Trickle-down Economics

Alberta’s oilsands, the world’s largest engineering project, may be getting rave reviews in the corridors of Ottawa and Washington, D.C., as a secure source of oil for the continent. At home, though, it is rapidly becoming a growing threat to northern water security.

Illustration by Clare Louise Mallison

The project’s growing water addiction is not only embarrassingly large but downright scary: oilsands miners now take an average of three barrels of potable water from the Athabasca River to make one barrel of bitumen. That means industry gulps enough water every year to fill 400,000 Olympic-sized swimming pools or to serve two cities the size of Calgary. Most appallingly, the majority of this water never sees a river again; it just ends up in some of the world’s largest toxic tailings ponds.

With plans to boost oil production from 1.2 million to three million barrels a day, most industry types recognize that this practice is not likely to improve fishing on the Athabasca River. It also imperils the industry’s very future.

The National Energy Board, the Canadian Senate and the Petroleum Technology Alliance Canada all have raised red flags about the oilsands industry’s water consumption habit in recent years. Vic Adamowicz, a resource economist at the University of Alberta, recently concluded that “planned increases in economic activity may not be feasible, or may be more costly than originally thought, given water scarcity concerns,” at an Edmonton conference aptly called “Running Out of Steam.”
So just what are industry’s options?

Well, Adamowicz examined a variety of those too and found that the free market combined with good, old-fashioned government restraint could play a vital water-saving role.

Adamowicz began his analysis by first describing the status quo as untenable. It doesn’t take a rocket scientist to recognize that giving away water for free to any Shell, Imperial or Syncrude that needs it hasn’t encouraged large industrial water users to significantly reduce water or develop water-saving tools. Even when the river drops to a critically low level in the winter and triggers a so-called “red light” condition, industry can still put a straw in the river and drink away.

So the status quo, fed by grossly incomplete data on the river, is another telling reminder that the absence of government regulation can be really bad for business, innovation and water.

Adamowicz then looked at a basic cap-and-trade system normally used to curtail carbon dioxide or air pollutants that cause acid rain. Such a system would recognize that government must firmly establish a limit for water giveaways that keeps both fish and downstream aboriginal communities that drink the water happy.

Such a system must also account for hidden withdrawals from industry’s biggest competitor for the water resource, climate change. According to famed University of Alberta water ecologist David Schindler, global warming has removed as much water from the Athabasca as the addition of 15 oilsands plants in the last 30 years, mostly by melting glaciers and reducing winter snowpacks in the Rocky Mountains, where the river rises. In other words Alberta’s climate-challenged government has already over-allocated water and will have to claw back current licences (it will likely have to in any event) if a cap-and-trade system is to achieve its purpose: the protection of the Athabasca River as an essential water bank for the north.

With a cap in place, industry would do what it does best: innovate. Oilsands producers with water licences would find new ways to conserve water so they could trade their surpluses with have-not companies. Such a system would also guarantee that any new player in the sands would be damned water efficient.

When Adamowicz presented these novel ideas at a university forum last May, industry and its regulators were largely a no-show. And that’s a pity. Markets can cut costs and save water through innovation. And governments can drive that innovation through regulation.

And isn’t that how the oilsands, never a sure thing as a business proposition, got started in the first place?

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