Alberta Will Tighten Oil-Sands Regulation

(Dow Jones Newswires), Apr. 6, 2011

The Alberta government said Tuesday it intends to set new environmental standards -- including outlining specific benchmarks for water contamination -- for areas affected by Canada's vast and growing oil-sands production in the western part of the country.

The provincial government also said it would set aside more than 7,700 square miles of land in the region for conservation. The move will require the cancellation of 10 oil-sands leases

The government didn't provide the names of the companies that would see their leases canceled under the new regional development plan for the Lower Athabasca region.

The government said that producing projects wouldn't be affected, only projects under development. That means that output won't be immediately affected. The companies would be compensated for their costs in purchasing and developing the leases.

Canada largely delegates regulation of its oil and natural-gas industry to the provincial level, so the new regulations signal significant new regulatory oversight for an industry that's been growing quickly in recent years. Alberta has been a big promoter of oil-sands development, and officials in both the U.S. and Canada have touted the industry's potential to ramp up output to feed American demand.

The oil-sands industry already accounts for about half of the 1.9 million barrels a day of oil that is exported to the U.S. Output is widely expected to double in size during this decade. But that growth rate partly depends upon the industry's ability to defend its environmental record.

Environmental groups have attacked the industry on several fronts, including criticism of the surface damage caused by strip mining and tailing ponds involved in some oil-sands production and the industry's higher greenhouse-gas emissions, compared to more conventional methods of extracting oil from the ground.

Last month, the Canadian government proposed a plan to revamp environmental monitoring for oil sands in response to criticism of the current system.

Part of the plan announced Tuesday will be benchmarks for assessing whether nearby water is being contaminated by the production cycle. The targets are expected to be roughly in line with water-contamination limits set by the U.S. Environmental Protection Agency, the government said. If those limits are breached, further review will be mandated.

The government said it would soon begin a 60-day consultation period with stakeholders and communities, and expected the new regulations to be in force by 2013. A time-line for implementation of the new monitoring system is expected by June.

Copyright (c) 2011 Dow Jones & Company, Inc.


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