The Next Government needs to address Alberta’s Fossil Fuel Liabilities Part 2

The Next Government needs to address Alberta’s Fossil Fuel Liabilities

Part 2: Oil Sands Fluid Tailings Management

Part 1 of this blog (see here) looked at the end of life environmental liabilities associated with fossil fuel activities in Alberta.  But there are ongoing operational concerns – as highlighted by the recent unplanned releases of fluid tailings from the Imperial Oil Kearl Oil Sands Facility – that raise potential safety and health risks and environmental impacts of fossil fuel operations.  These unplanned releases particularly highlight the lack of transparency and poor communication on behalf of the Alberta Energy Regulator (AER).

The AER is currently responsible for regulating all aspects of the oil and gas industry including having authority to issue approvals under the Environmental Protection and Enhancement Act and the Water Act.  Enforcement and compliance activities also fall within the AER’s mandate.  While this may increase efficiency from the perspective of the oil and gas industry participants, it also results in a lack of transparency and independent regulatory oversight of the industry. It is time to consider alternative regulatory structures to ensure environmental protection and adherence to the pollution pays principle – rather than industry efficiency – guide oil and gas regulation in Alberta.

The Polluter Pays Principle and the Legacy of Fossil Fuels in Alberta

As has been stated by the Supreme Court of Canada, the polluter pays principle “has become firmly entrenched in environmental law in Canada… [and] also recognized at the international level”.[1]  The SCC describes the polluter pays principle as:

To encourage sustainable development, that principle assigned polluters the responsibility for remedying contamination for which they are responsible and imposes on them the direct and immediate costs of pollution.  At the same time, polluters are asked to pay more attention to the need to protect ecosystems in the course of their economic activities.[2]

In simple terms, the polluter pays principles means that industry should clean up the mess it makes.  Implementation of this principle, however, may not be so simple (see our publication The Polluter Pays Principle in Alberta Law, An Introduction & Survey for more discussion).[3]

Looking at the legacy of fossil fuels in Alberta, it is apparent that the polluter pays principle has been poorly implemented with respect to fossil fuel extraction in the province.  There are over 6,000 orphan sites in Alberta – meaning there is no legally responsible or financially able person to conduct necessary abandonment and reclamation.[4] A public statement by the Alberta Energy Regulator (AER) in 2018 estimated oil and gas liabilities at $58.65 billion[5] (although the AER’s internal estimates have been as high at $260 billion[6]). Other estimates place the cost of Alberta’s well liability at $100 billion.[7]  Placing these liabilities on the public purse – as opposed to those who created the liabilities – diverts public funding that could be used in support of the provincial educational or health care systems.

This part of the blog looks at oil sands fluid tailings management in Alberta.  The recent releases of fluid tailings from the Imperial Oil Kearl Oil Sands Facility highlight the potential safety and health risks and environmental impacts of fossil fuel operations within Alberta.

End-of-Life Liabilities are Not the Only Problem: Oil Sands Fluid Tailings Management

Oil sands operations – like other oil and gas operations – are subject to general environmental legislation such as the provincial Environmental Protection and Enhancement Act and the Water Act, and the federal Fisheries Act.  These pieces of legislation operate to prohibit the release of substances into the environment, to prohibit land-based activities that affect water, and to prohibit deposition of substances that impact fish habitat (except in accordance with statutory authorizations that may be granted).

There are also specific requirements for the management of oil sands fluid tailings.  The Tailings Management Framework (TMF)[8] is meant to provide “direction to manage fluid tailings volumes during and after mine operation in order to manage and decrease liability and environmental risk resulting from the accumulation of fluid tailings on the landscape”.[9]  The TMF is administered through the Oil Sands Conservation Act and the Environmental Protection and Enhancement Act, and fills a gap by providing a framework to monitoring and management of fluid tailings accumulation.  It is complemented by the Surface Water Quantity Management Framework for the Lower Athabasca River and the Water Conservation Policy for Upstream Oil and Gas Operations.

The TMF outlines several policy outcomes, one being minimization of liability to Albertans by establishing a “responsible balance between protecting the people of Alberta from the environmental and economic costs associated with the liability of the accumulation of fluid trainings during oil sands mining”.[10] A second policy outcome is management of environmental effects to minimize them for current and future generations which includes progressive reclamation of fluid tailings over the life of mining projects and the consideration of end landscape objectives during planning and operation phases. Overall the TMF is very focused on managing the volume of accumulated fluid tailings:[11]

Fluid tailings accumulation is minimized by ensuring that fluid tailings are treated and reclaimed progressively during the life of a project and all fluid tailings associated with a project are ready-to-reclaim within 10 years of the end of mine life of that project.  The objective will be achieved while balancing environmental, social, and economic needs.

