CALGARY--The head of Royal Dutch Shell PLC's Canadian unit
Wednesday said the company may not be able to meet promised targets
for reducing toxic wastes from oil sands and called for greater
regulatory flexibility.
Shell, which operates two major oil-sands surface mines in
northern Alberta, had committed to cutting the amount of waste
generated by its heavy-oil extraction projects in Canada. But the
company and other producers have struggled to meet reduction
targets mandated by the government and now face the prospect of
penalties if those goals remain unmet.
"It's going to be very challenging" to achieve mandated
reduction targets next year, said Lorraine Mitchelmore, president
of Shell Canada Ltd.
Growth in natural gas and oil sands is a core focus for the
energy company, she said, adding the company is committed to its
operations in Canada as a "multi-decade opportunity."
Ms. Mitchelmore said Shell hopes to link inland sources of
natural gas to a proposed liquefied natural gas export terminal on
Canada's Pacific coast, though the company hasn't made a final
investment decision yet.
She also said Shell's Canadian oil-sands operations meet the
company's internal yardstick for profitability as long as prices of
Brent crude remain above the $70 mark.
The company has had less success in reducing the environmental
impact of wastes generated by its oil sands operations, even though
Shell says it has reduced the intensity of its greenhouse gas
emissions and use of fresh water.
Alberta's Energy Resources Conservation Board, the province's
chief regulatory authority, last year said Shell's two oil-sands
mines and two others owned by rivals, Suncor Energy Inc. and
Syncrude Canada Ltd., each failed to meet cleanup goals in at least
one of two cumulative periods measured.
It found that not only did the amount of waste generated not go
down, but actually increased in line with greater oil-sands
production. The report followed-up on a policy implemented in 2009
known as Directive 74, which laid out specific targets for reducing
oil sands wastes and reclaiming waste-storage ponds in the boreal
forests where the industry is centered.
The regulator waived penalties, citing industry progress in
introducing new technology, but warned operators to make up any
shortfalls and said it would "assess enforcement options" in a
follow-up report due in 2015.
That move angered environmental groups and raised questions
about the province's commitment to reducing or eliminating
so-called tailings ponds of fluid waste.
Oil-sand wastes, which are toxic in high concentrations, are a
byproduct of mining when bitumen, or heavy oil, is separated from
clay, sand and silt. The tailing ponds where wastes are collected
have become a magnet for critics, who say they are an eyesore and
dangerous to wildlife.
Ms. Mitchelmore said Shell and other oil-sands strip-mine
operators have urged Alberta's government to ease requirements to
allow the industry more time and flexibility. "Prescriptive
regulation puts you in a box," she said.
Last year, then-premier Alison Redford said fluid tailings
growth would be halted by 2016 and that tailing ponds would
"disappear from Alberta's landscape in the very near future."
Industry executives say that is not realistic. Ms. Mitchelmore
said tailings may be eliminated one day, but not anytime soon.
"Timeline? I don't know," she said.
Write to Chester Dawson at chester.dawson@wsj.com
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