Environmental Regulation of Canadian Oil Sands Projects is Similar to Other Operations of Comparable Size and Scope, IHS CERA report says

Download the complete report: www2.cera.com/oilsandsdialogue

Monday, January 23, 2012 6:41 pm EST

Dateline:

CAMBRIDGE, Mass.
"The report provides important context to the ongoing discussions about the development of Canadian oil sands"

The environmental regulatory system for Canadian oil sands is similar in rigor to that of its peers, according to a new case study by IHS CERA. The report assesses the project-level environmental regulatory system for oil sands compared to South Australian Mining and Alaskan mining and oil operations.


The Southern Australia and Alaskan operations were determined to be suitable project-level peers to the oil sands because their operations are similar in size and scope, and they have comparable governance, resource investment and development philosophies. Given the different growth outlooks for the jurisdictions (oil sands are projected to grow rapidly, possibly doubling over the next decade while the growth outlooks for South Austrailia and Alaska are relatively modest) regional requirements are not directly comparable, thus the report does not make comparisons at the regional level.


“The report provides important context to the ongoing discussions about the development of Canadian oil sands,” said Jackie Forrest, director of the IHS CERA Canadian oil sands dialogue. “While this is not a comprehensive list of all aspects of environmental regulation, it provides an illustrative case study. What we found was, for the specific examples we compared, there are more similarities than differences between oil sands environmental regulation and that of its peers.”

Among the similarities found:

  • Project-level regulation – The project approval, ongoing operations and project closure phases of a project's life—including the data required and process—were found to be similar for the Canadian oil sands and its peers. Similarities include the approval process, public consultation and outcomes during approvals, the use of inspections and enforcement, and requirements for environmental monitoring.

  •  Data availability and transparency –When considering project approvals, reclamation financial security, enforcement and inspections data availability and transparency for oil sands were found to be comparable to others.

  • Consultation requirements during operations – Alaska and South Australia also have no formal requirements for oil and gas developments, though they are required for active mines. The oil sands regulatory system also has no formal requirements. However, in all three jurisdictions many operators voluntarily consult with local stakeholders on a regular basis.

  •  Financial securities – All jurisdictions examined require financial securities for surface mining operations in case operators go bankrupt and cannot reclaim lands disturbed during the operation.

  • Project denials are rare – Because of on-going vetting prior to submission, a common criticism of oil sands development is that projects are always approved. The report finds that project denials are also rare in South Australia and Alaska. One reason for few denials is that when a project developer discovers the regulator’s requirements cannot be met they typically either terminate the costly application process or change the project design to address the regulator’s concern.

Although many similarities were observed between oil sands regulations and that of its peers, differences do exist, the report says.

  • Differences in process sequence - Lands leased for Canadian oil sands development are leased to industry prior to studying the environmental impacts or consulting the public. The process proceeds in the opposite order in Alaska, where an environmental impact assessment is conducted and stakeholders are consulted before lands are made available to resource developers with stipulations and conditions for the region as a whole. However, Alberta is currently in the process of establishing a regional plan that encompasses the oil sands development area. If the plan is approved, oil sands projects would be subject to regional conditions and stipulations similar to Alaska, the report notes.

  •  Method for financial security differs. While all jurisdictions examined require financial securities for surface mining operations in case operators go bankrupt and cannot reclaim lands disturbed during the operation, the method for oil sands differs from the peer group in one aspect. For Alaska and South Australia, the financial securities are intended to cover all estimated reclamation costs. For oil sands, only part of the reclamation cost is paid by the funds in the government's financial security—the remainder of the cost is covered by the value of the resource (the bitumen available for recovery).

The report, Assessing Environmental Regulation in the Canadian Oil Sands is the latest report from the IHS CERA Canadian Oil Sands Dialogue, which brings together a wide variety of stakeholders to participate in an objective analysis and open exchange on the benefits, costs, and impacts of various choices associated with Canadian oil sands development. The dialogue addresses a range of topics that have the potential to shape the future growth of oil sands.

The complete report is available for download at www2.cera.com/oilsandsdialogue

About IHS ( www.ihs.com)

IHS (NYSE: IHS) is the leading source of information and insight in critical areas that shape today’s business landscape, including energy and power; design and supply chain; defense, risk and security; environmental, health and safety (EHS) and sustainability; country and industry forecasting; and commodities, pricing and cost. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS employs more than 5,500 people in more than 30 countries around the world.

 

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Contact:

Energy; Natural Resources
Jeff Marn, +1 202 463 8213
Energy Strategy, Renewable Energy
jeff.marn@ihsmarkit.com