AER Regulatory Appeal
In this decision, the AER confirmed the decision to approve Pure Environmental Waste Management Ltd.’s (Pure’s) application 1910941 for the Hangingstone waste management facility and issue waste management approval 211 (WM 211), subject to conditions.
Background
In June 2018, Pure filed an application for a new oilfield waste management facility in Legal Subdivision (LSD) 10, Section 25. The Hangingstone waste management facility (“Hangingstone Facility”) is one part of Pure’s Hangingstone waste management project (the “Hangingstone Project”). The Hangingstone Facility would accept, for disposal, third-party-generated waste. Waste would be disposed of into washed out solution-mined salt caverns, which would treat the waste through phase separation. Separated hydrocarbons would be recovered and sold. Brine recovered from the salt caverns would be treated before being injected into disposal wells.
The AER issued an approval for the Hangingstone Facility on January 30, 2019. On February 27, 2019, Suncor Energy Inc. (“Suncor”) filed a request for regulatory appeal for the Hangingstone Facility. The AER granted the request for regulatory appeal, and a hearing on the regulatory appeal followed a full hearing that was held for the Hangingstone Project.
There Is a Need for the Hangingstone Facility and It Will Provide Some Benefits to Albertans
The AER found that an oilfield waste management facility that can handle a wide range of oilfield waste was needed in the region. It accepted that having a waste management facility in the area will reduce the need to truck oilfield waste to distant waste facilities, thereby improving road safety and reducing GHG emissions. Smaller producers, who are close to Highway 63 and do not have an on-site waste disposal system, could benefit from probable cost savings resulting from a nearby oilfield waste management facility that can handle a wide range of oilfield waste.
In addition to the waste volumes generated by small producers in the vicinity of the Hangingstone Facility, the AER acknowledged that there are significant volumes of waste generated within the Athabasca Oil Sands Area and that this is expected to continue for the foreseeable future. Additionally, Pure’s evidence indicated some potential growth in bitumen production in the region, as well as growth in waste volumes from ageing plays, which was not contested by Suncor. The AER noted that it is more likely than not that any potential increase in bitumen production would result in increased waste generation. Building one facility that is large enough to handle current waste volumes and any future growth in waste volumes, rather than building multiple smaller facilities, is consistent with the AER’s mandate of orderly development.
The Potential for Surface Heave Does Not Pose a Significant Risk to the Hangingstone Facility
The AER noted that in steam assisted gravity drainage operations, the amount of surface heave or ground deformation that may occur depends on factors such as the depth of the reservoir; the vertical thickness of the bitumen-containing reservoir; the reservoir and overburden rock’s thermal, hydraulic, and mechanical properties; and the temperature and pressure of steam injection.
The AER found that given the absence of any evidence enabling it to validate the modelled heave values provided by Suncor, it was more reasonable to rely on the publicly available data provided by Pure to evaluate the degree of surface heave that may occur at the Hangingstone Facility.
The AER agreed with the general proposition that heave is inversely proportionate to the true vertical depth of a reservoir; the deeper the reservoir, the less noticeable the surface deformation. Having regard to the evidence, the AER noted that it was reasonable to expect that heave at the location of the Hangingstone Facility would be more comparable to the 39 cm value measured at JACOS Hangingstone rather than the 84 cm value measured at MacKay River.
Both Pure and Suncor stated that reservoir thickness and operating pressure could also impact the magnitude of surface heave. The AER noted that the evidence of lower operating pressures by Suncor at nearby operations, and a thinner reservoir beneath the Hangingstone Facility meant that any heave in the vicinity of the Hangingstone Facility would likely be closer to Pure’s estimate.
With regard to slope change caused by surface heave, the AER found that the slope of heave in Section 25 would be modest.
Based on the foregoing, the AER found that the heave rate that may occur at the location of the Hangingstone Facility if Suncor steams the reservoir within Section 25 as part of its Meadow Creek West operations will be modest and close to Pure’s estimate of 2 cm per year, with a maximum heave of 30 to 35 cm and a slope of 0.07 percent.
The AER also found that any risk to the Hangingstone Facility caused by the amount of heave estimated by Pure or even modelled by Suncor can be mitigated through engineering design. It accepted Pure’s evidence that the Hangingstone Facility can and will be built to withstand the anticipated range of heave and that heave will not adversely affect the operation or integrity of the Hangingstone Facility.