The TMF requirements are to be incorporated into new project approvals, amendments and renewals. It should be noted that oil sands approvals have relied heavily on the concept of “adaptive management” meaning that known environmental concerns will be addressed through unknown future technology.[12]  At this point in time, fluid tailings are being managed using pit lakes in which solids (sand, clay and residual bitumen) settle out from water.  Although some water is recycled back into oil sands extraction processes,[13] there are plans underway to release the tailings water into the Athabasca River.[14]

As well, the TMF requirements are reflected in the AER’s Directive 085.[15]  For instance, oil sands mining project applications require a fluid tailings volume profile and a management plan.  If the profile and plan are approved by the AER, then thresholds are set to achieve an end-of-mine fluid tailings volume (thresholds consist of a profile deviation trigger, a total volume trigger and total volume limit).

There is also a Mine Financial Security Program which collects security deposits based on the estimated liabilities of a mine.[16]  This program is meant to protect Albertans from the costs associated with oil sands mines inability. There have been criticisms of this program for its failure to collect sufficient amounts of security, as well as, a lack of transparency.[17]  For instance, in 2015 the Auditor General of Alberta (AGA) found that there was significant risk that asset values are being overstated resulting in insufficient security amount being collected.[18] In 2021, the AGA reviewed the implementation of its 2015 recommendations and found there was unsatisfactory progress in changing the calculation of security.[19]

A Failure in Management: Imperial Oil’s Kearl Oil Sands Fluid Tailings Releases

While investigations are still underway, there have been releases of fluid tailings water at Imperial Oil’s Kearl Oil Sands Facility.[20]  These releases have triggered responses by both the provincial and federal governments.  Given that these are substance releases there may be consequences under the provincial Environmental Protection and Enhancement Act. As well, potential impacts on water may trigger consequences under the provincial Water Act or the federal Fisheries Act. However, it should be noted that there may be evidentiary difficulties in demonstrating a causal link between the releases and signifiant adverse environmental effects or harm to fish (especially where surrounding water bodies dilute the releases).

Details of releases can be found in the Environmental Protection Order (EPO) which was issued by the AER on February 6, 2023.[21]  The EPO outlines that two releases occurred, one on May 19, 2022 and the other on February 4, 2023.  The earlier release was determined to be seepage from a tailings area.  The second release was due to overflow of an industrial wastewater storage pond.  Imperial Oil maintains there is no impact to wildlife or local drinking water sources, and that the substances did not enter any rivers.[22]

There was no public notification – including to the surrounding Indigenous communities – of the release that occurred in May 2022 until issuance of the EPO almost 9 months later.  Nor was notification provided to the Governments of Canada or the Northwest Territories.

On March 13, 2023, Environment and Climate Change Canada issued a statement that it believed the release to be deleterious or harmful to fish and accordingly issued a direction under the federal Fisheries Act requiring Imperial Oil to contain the seepage and prevent its entry into fish-bearing waters.[23] On May 4, 2023, a formal investigation for a suspected contravention of section 36(3) of the Fisheries Act was opened by Environment and Climate Change Canada.[24]

While not a release of fluid tailings, there was a release of water from a sedimentation pond at the Suncor Fort Hills site on April 16, 2023.[25]  This release of water had Total Suspended Solids that exceeded its approval levels.

Obviously, fluid tailings releases are concerning with serious potential for impacts on human health and safety, and on the environment.  It also concerning that news of a leak was not shared by the regulator until 9 months after its initial occurrence.  This is a lack of transparency and communication that exacerbates the potential harm from the leak itself.

Alberta’s Government can and should implement a better system

Currently, the AER is responsible for regulating all aspects of the oil and gas industry including authority to issue approvals under the Environmental Protection and Enhancement Act and the Water Act.  Enforcement and compliance activities also fall within the AER’s mandate.  While this may increase efficiency from the perspective of the oil and gas industry participants, it also results in a lack of transparency and independent regulatory oversight of the industry.  Indeed, lack of transparency has often been raised as an issue for various aspects of oil and gas liability: including the calculation of security deposits, the determination of closure spend quotas, the estimations of liability, and the containment and treatment of fluid tailings.  Without high levels of transparency, there is a risk of regulatory capture which results in regulation and decision-making that is primarily driven by  industry’s interests as opposed to public interest.

Although the broad framework for regulation of fossil fuel industry is set by legislation, much of the detailed day-to-day operational matters are governed by rules created the AER.  The AER is responsible for decision-making on statutory approvals.  It is also responsible for ensuring compliance on all aspects of the fossil fuel industry including environmental, habitat and water impacts.  Enforcement decisions – as well as communications around those decisions – fall within the AER’s discretion.  In other words, a great deal of authority is centred in the AER – a regulatory body with no elected officials – which has typically focused on enhancing regulatory efficiency from the perspective of industry (e.g. one-stop automated decision-making).  Without elected officials, there is limited accountability for the AER’s (in)actions. Historically, there have been only very limited attempts to involve the public in the AER’s rule-making processes.  It is time to consider alternative regulatory structures to ensure environmental protection and adherence to the pollution pays principle – rather than industry efficiency – guide oil and gas regulation in Alberta.

