Canada's Oil and Gas

Alberta’s Oil Sands Raise Flaring Emissions as Rules Lag

Bloomberg,

18 June, 2013

In the farming country of northwest Alberta, heavy oil wells are becoming more common than cattle and combines. Along with money and jobs, the boom has brought smells and fumes that are adding to the greenhouse gas emissions from Canada’s oil sands.

Emissions from flaring, or burning of natural gas, methane and hydrogen sulphide associated with oil production, have risen in each of the last three years as drillers increased activity and the government failed to implement new industry targets.

“There’s no new absolute target to reduce flare or vent emissions,” said James Vaughan, who works at the Alberta Energy Conservation Board’s surveillance branch, in an interview. “The economics for conserving gas just doesn’t seem to be there” because of a decline in natural gas prices.

Flaring by companies including Husky Energy Inc. (HSE) is rising even as the Canadian government touts the country’s efforts to limit emissions to win support for TransCanada Corp. (TRP)’s Keystone XL pipeline. Prime Minister Stephen Harper met his European counterparts last week in Paris and London, appealing for them to stop EU plans to single out Alberta as a source of high-polluting energy.

Environmental groups such as 350.org and the Sierra Club have lobbied President Barack Obama to reject the Keystone XL pipeline, which would carry crude from Alberta to U.S. Gulf Coast refineries, saying that oil-sands production has a larger climate-change impact. Globally, about 5.3 trillion cubic feet of gas is flared annually, the equivalent of 25 percent of U.S. consumption of the fuel, according to the World Bank.

Surging Production

With bitumen production expected to surge to 6.7 million barrels a day by 2030, flaring and venting will continue to rise without new regulations, said Chris Severson-Baker, managing director of the Pembina Institute, a Calgary-based environmental research group and consultancy.

Flaring and vented gas from crude oil and bitumen production increased 66 percent between 2009 and 2011, the most recent figures available, according to ERCB data. The upward trend continued last year, according to preliminary data from the regulator.

Previous declines from 1996 to 2009 resulted from the implementation of recommendations from an alliance of non-governmental groups, industry, the public and government, known as the Clean Air Strategic Alliance, helping Alberta achieve the most “comprehensive” enforcement rules to manage flaring globally, according to a 2004 World Bank report.

Negative Impacts

Emissions from flaring in Nigeria have “negative impacts” on lung function, according to a report in the Research Journal of Environmental Earth Sciences published on March 8, 2012. Inhaling vapors associated with heavy-oil production may result in nose and throat irritation, headaches and nausea, Baytex Energy Corp. (BTE), a Calgary-based producer, said on its website.

A 2005 report by the Environmental Rights Action and Climate Justice determined gas flaring in Nigeria’s Bayelsa State likely causes 49 premature deaths and respiratory illnesses in 5,000 children annually.

Alberta, home to Canada’s oil and gas industry, relies on companies to determine whether capturing, burning or releasing gas, known as venting, is “economically viable,” said the ERCB’s Vaughn. A combination of measures, including a previous emissions target for the industry, allowed Alberta regulators to slash flaring emissions by 80 percent between 1996 and 2009.

Progress Imperiled

That progress is at risk without stiffer regulations and targets, said Severson-Baker.

“We knew because of industry trends that flaring and venting was likely to start climbing upwards,” he said in an interview. “When it came right down to it, industry wasn’t able to spend more money on flaring and venting abatement and the government wasn’t prepared to push any further.”

Canadian Natural Resources Ltd. (CNQ) was responsible for the largest volume of flared and vented gas in the province in 2011, followed by Husky, according to regulatory data. Smaller companies including Manitok Energy Inc. (MEI) flared more gas as a proportion of their production.

Massimo Geremia, chief executive officer of Manitok, didn’t respond to a request for comment. Husky spokeswoman Kim Guttormson declined to comment. Canadian Natural Resources declined to comment.

Alberta’s energy regulator is tabling new rules, expected by the end of the year. An increase in operators drilling oil wells with small volumes of associated gas, which is difficult and expensive to capture, has also contributed to the rising flaring and carbon dioxide emissions, said Vaughn.

Open Wounds

“We are looking at expanding the test to look at other parameters to take into account something outside of economics,” he said. “When the public comes to us and asks why isn’t this facility conserving and we go back to them and say the economics aren’t there, that’s a hard pill for the public to swallow.”

Those issues have surfaced in the Peace River district in an area called Three Creeks. For Thera Breau, the increased heavy oil production and flaring has coincided with open wounds and eye problems for her four sons, all under the age of seven.

“My baby had a red spot behind his knee and by the end of March the blotch spread to the other leg,” Breau, a 36 year-old physiotherapist, said in an interview. “All the gas is free-vented and free-flared. The regulations are lagging.”

Leaving Home

Breau is among half a dozen families who have left their homes in the Peace River area to get away from the fumes and bad smells, she said. Neighbors Marcel and Vivianne Laliberte in October left their farm where family members have grown grains since 1928 after suffering from bleeding noses, headaches and swollen glands.

“It’s a heart-breaking situation,” said Vivianne Laliberte, in a phone interview. “Proper monitoring is not being done and people’s concerns are being disregarded.”

Baytex voluntarily halted its drilling program in the area near Three Creeks about a year ago and added equipment to capture gas and a pipeline system to use or sell about 1 million cubic feet of gas daily that would have previously been vented, said Brian Ector, a Baytex spokesman.

“We’ve put a lot of time and effort into reducing the amount of venting and reducing the emissions and reducing the odors up at Peace River,” he said.

Baytex captured almost 95 percent of the gas produced during oil extraction at its operations across Alberta, better than the industry average, according to ERCB data from 2011.

“We have always been fully compliant with the ERCB regulations, but we want to go above and beyond that,” Ector said.

North Dakota

Alberta isn’t the only jurisdiction in North America wrestling with rising flaring and venting emissions.

Oil production in North Dakota has tripled since 2010 to 718,790 barrels a day in March and companies are flaring about 30 percent of the associated gases, said Ryan Salmon, director of the oil & gas program at Ceres, a network of investors that promotes sustainability through the adoption of environmentally friendly business practices.

“You can’t underestimate how much is going up in flames-- $1 million a day alone in North Dakota,” he said. “Reluctance on the part of companies comes down to near-term economics of getting infrastructure in place. You need to have both voluntary actions and regulation.” Ceres represents investors with $11 trillion worth of assets.

Oil producers can reduce flaring by connecting the produced gas to pipelines and selling or using the gas. If that’s not economic or practical, the “next best” option is to make sure the waste gas is combusted at the well site using high-efficiency gas incineration equipment to destroy volatile organic chemicals, said Audrey Mascarenhas, chief executive officer of Calgary-based Questor Technology Inc. (QST), which manufacturers gas-incineration equipment.

“Many will see the waste gas as still being combusted, however, when combusted at high efficiency the waste gases are being reduced to benign elements,” she said. “That is not happening now.”