Canada Oil Sands Industry Must Get 'Social License' To Grow -Report
November 10 2010 - 11:08AM
Dow Jones News
Negative perception of Canada's oil sands could slow its growth
if the industry doesn't make a compelling case for continued
development, a report by the U.S. consulting firm Deloitte
says.
The report calls the oil sands "Canada's primary economic
development project," which will create C$1.7 trillion in gross
domestic product over the next 25 years. It says environmental
objections to oil sands development must be countered by
demonstrations of its economic benefits, technological improvements
to its environmental performance, and its advantages compared with
oil produced by other countries with less stable governments and
less ethical regulation.
"Production could be at risk of stagnation if the industry is
not granted a social 'license to grow,'" according to the
report.
Environmentalists are opposed to the oil sands industry, located
in northeastern Alberta, for the large surface disruptions and
carbon dioxide emissions it creates. The potential for pollution to
the surrounding watershed is also being studied.
Recent deaths of birds in large tailings ponds have highlighted
the environmental challenges of the industry in Canada. In the
U.S., the proposed expansion of a TransCanada Corp. (TRP) pipeline
to carry more oil sands crude to the Gulf Coast has drawn
resistance from environmentalists and Democratic legislators.
The Deloitte report says oil sands producers must continue to
make strides in technology to limit their physical and carbon
footprints, such as recent improvements in technology to reclaim
large waste ponds created by oil sands mining, and improvements in
the efficiency and energy use of underground oil sands
extraction.
The report also highlights the potential for rising labor and
infrastructure costs that could hamstring the industry's
development, as it did during the last boom in 2005 to 2008 when
competition for talented labor and infrastructure caused prices to
skyrocket. It suggests companies coordinate a strategy to retain a
skilled work force to avoid a similar run-up in costs as the
industry grows.
Continued reliance solely on U.S. customers is also a risk for
the oil sands industry, the report says, as nearly all of the 1.3
million barrels a day it produced last year were shipped to the
U.S. The Northern Gateway pipeline proposed by Enbridge Inc. (ENB)
to take oil sands crude to western ports to ship to Asian market
would reduce the risk of regulation from the U.S. and increase
market competition for oil sands production, the report says. The
Northern Gateway project is currently under review by the Canadian
government, and opposed by environmental groups concerned about the
potential for oil spills.
-By Edward Welsch, Dow Jones Newswires; 403-229-9095;
edward.welsch@dowjones.com
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