Disposal Wells
In this decision, the AER approved an application for the disposal scheme associated with Pure Environmental Waste Management Ltd.’s (“Pure’s”) existing 1-24 well, subject to a condition, and denied five other facility applications; two mineral surface lease (“MSL”) applications; and two licence of occupation (“LOC”) applications.
Background
Pure filed ten applications as part of its Hangingstone waste management project (the “Hangingstone Project”) located about 25 km south of Fort McMurray. The applications all related to three disposal wells and a single pipeline that would connect one of the disposal wells to Pure’s previously-approved Hangingstone waste management facility (the “Hangingstone Facility”).
The Applications included the following:
The AER received requests to participate in this proceeding from Suncor and Alberta Agriculture and Forestry (“AAF”). In its request to participate, Suncor stated that it was concerned that Pure’s proposed disposal wells and pipeline would be in the area of Suncor’s Meadow Creek East and West in situ oil sands projects. Suncor submitted that Pure’s applications would directly and adversely impact Suncor’s ability to access and extract bitumen at the Meadow Creek East and West in situ projects. The panel granted Suncor and AAF full participation rights in the hearing.
Regulatory Framework
The AER noted that the applications required the AER to consider provisions under the Responsible Energy Development Act, the Oil and Gas Conservation Act, the Pipeline Act, and the Public Lands Act. The AER also had to consider the Lower Athabasca Regional Plan and any sub-regional plans that are in force. Finally, given Suncor’s participation and its concern about the impact of Pure’s applications on Suncor’s Meadow Creek East and Meadow Creek West in situ oil sands projects, the AER considered the purposes of the Oil Sands Conservation Act.
There Is a Need for Disposal Wells and Access to Disposal Capacity to Support the Hangingstone Project
The AER noted that Pure initially took the position that the applications for the disposal wells and pipeline were separate from and independent of the approved Hangingstone Facility, which was the subject of a regulatory appeal. However, in its hearing submission for this proceeding, Pure confirmed that the proposed disposal wells and pipeline form an integral part of the Hangingstone Project. Pure acknowledged that its approved Hangingstone Facility could not operate without sufficient disposal capacity to allow solution mining (washing) and operation of the salt caverns.
The AER found that while the magnitude of the benefits resulting from transportation cost savings, increased traffic safety, and emission reductions are subject to some uncertainty, having a locally available waste management solution would generally be of benefit to oil sands producers and in the public interest, assuming regulatory requirements are satisfied, and potential adverse effects on other activities are considered and appropriately mitigated.
With respect to the need for the disposal wells and disposal scheme that are the subject of the applications, the AER noted that solution mining and operation of the salt caverns at the approved Hangingstone Facility requires access to sufficient disposal capacity to accommodate brine and waste fluids generated from the washing and operation of the caverns. The AER found that there is a need for disposal wells and disposal capacity to support the construction and operation of Pure’s approved Hangingstone Facility.
Crown Mineral Activity Authorizations Do Not Limit the AER’s Authority to Consider the Applications
Pure and Suncor both obtained Crown Mineral Activity (“CMA”) authorizations to dispose into the Keg River Formation from Alberta Energy. Pure’s CMA authorizations allow it to dispose into the Keg River Formation from its existing 1-24 disposal well and its proposed 1-36 and 4-32 disposal wells. Suncor’s CMA authorizations allow it to dispose into the Keg River Formation from two existing disposal wells (the 3-31 disposal well and the 11-29 disposal well).
The AER noted that while a CMA authorization issued by Alberta Energy is a necessary prerequisite for the approval of a disposal scheme, CMA authorizations do not provide any preferential right to the holder to access disposal capacity within a formation. The issuance of a CMA authorization does not constrain the AER’s decision-making authority with respect to applications for disposal schemes.
The AER stated that if the disposal capacity in the Keg River Formation is not sufficient to accommodate both Pure’s and Suncor’s anticipated disposal volumes, then the disposal capacity should be allocated based on the relative benefits of Pure’s and Suncor’s projects and the potential for Pure’s proposed disposal wells and disposal scheme to adversely affect bitumen recovery at Suncor’s Meadow Creek East and West projects. These factors need to be considered and weighed to inform the AER’s public interest determination and its decision on the applications.
The Disposal Capacity of the Keg River Formation in the Vicinity of Pure’s Proposed 1-36 and 4-32 Disposal Wells Is Limited and Not Sufficient to Accommodate Both Suncor’s and Pure’s Anticipated Disposal Volumes
The AER outlined its assessment of evidence provided by experts for Pure and Suncor and found that the disposal capacity in the Keg River Formation, specifically in the vicinity of Suncor’s 3-31 and 11-29 disposal wells and Pure’ proposed 1-36 and 4-32 disposal wells, appears to be limited and not sufficient to accommodate both Pure’s and Suncor’s anticipated disposal volumes.
Pure’s Proposed 1-36 and 4-32 Disposal Wells and Disposal Scheme May Result in Adverse Effects to Suncor’s Meadow Creek Projects
The AER made note that Suncor has invested significant time and financial resources to develop the Meadow Creek projects. The AER found that should Suncor proceed with the Meadow Creek East and Meadow Creek West projects, the projects would provide significant economic benefits to Alberta through employment, capital and operational expenditures, taxes, and royalties.
