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DECLASSIFIEDPRIORTORELEASEUNDERACCESSTOINFORMATIONACT
SECRET
Oil
SANDSINDUSTRYCONSIDERATIONS
AND
MARKETDIVERSIFICATIONINTRODUCTION
5.15(1)
MINISTERANDNRCANROLE•TheMinisterholdsresponsibilitiesforfederalpipelinemattersandoverseesfederalregulatoryprocessesforpipelinesthroughtheNationalEnergyBoard.•NRCanplaysaroleingroundingtheoilsandsdebateinscientificandfact-basedterms,supportingoutreach,andprovidingrelevant,accuratefactstoForeignAffairsandInternationalTradeCanada(OFAIT)andotherFederalagenciestosupporttrade,regulatoryrolesandrelatedpolicydevelopmentimpactingtheoilsands.•NRCanplaysaroleinresearchanddevelopmenttosupportandaccelerateinnovationandtheadoptionofcleantechnologiestoaddressenvironmentalissues.
BACKGROUND
G
Theoilsandscomprise170ofCanada's174billionbarrelsofprovenoilreserves.About35billionbarrelsofoilsandsresourcesarelocatedwithin75metresofthesurfaceandcanbeaccessedthroughmining.Theremaining135billionbarrelsaretoodeeptomine,andhaveonlyrecentlybecomecommerciallyaccessible,duetoadvancesindrillingandotherextractiontechnologies(called"insitu").TheoilsandsgiveCanadathethirdlargestprovenorestablisheddepositofcrudeoilintheworldafterSaudiArabiaandVenezuela.•TheenvironmentalperformanceofoilsandsdevelopmentinCanadaisunderintensepublicscrutiny.Theprevailingnarrativepositionsthecontribution
ofths
oilsandstoCanada'seconomyandenergysecurityagainstpotentialenvironmentaldamageandimpactonAboriginalcommunities.HowCanadaaddressestheenvironmentalissuessurroundingthecurrentandprojectedgrowthoftheindustryisoffundamentalimportancetoCanadiantradeandnationalandinternationalenergysecurity.
Significantproductiongrowthleadingtoconcems...
•Productionfromtheoilsands,currentlyatapproximately1.5millionbarrelsperday(bpd)issettoincreasetoapproximately3millionbpd
by
2020,andto4.5millionbpdshortlythereafter.This
~1-
000001
 
DECLASSIFIEDPRIORTORELEASEUNDERACCESSTOINFORMATIONACT
SECRETsignificantincreaseinproductionhasledtoincreasedconcernsonthepotentialimpactonthelocalenvironment(includingwater,air,andland),onCanada'sgreenhousegas(GHG)emissionsreductiontargetsfor2020,andonaboriginalhealth.This,inturn,hasledtoincreasedconcernandoppositionfromenvironmentalnon-governmentalorganisationsinCanadaandinternationally.•In2010,99percentofCanada'sapproximately1.9millionbarrelsperday(bpd)ofcrudeoilexportsweredestinedforU,S.markets.Thevolumeofcrudeoilexportsisexpectedtogrowsignificantlyoverthenexttwodecades.
,..includingpotentialtransportationnetworkbottlenecks
•PipelinestotheU.S.MidwestprovidetheprimarytransportforCanadiancrudeoilexportsthatflowtorefinersinIllinoisandOklahoma.CanadiancrudeoilalsoflowsviapipelinetoCanadianrefinersinWesternCanadaandtoSarnia,ON(throughtheUS).•StronggrowthinCanadianoilexportstotheU.S.hasledtoanoversupplyintheU.S.MidwestmarketandCanadianoilexportsareessentiallylandlocked.ThiseffectiscompoundedbythecurrentinabilityoftheMidwestpipelinedistributionnetwork'stotransportcrudeoiloutoftheMidwestregiontootherU.S.markets.
o
RecordstockpilesatCushing,Oklahoma,thefinaldeliverypointforWestTexasIntermediate(WTI)-thegenerallyacceptedNorthAmericancrudeoilbenchmark-havecausedanunprecedentednegativedifferential(upto$15perbarrel)betweenWTIcrudeoilpricesandcrudeoilsthataredeliveredbytankerfromothernationsandregionsintheU.S.(generallypricedaccordingtoBrent,theglobaloilbenchmark).
Marketdiversificationoptions
•Thereareseveralproposalstoexpandexportpipelinecapacitytoaccommodatenewoilsandsproductionandtodiversifymarkets(seemapatAnnex1).•Oilexportsessentiallygointhreedirections-south,west,oreast
o
KeystoneXL(south)-900,000bpdfromHardisty,AB,tothe
u.s.
gulfcoast.[ProjectStatus:Canadianfacilitiesapproved;U.S.facilitiesundercontestedenvironmentalassessment]oNorthernGateway(west)-525,000bpdfromNorthofEdmontontoKitimat,B.C.,thentoAsiaandU.S.westcoastviatanker.[ProjectStatus:currentlyunderCanadianregulatoryandenvironmentalassessmentreview]
o
TransMountain(west)-400,000bpdofoilfromEdmontontoVancouver,withthepossibilityofalsotransporting400,000bpdofoiltoKitimat,B,C.[ProjectStatus:conceptual]
o
EnbridgeTrailbreaker(east)-240,000
bid.
