The Future of Oil and EA in Canada

by Raniya Shams

The CEAA 2012 is touted to be an updated and modern version of the former CEAA and contains elements that allow Canada’s natural resources to be developed in a responsible and timely way, thus resulting in better environmental assessments[1]. The new designated list approach and the time limits prescribed have no doubt resulted in far fewer projects being subjected to federal environmental assessments. Not to mention the fact that hundreds of development projects now might no longer be motivated to look for alternatives or measures to mitigate environmental effects. On top of this, if the few remaining major projects which undergo a federal assessment are predisposed to be approved solely on the basis of the potential economic gains, then the purpose of an EA as a whole is defeated.

The recent approval of the joint review panel for the 100,000 barrel a day expansion of Shell’s Jackpine oil sands mine in the name of public interest despite the findings of significantly adverse environmental effects goes to show just that. The panel concluded from Shell’s analysis that the effect of the project when combined with the effects of the other projects in the region exceeds the thresholds for impacts on air quality, water quality and wildlife habitat[2]. The project will also have adverse effects on Aboriginal Traditional Land Use, rights and culture.  More importantly, there is a lack of proven, effective mitigation measures for all these effects.  Nonetheless, the project has been approved with conditions by the panel based on the significant economic benefits it is deemed to provide to the entire economy over its approximately 40 year life-cycle[3].

When you look at the economics of it, the financial benefits are questionable. It might be true that the demand and preference for crude oil might not phase out soon enough and the world may end up needing every drop of Canada’s crude oil. But given a cyclical commodity like oil, is it reasonable to weigh in so heavily on the cumulative economic returns for a time span of 40 years or more? “Oil prices have to stay lofty to make investment in this sector pay. Any faltering in prices could cause profits to be elusive, or evaporate[4].  Oil companies are not very forthcoming about the rate they actually require to remain commercially viable due to competitive reasons but the minimum price has been pegged at $85 to $95 USD which makes it one of the world’s most expensive oil 2. Alberta oil sands companies are already facing many challenges especially rising production costs. Some attribute this to environmental regulations but quite simply much of it has to do with rising labor costs and declining productivity[5]. Alberta’s wage growth rate has been outstripping the rest of the economy for years now. On top of accounting for these changes in the future, Canada’s biggest trading partner, United States have been forecasted to become the next biggest oil producer[6]. There might be a huge shift in the global energy map if that happens. So who is to know whether technological innovations would not unlock newer maybe even cleaner deposits elsewhere and cause the oil price to swing down just like the impact shale gas has had on world price of natural gas.

Adding to this are also the huge environmental costs. How practical would it be to destroy the valuable ecological systems, resources and the culture, heritage and livelihoods of the locals for something that might not pay out as much as it is being banked on right now? The International Energy Agency estimates that only a third of the economically profitable energy efficiency measures available to the world have so far been implemented4. In this aspect, a planning and decision making tool like EA if used properly has the potential to play a key role in bringing about innovations in the energy sector largely because of its potential to generate large amount of key environmental and social data. Also if the proponent knows that without adequate and effective mitigation measures, the project definitely will not be approved then it could very well be enforced to find innovative methods to reduce adverse environmental impacts. Although EA is not a regulation, its proper implementation could very well act like one.  This is not entirely a bad thing because there has been research showing significant positive relationships between regulatory compliance expenditures and R&D expenditures by the regulated industry[7].

However in Canada, it seems that instead of exploiting the benefits of EA to foster innovation and bring about adequate investment in renewable energy sources, oil giants like Shell might be getting away by proposing inadequate mitigation measures. The Jackpine EIA is noteworthy because it has been the first oil sands project assessed under the CEAA 2012 and the first of its kind where the review panel has acknowledged the significant adverse environmental effects it will have[8]. It therefore remains to be seen whether the CEAA 2012 will live up to its claims and result in better environmental assessments or not.


[1] Canadian Environmental Assessment Agency Government of Canada, “Canadian Environmental Assessment Agency – Acts and Regulations – Canadian Environmental Assessment Act, 2012,” July 6, 2012, http://www.ceaa-acee.gc.ca/default.asp?lang=en&n=16254939-1.

2 “Pembina Reacts to Decision on Shell Jackpine Oilsands Mine Expansion,” accessed October 7, 2013, /media-release/2462.

3 “Oil-sands Expansion Conditionally Approved Despite ‘significant’ Effects on Wildlife,” The Globe and Mail, accessed October 7, 2013, http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/oil-sands-expansion-conditionally-approved-despite-significant-effects-on-wildlife/article13104665/.

4 “Economics Biggest Threat to Embattled Oil Sands,” The Globe and Mail, accessed October 7, 2013, http://www.theglobeandmail.com/incoming/economics-biggest-threat-to-embattled-oil-sands/article546652/.

5 Deborah Yedlin, Calgary Herald September 13, and 2013, “Yedlin: Rising Costs Mark Significant Risk to Oilsands,” Www.calgaryherald.com, accessed October 7, 2013, http://www.calgaryherald.com/business/Yedlin+Rising+costs+mark+significant+risk+oilsands/8907383/story.html.

6 “World Needs Oil Sands Crude, IEA Economist Says,” The Globe and Mail, accessed October 6, 2013, http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/world-needs-oil-sands-crude-iea-economist-says/article5702107/.

7 Adam B. Jaffe and Karen Palmer, “Environmental Regulation and Innovation: A Panel Data Study,” Review of Economics and Statistics 79, no. 4 (November 1, 1997): 610–619, doi:10.1162/003465397557196.

8 “Shell Jackpine JRP Report: Would the Real ‘Adaptive Management’ Please Stand Up?,” ABlawg, accessed October 7, 2013, http://ablawg.ca/2013/07/31/shell-jackpine-jrp-report-would-the-real-adaptive-management-please-stand-up/.

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