[1] Imperial Oil Ltd. v Quebec (Minister of the Environment), [2002] 2 SCR 624 at para. 23.

[2] Ibid. at para. 24.

[3] Environmental Law Centre (Alberta), The Polluter Pays Principle in Alberta Law, An Introduction & Survey (Edmonton: 2019, Environmental Law Centre).

[4] See list of orphan sites on the Orphan Well Association website, online: https://www.orphanwell.ca/about/orphan-inventory/.

[5] Alberta Energy Regulator, “Public Statement” (November 1, 2018), online: https://static.aer.ca/prd/documents/news-releases/AERPS2018-05.pdf.

[6] Carolyn Jarvis et al., “Alberta regulator apologizes for spooking public with $260-billion cleanup cost estimate” (November 2, 2018) Global News, online: https://globalnews.ca/news/4621955/alberta-regulator-apologizes-for-spooking-public-with-260-billion-cleanup-cost-estimate/ [Jarvis et al.].

[7] Sharon J. Riley, “Investigation: The story of Alberta’s $100-billion well liability problem. How did we get here?” (November 2, 2018) The Narwhal, online: https://thenarwhal.ca/the-story-of-albertas-100-billion-well-liability-problem-how-did-we-get-here/.  See also the Alberta Liabilities Disclosure Project website, online: https://www.aldpcoalition.com.

[8] Lower Athabasca Region: Tailings Management Framework for the Mineable Athabasca Oil Sands (Edmonton: 2015, Alberta Government) [TMR].

[9] Ibid. at 1.

[10] Ibid. at 8.

[11] Ibid. at 8.

[12] See Nathalie J. Chalifour, “Case Comment: A (Pre)Cautionary Tale about the Kearl Oil Sands Decision, The Significance of Pembina Institute for Appropriate Development et al. v Canada (Attorney-General) for the Future of Environmental Assessment” (2009) 5(2) McGill L.J. 251.

[13] Canadian Association of Petroleum Producers website, online: https://www.capp.ca/explore/tailings-ponds/.

[14] Bob Weber, “Draining tailings into Athabasca solution under review in oilpatch, says Guilbeault” (August 18, 2022) CBC website, online: https://www.cbc.ca/news/canada/edmonton/oilsands-tailings-guilbeault-athabasca-alberta-1.6554755.

[15] Alberta Energy Regulator, Directive 085: Fluid Tailings Management for Oil Sands Mining Projects (May 19, 2022).

[16] Alberta Energy Regulator website: https://www.aer.ca/regulating-development/project-closure/liability-management-programs-and-processes/mine-financial-security-program.

[17] See for example, Drew Yewchuk, “Another Year Gone under the Mine Financial Security Program” (October 19, 2021), ABlawg, online: https://ablawg.ca/2021/10/19/another-year-gone-under-the-mine-financial-security-program/.

[18] Auditor General of Alberta, Report of the Auditor General of Alberta, July 2015  (Edmonton: 2015, Office of the Auditor General of Alberta).

[19] Auditor General of Alberta, Report of the Auditor General of Alberta, June 2021 (Edmonton: 2021, Office of the Auditor General of Alberta).

[20] Alberta Energy Regulator website, online:  https://www.aer.ca/protecting-what-matters/holding-industry-accountable/investigations/ongoing-investigations/imperial-oil-kearl-oil-sands.

[21] Alberta Energy Regulator website, online: https://www1.aer.ca/compliancedashboard/enforcement/202302-02_Imperial%20Oil%20Resources%20Limited_Kearl_Order.pdf.

[22] Imperial Opening Statement to Standing Committee on Environment dated April 20, 2023, online: https://www.imperialoil.ca/-/media/imperial/files/operations/kearl/imperial-opening-statement-april-20-2023.pdf?la=en-ca&hash=06AEBBD146F89D7574DC66C66E93B041E9AF8CFC.

[23] Bob Weber, “Imperial Oil faces federal order to stop seepage as tailings leak deemed harmful to wildlife” (March 14, 2023) CBC website, online: https://www.cbc.ca/news/canada/edmonton/kearl-imperial-oilsands-leak-1.6778165.

[24] Government of Canada website, online: https://www.canada.ca/en/environment-climate-change/news/2023/05/environment-and-climate-change-canada-enforcement-opens-a-formal-investigation-into-imperial-oil-ltds-kearl-oil-sands-site.html.

[25] Alberta Energy Regulator website, online: https://www.aer.ca/providing-information/news-and-resources/news-and-announcements/announcements/announcement-april-18-2023.

Photo credit Julia Kilpatrick, Pembina Institute/flickr