UPDATE: Canada's Oil Sands Cos To Share Research On Waste Ponds

Canada's major oil sands mining companies, under pressure from regulators and environmentalists, said Monday they've agreed to collaborate on technology to clean up the massive waste-water lakes created by their operations.

The agreement comes as Alberta's government is requiring oil sands miners to cut tailings production by 20% starting this year, increasing to a 50% annual reduction by 2012. Tailings ponds--a toxic mixture of clay, water and leftover oil--cover more than 50 square miles in northeastern Alberta and could take hundreds of years to settle on their own.

All the current oil sands mining companies have submitted their own plans, using different technologies, to curtail the growth of the tailings ponds, which are projected to expand at the rapid pace of growth in the oil sands industry. Canada is the largest exporter of oil to the U.S. Roughly half the country's oil production comes from the oil sands, and oil sands production is expected to double by the end of the decade.

Under the agreement, Canadian Natural Resources Ltd. (CNQ, CNQ.T), Imperial Oil Ltd. (IMO), Royal Dutch Shell PLC (RDSA, RDSA.LN), Suncor Energy Inc. (SU, SU.T) Syncrude Canada Ltd. (SYNCRUDE.YY), Total SA (TOT, FP.FR) and Teck Resources Ltd. (TCK, TCK.A.T) will share their tailings research and technology and "eliminate monetary and intellectual property barriers," according to a release.

Of the tailings technologies submitted by the miners, only Suncor's "tailings reductions operations," or TRO, technology has met the original targets set by Alberta's government, and has been best regarded by environmental groups. TRO uses sloping sand beaches and a polymer additive to dry tailings over several months into a solid surface. Suncor became the first company to remediate an oil sands tailings pond this year.

Suncor Chief Executive Rick George has previously said he'd be willing to share Suncor's technology with other companies for a "nominal" fee that would offset some of the costs of Suncor's research. Suncor has spent $250 million researching TRO and has committed $1 billion over the next two years in implementing the technology on its own tailings ponds.

Shelley Powell, Suncor's vice president in charge of oil sands extraction and operations, said that under the agreement the fee will be waived, and that Suncor will benefit from the larger research and development capabilities of the international oil majors like Shell, Total and Exxon Mobil (XOM), which is the majority owner of Imperial Oil.

"We think we're going to get a real leapfrog benefit in terms of the next round of technology," Powell said. "We can bring the foundation of the TRO technology to the table; they can put all their smart R&D folks together and advance it in a much quicker way than we'd be able to do within Suncor."

Oil sands tailings ponds were the focus of intense criticism due to the deaths of thousands of waterfowl that have landed in the ponds and died from the toxic chemicals. Despite taking steps to prevent such accidents, several hundred more birds died in a Syncrude tailings pond in October.

Oil sands strip mining operations create tailings ponds, but underground extraction methods don't. Though most current production is mined, 80% of the oil sands are only recoverable using underground extraction methods, and an increasing amount is being recovered this way by companies such as Cenovus Energy Inc. (CVE, CVE.T).

-By Edward Welsch, Dow Jones Newswires; 403-229-9095; edward.welsch@dowjones.com

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