January 10, 2008 / 11:46 PM / 10 years ago

Canada oil sands projects flunk green test: groups

4 Min Read

CALGARY, Alberta (Reuters) - Canadian oil sands mining projects, seen as a key source of North American energy supply for decades to come, have been given poor environmental marks in a report released on Thursday, with even the best performer barely garnering a passing grade.

Environmental groups Pembina Institute and World Wildlife Fund surveyed 10 Alberta oil sands ventures, including seven yet to start producing, for attention to land, air emissions, water, climate change and overall environmental management.

Authors of the study called on the government to set more stringent limits on water use, emissions and impacts on wildlife and public health.

Only Royal Dutch Shell Plc's Muskeg River mine got a passing mark, and even that was just 56 percent, according to the report, entitled "Under-Mining the Environment."

"What this study has shown is that there's more talk than there is action in terms of meaningful commitments to addressing the issues," said Dan Woynillowicz, senior policy analyst at the Pembina Institute.

All projects scored well in some areas and poorly in others. If each adopted the best features of their rivals, the industry could make meaningful improvements, the study said.

For instance, if all mines had the greenhouse gas emissions intensity proposed by Canadian Natural Resources Ltd for its Horizon project, due to start up later this year, Alberta could cut its emissions by 3 percent a year, it said.

If all companies had similar water use to Petro-Canada's proposed Fort Hills project, the oil sands industry could reduce its consumption by almost 60 percent, said the report, which took a year to complete.

Canadian Natural got an overall 31 percent mark and Petro-Canada scored 37 percent. The average was 33 percent.

Canada's oil sands are the target of more than $100 billion of investment as the world's oil industry aims to cash in on the need to feed growing demand for secure oil supplies, especially in the United States.

Mined oil sands from Shell, Syncrude Canada Ltd. and Suncor Energy Inc, are processed into about 800,000 barrels of refinery-ready light crude a day, which is roughly 30 percent of the country's overall oil output.

Output is expected to triple by the middle of the next decade, an increase in the energy-intensive business that is alarming to environmentalists and residents of towns near the northern oil sands hub of Fort McMurray, Alberta.

The oil industry said it was not surprised by the findings, pointing out that some of the equipment being used is older and less efficient and that it is being upgraded every few years.

"It points out areas that I think people are already working on, certainly that industry and government are already working on, said Pierre Alvarez, president of the Canadian Association of Petroleum Producers.

"Everybody acknowledges there's work to do but I think they also acknowledge that performance has improved and there's the expectation it will continue to improve."

Pembina and the WWF also criticized the Alberta government, saying they found it provides the public with only limited summary information about developers' environmental performance and much of that is out of date.

"The government has not been in any way driving environmental performance. The government's been as focused on growth as the industry has -- it's been 'How fast can we go?' not 'How well can we do it?"' Woynillowicz said.

He said the study is partly aimed at investors, who will eventually have to deal with liabilities among firms that do not live up to coming regulations for things like greenhouse gas emissions, which will carry major costs.

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