re-localize our economies. We will eat higher quality locally grown food. We will engage more with each other in local communities. We will move to a slower, saner world. DT Speaking as in industry representative we work to create wealth and employment and to try to assure a secure energy supply. The consumer looks to us for assurance that that there be gas in the pumps and power in the grid.
• Name two common starting points you could agree upon. AN We agree that we need a carbon tax. Result would help us to reduce carbon dependency. And we agree on moving to greater investment in renewable. DT. I like the vision of the "sinless" plant. That is a good starting point for industry planning. We could agree on getting to the bottom of the cancer incidence in Fort Chip.
• Leadership and Vision - is there a vacuum? AN There has been lack of provincial and national leadership. I have no idea what the government's vision for AB is. I have no idea what the national vision for the future of the tar sands is? If your leaders are not leading then we need to step up. DT In Alberta, Canada, the world, governance issues are huge - I do not criticize people in that role.
• Indicators: What metrics tell us what is really happening with this project. AN We have done no comprehensive study on the cumulative impact? Ft McM report showed that with rapid development we saw social deterioration. We have no report on Alberta or national impact. Which indicators? We don't know? Canadians are not strategic thinkers the way Europeans and Chinese are. DT Corporate social reporting is from perspective of a single company and a single project. A suite of social indicators have been used in Ft McM. It did not take root. See "Gillette Syndrome" for US study on rapid impact of hydrocarbon development.
• DT I believe in the market and not in the government picking winners and losers. AN I side with Peter Lougheed. One project at a time. I thank DT for having the courage to show up and I have been at so many forums where CAPP or govt didnÕt show up.
• Provincial or Federal Energy Strategy. DT The national energy strategy needs to be about more than oil sands. Focus on all sources of energy and integrates the nature and amount we need in a manner that supports and fragile economy having economic and ecological issues in mind. AN The absence of national policy has defaulted to rapid development of tar sands along with Dutch disease and social malaise in Ft McM. We need a comprehensive policy, including a sovereign wealth fund, keeping money in local economies etc. We don't think long terms. We develop and export.
• Canada vs Alberta. AN We need to look after Alberta first, then take care of the rest of Canada. We are too resource centred rather than Alberta centred. DT As a resource developer the Alberta sets the rules by which I do business.
• Audience: I see us heading toward a world where people are using more energy and more energy per person. Andrew, your world is imaginary - it doesn't exist. DT We are each using more energy. Hydrocarbon energy dependence will grow - but hydrocarbons will not fill the gap. AN Energy consumption is going up. Average Alberta consumers 60 barrels annually. If China and India aspire to live like North Americans we are going to hit a wall. They now consume about 2 - 5 barrels per capita. Every barrel of oil uses capital investment and water etc. The idea that we are entitled to more energy is questionable. The idea that North America can claim more energy slaves than India or China is a deeply moral question.
• AN a functioning political jurisdiction requires that we run on taxes and take the royalties off the table. Cap and Trade comes from the same people who gave you asset backed derivatives.

Bill Phipps: When and how are we going to have the public policy debates we need to have - including all the interests here today and more.

Donna Kennedy Glans: Constructive Engagement: Please tell politicians you know that what Kairos does is constructive engagement. Complexity: There isn't ever a right answer. When you are dealing with complexity there is never A Right Answer. You have to ask the right questions. You better have a right relationship. Faith: We don't ever take our faith hats off - no matter the complexity. At the end of the day, we have to create a shared narrative.

CM: Thank you for being part of this and sticking with it. Alberta needs days like this. Thank both of our speakers. Accept a small token of our appreciation. We close with a word of prayer.

Additional Questions Handed In But Not Discussed:

• Who owns the oil, really? It's a global resource.
• Who decides the pace of development, really? Why is it not staged?
• What drives development? Consumer demand or oil company profits?
• To get serious about GHG reduction: Why isn't nuclear or methane part of the discussion?
• If we use up natural gas for SAGD, then how will we assure natural gas for domestic use?
• Name the three things you agree on?
• From which aristocracy do you think we should buy the 2 million bbls/day of oil to replace oil sands production?

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