ReversetheflowofthePortland-MontrealpipelineandtheEnbridge(MontrealtoSarnia)pipelinefromimportingforeigncrudeoiltoexportingCanadianCrudeoilbyshipfromPortland,Maine.[ProjectStatus:"TrailbreakerProject"shelvedduetomarketconditionsandenvironmentaloppositioninQuebec)
•Of
theprojectslistedabove,themostregulatoryprogresshasbeenmadeonKeystoneXL.AsthepipelinecrossestheCanada-U.S.border,itrequiresaPresidentialpermit,issuedthroughtheU.S.DepartmentofState.ThisprojecthasprovokedstrongreactionsfromvariousstakeholdersintheU.S.KeystoneXL'sopponentshavecitedenvironmentalconcernsassociatedwithimportinglargeramountsofoilsandsderivedcrudewhereasitssupportershavearguedthatthepipelinewill
-2-
000002
 
-DECLASSIFIED-PRIORTORELEASEUNDERACCESSTOINFORMATIONACT
SECRETstrengthenU.S.energysecuritybyreducingthecountry'srelianceonoilimportsfromlessstable5.21(1)(a)Sources.5.21(1)(bkdvocatesbothforandagainsttheKeystoneXLpipelinehavebeenveryactiveinstakingouttheirpositionspubliclyI:lYwrjtingI~tt~rstoU.?decisionrn~k~rsaQdengagingmediaoutletsthroughoutNorthAmerica._.theU.S.DepartmentofStatereleasedaSupplementalDraftEnvironmentallinpactStatementfortheprojectonApril
22,2011.
Thenextstepsareapubliccommentperiod,releaseofaFinalEnvironmentalImpactStatement,aninter-agencyreview,concludingwithafinalpubliccommentperiod.StatehasindicatedafinaldecisiononthePresidentialPermitwillbemadeinthefallof
2011.
o
In
2010/11,
significantcrudeoilexportcapacitywasaddedbyEnbridge'sAlbertaClipperexpansionprojectandTransCanada'snewKeystonesystem(KeystonepipelineandCushingextension).WhilethereiscurrentlysufficientpipelinecapacitytoexportcrudeoiloutofWestemCanada,bottlenecksexistincertainU.S.pipelinetransportationsystems,andthiscapacityconstraintlimitsthevolumeofcrudeoilthatcanbeexportedaswellasthegrowthoffutureoilsandsproduction.
GrowingoPDos/1iontooilsands
Pressureonpipelinedistributionnetworkshasarisenduetogrowthandinvestmentintheoilsandssector.Fromonlyasmallfractionwodecadesago,oilsandsproductionnowaccountsforhalfofthe3millionbarrelsperdayofcrudeoilthatCanadaproduces.Robustproductiongrowthisforecasttocontinueoverthenexttwodecadesandthisincreaseingrowthhasattractedstrongreactionsdomesticallyandinternationally,bothpositiveandnegative.Onthepositiveside,theoilsandsarguablyrepresentthelargestsourceofoilinastable,transparent,market-basedenvironmentthatisopentoforeigninvestment.Additionally,theoilsandshaveSignificantlyincreasedCanadianandNorthAmericanenergysecurity.Theymakeup2percentofCanada'seconomy,theyemployapproximately
144,000
Canadians,bothdirectlyandindirectly,andtheyareexpectedtocontributeasmuchas
$1.7
trilliontowardsCanadianGDPoverthenext25years.Onthenegativeside,rapidgrowthintheoilsandshasledtoconcernsaboutcumulativehealthandenvironmentalimpacts.Oilssandsgreenhousegas(GHG)emissionsaresettobethefastestgrowingsourceofGHGsinCanadaoverthenextdecade,risingfrom4percentofCanada'stotalemissionsin
2005
upto
12
percentin2020.Thereareconcernsthatoilsandsdevelopmentincreasestheriskofwatercontaminationandthatcurrentwatermonitoringeffortsareinadequate.Finally,therearealsoconcernsabouttheimpactofoilsandsminingandtailingspondsonland,forestsandwildlife.
Outreacheffortsseekingtoestablishbalanceddialogue
•NRGanispursuinganoutreachstrategyfocussedonprovidingstakeholderswithanaccurateportraitofthebenefits,risksandchallengesrelatedtotheoilsands,andtheGovernment'sroleinprotectingthepublicinterest.TheDepartmentseekstogrounditsoutreachinrealandtangiblefactsoneconomicbenefits,impactsonenvironmentalperformance,andconcreteeffortstoaddressenvironmentalchallenges.Theseincludetheadoptionofmeasuresrequiringstrongerenvironmentalmonitoring,betterregulatoryperformancestandards,morevigorousenforcementof
000003
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