The AER noted that its approval for the Meadow Creek East project includes conditional approval of the disposal scheme for Suncor’s previously drilled 3-31 and 11-29 disposal wells and Suncor’s planned but undrilled 4-12 and 5-36 disposal wells. Pure’s proposed disposal wells at 1-36 and 4-32 are in close proximity to Suncor’s conditionally approved disposal wells. The AER further noted that, based on the evidence presented, the disposal capacity in the Keg River Formation in the vicinity of Pure’s proposed disposal wells appears to be limited and not sufficient to accommodate both Suncor’s and Pure’s anticipated injection volumes.
The AER found that Pure’s proposed 1-36 and 4-32 disposal wells are likely to adversely affect Suncor’s proposed Meadow Creek projects by significantly reducing the amount of available disposal capacity and that this could adversely affect the economics of bitumen recovery at Suncor’s Meadow Creek projects.
In contrast, the AER found that there is little potential for interference between Pure’s existing 1-24 disposal well and Suncor’s conditionally approved disposal wells given that the 1-24 well is 14 to 16 km from Suncor’s disposal wells and in an area that Suncor does not consider to be prospective for injection.
Other Disposal Options Are Available to Pure in the Hangingstone Area
The AER accepted that the Keg River Formation is the only viable subsurface disposal option in the Hangingstone / Meadow Creek area.
The AER noted that Pure’s proposed disposal wells are 14 to 16 km from the approved Hangingstone Facility and would require an approximately 20 km pipeline to connect them to the facility. Given that Pure took the position in this proceeding that the Keg River Formation is an extensive reservoir with a very large disposal capacity, the AER noted that it does not seem necessary or optimal to locate its disposal wells so far away from the approved Hangingstone Facility and so close to Suncor’s 3-31 well. If Pure’s interpretation of the Keg River Formation’s disposal capacity is correct, then Pure should be able to locate its disposal wells closer to the approved Hangingstone Facility and in an area where there is less potential to interfere with Suncor’s approved disposal scheme.
Based on Pure’s evidence, the AER found that Pure has options available to it other than the 1-36 and 4-32 wells to secure additional disposal capacity within the Keg River Formation for the approved Hangingstone Facility.
Approval of Pure’s 1-36 and 4-32 Disposal Wells and Associated Disposal Scheme Is Not Consistent With Efficient and Orderly Development and Is Not in the Public Interest
The AER found that with respect to the applications for the 1-36 and 4-32 disposal wells and the associated disposal scheme, approval would not be consistent with the AER’s mandate of efficient, economic, and orderly development or in the public interest. These proposed activities are likely to result in adverse effects to Suncor’s Meadow Creek East and West in situ oil sands projects, potentially impacting bitumen recovery. As a result, the AER did not approve these applications.
While the AER found that there is a need for disposal capacity to support mining and operation of the salt caverns at the approved Hangingstone Facility, it found that Pure did not fully evaluate alternative disposal well locations before deciding to locate its 1-36 and 4-32 disposal wells immediately adjacent to Suncor’s disposal wells. Based on the evidence provided by Pure, it appears that alternative disposal well locations are available to Pure.
While the AER found that Pure’s Hangingstone Project would likely provide benefits to oil sands producers through reduced transportation costs and emissions and that this would be in the public interest, it also found that the expected magnitude of the economic benefits is relatively small when compared to the expected economic benefits to Alberta resulting from Suncor’s Meadow Creek projects. The AER found that the potential benefits of Pure’s Hangingstone Project are not sufficient to outweigh the potential risk to Suncor’s Meadow Creek projects that could result from approval of the 1-36 and 4-32 disposal wells. The AER noted that its decision on these two wells is not a decision on the Hangingstone Project; it is a decision on the wells at these proposed locations. Pure may have other options for waste disposal, which may allow the Hangingstone Project to proceed.
Approval of the Disposal Scheme for Pure’s 1-24 Disposal Well Is Consistent With Efficient and Orderly Development and Would Not Adversely Affect Suncor’s Meadow Creek Projects
The AER approved application 1920277 for the disposal scheme for Pure’s 1-24 disposal well, subject to a maximum wellhead injection pressure of 3550 kPa.
It accepted that Pure requires disposal capacity in order to operate its approved Hangingstone Facility. The 1-24 well is already drilled and is located at the approved Hangingstone Facility. In addition, the well is in an area that Suncor does not consider prospective for disposal and in an area where disposal operations are not likely to have an adverse effect on Suncor’s conditionally approved disposal wells.
Applications MSL181075, MSL190384, LOC181213, LOC190487, and 934887
Pure applied for these applications because they would be necessary to construct, operate, and provide access to its proposed disposal wells, if approved.
The AER noted that the MSL and LOC applications relate to the surface well sites and access for the 1-36 and 4-32 disposal wells. As the AER decided to deny the applications for these disposal wells, there was no need for the mineral surface leases and associated access for these wells. The AER, therefore, denied applications MSL181075, MSL190384, LOC181213, and LOC190487.
Similarly, the AER noted that the applied-for pipeline licence relates to a pipeline that proposes to transport produced saline water from the approved Hangingstone Facility to the 4-32 well for disposal. As the disposal well applications are not being approved, the AER stated there is no need for the pipeline. The AER denied application 934887.
