Oil Water Wells Alberta*

August 9, 2002

Alberta Struggles to Balance Water Needs and Oil

By BERNARD SIMON

ORONTO, Aug. 8 — Alberta's oil companies use nearly half as much water as the entire city of Calgary, the province's commercial center, which has a population of almost a million. So it is hardly surprising, with much of western Canada still in the grip of its worst drought in decades, that the oil industry's water consumption has become a bone of contention.

"When people see lake levels dropping and, right next to that, they see oil and gas operations that use water, it's pretty easy to equate the two," said Pius Rolheiser, a spokesman for Imperial Oil, the Canadian unit of the Exxon Mobil Corporation.

That reality was driven home to Calgary's TrueNorth Energy last month when the Alberta Energy and Utilities Board, a regulatory agency, reviewed the company's plans for a $2.2 billion bitumen extraction project near Fort McMurray, in northern Alberta. "Water is probably the biggest issue that we faced at the hearings," said D'Arcy Levesque, a vice president at TrueNorth, a unit of Koch Industries of Kansas.

The debate over the oil industry's appetite for water is likely to intensify in coming months as Alberta's Progressive Conservative government puts the finishing touches on a new water policy, designed to spell out priorities for water use and how best to tailor a finite supply to ever-rising demand. The government is expected to disclose its strategy in the fall.

With most of Alberta still parched despite some rain in the south in the past week, environmentalists, farming groups and others are calling for tighter control of the oil industry.

The Pembina Institute, an Edmonton-based research group, and the Oilsands Environmental Coalition have proposed a moratorium on new licenses for water from the Athabasca River, one of the main sources of water for oil sands projects in northern Alberta, including TrueNorth's.

Others have suggested that oil producers start paying for their water.

Alberta treats water "as an inexhaustible resource," said William Donahue, a fresh water researcher and academic in Edmonton. "The disconnect between supply and demand is not sustainable."

The energy industry makes up about a quarter of Alberta's economy, and water plays a critical role in its operations, both in extracting oil from conventional wells and in extracting bitumen — which is refined into oil — from oil sands.

Injected into an oil reservoir, water provides extra pressure to push more oil to the surface. In the case of oil sands, which form a big part of Alberta's oil production, huge quantities of steam are injected into the bitumen to heat and soften it, making it easier to extract.

Depending on the process, from one to 10 barrels of water may be used to obtain each barrel of oil.

David Pryce, vice president for western Canada operations at the Canadian Association of Petroleum Producers, said these methods can double normal recovery rates. "We have a maturing basin here," he said. As reservoirs are depleted, "we're going to be seeking more water to do more enhanced recovery." According to the association, about 55 percent of Alberta's oil output, totaling 1.55 million barrels a day, is now brought to the surface with the help of enhanced water-assisted methods.

The oil companies and their critics disagree on the impact of the industry's growing water consumption.

Mr. Pryce said that the oil and gas sector makes up just 2 to 2.5 percent of all water licenses issued in the province, and that producers normally use only 40 to 60 percent of their allocations.

The companies say that a rising proportion of their consumption is salty, brackish water taken from deep underground aquifers and is of no use to farmers or city-dwellers. Imperial Oil is planning to expand production at its big Cold Lake oil sands operation by about 50 percent over the next six years without using any extra fresh water.

More than 90 percent of the 300,000 to 400,000 barrels of water used each day at Cold Lake is recycled, Mr. Rolheiser said.

But Mr. Donahue said his research at Muriel Lake, northeast of Edmonton and close to the hub of oil sands activity, including Imperial's Cold Lake operation, suggested that the oil companies' appetite for water was having a long-term effect. Muriel Lake has lost half its water since the mid-1970's. Heavy rains in 1997 replenished many other lakes in the area, but the level of Muriel Lake is falling again.

Mr. Donahue said the addition of chemicals to water used in oil recovery and the fact that much of the recycled water ends up in deep underground reservoirs meant that "ultimately, it is lost from the normal water cycle."

Last year, an "action committee" of farmers and other residents around the town of Eckville opposed an application by Conoco Canada for an extra fresh water license for its nearby oil wells. The protest led Conoco to take a second look at its production methods and the geology of the area. After determining that it could use more salt water and that it could recycle water that came to the surface mixed with oil, Conoco not only withdrew its application but also cut its water consumption by 10 percent.

Peter Hunt, Conoco's general manager for public affairs, said the experience at Eckville "caused us to start thinking about a proper corporate policy on water usage." That review is still in its early stages but, Mr. Hunt said, "instead of assuming that we can use the water that's there, we now think hard about what the alternatives are."

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