The AER was satisfied that proper design and effective monitoring will sufficiently mitigate the risk surface heave may pose to the Hangingstone Facility. It noted that the development of heave is a slow process that will allow for intervention if needed. It, therefore, included conditions requiring Pure to ensure that the design of the Hangingstone Facility is sufficient to protect the facility from surface heave resulting from Suncor’s operations and to monitor for any potential effects of surface heave on the integrity of the Hangingstone Facility should Suncor commence steam operations in the vicinity of the facility.
The Hangingstone Facility Will Not Prevent Suncor From Recovering Bitumen in the Area or Cause Resource Sterilization
There May Be Economically Recoverable Bitumen Beneath the Hangingstone Facility and in Section 25
Based on the evidence regarding pay thickness, bitumen saturation, and the presence of bottom water, the AER noted that it is currently unclear whether it would be economical to recover bitumen located in Section 25 and beneath the Hangingstone Facility.
The AER agreed with Suncor’s submissions that as technologies advance, resources that have historically been challenging to recover might become more economical. While the production of bitumen in Section 25 and beneath the Hangingstone Facility may not currently be economical, it may become economically viable in the future.
The Location of the Hangingstone Facility Does Not Prevent Suncor From Acquiring Data to Characterize Bitumen and Evaluate Caprock
The AER accepted that to maximize resource recovery and optimize well and pad placement, Suncor must properly characterize the resource. It also acknowledged that to safely produce bitumen and contain the high-pressure steam within the reservoir, it is important to evaluate the reservoir’s caprock integrity.
The AER made note of the constraints (both natural and manmade) and complexity of acquiring subsurface data, which requires long-term planning and execution, often stretching over decades. It also noted that the footprint of the Hangingstone Facility is a small fraction of the Suncor’s Meadow Creek West project area, approximately 0.0153 per cent. Given the expansiveness of Athabasca oil sands leases and the time required to acquire data, the AER was of the opinion that it is not reasonable to expect to be able to rely on unconstrained surface access over the entirety of leases as a means of ensuring the acquisition of comprehensive data.
The AER found that while Suncor may not be able to use its preferred method of evaluation, it will still have viable options. The presence of the Hangingstone Facility does not prevent Suncor from sufficiently characterizing the resource and caprock. The AER also found it unlikely that the potential absence of data over one legal subdivision will prevent Suncor from having confidence in its interpretation of caprock integrity in Section 25.
The AER placed a condition on the approval, requiring that Pure must give Suncor a reasonable opportunity to place geophones, use vibroseis trucks, or do both within the boundaries of Pure’s miscellaneous lease to allow Suncor to obtain seismic data.
The Hangingstone Facility Would Not Lead to a Material Loss of Economic Benefits to Suncor and the Public
The AER noted that nearly half of the legal subdivisions within Section 25 have other infrastructure in place, including a pipeline corridor and Highway 63. This infrastructure will affect Suncor’s ability to recover bitumen within Section 25. In comparison with the footprints of the highway and pipeline corridor, the footprint of the Hangingstone Facility is small, 0.35 per cent of the section. If the presence of the highway and pipeline corridor does not make the production of bitumen within Section 25 uneconomical, it is unlikely that the Hangingstone Facility (which has a relatively small footprint and is located close to the highway and pipeline corridor) will prevent Suncor from extracting the bitumen beneath it or from selecting the most efficient pad location.
The AER was satisfied that given the small amount of bitumen that Suncor may not be able to extract because of the presence of the Hangingstone Facility, resource conservation and sterilization/ waste are not a concern. Not recovering absolutely all bitumen is unavoidable and permitted so long as it is not excessive.
Disposal Capacity
The AER noted that it was necessary to have regard for the Hangingstone Project as a whole in considering this appeal. This was complicated by the fact that the applications for the disposal wells that will support Pure’s operations at the Hangingstone Facility and this appeal are being considered in separate hearings with separate records. Nonetheless, the AER stated that it must have regard for the overall Hangingstone Project. It stated that if the Hangingstone Project is not needed or cannot succeed, it is difficult to see how the Hangingstone Facility can be in the public interest.
The AER stated that there is no requirement that disposal capacity be proven prior to approval of the Hangingstone Facility. However, if there was no prospect of Pure obtaining disposal capacity, this would be relevant to the overall viability of the Hangingstone Facility and the Hangingstone Project.
While Pure had not demonstrated that it had proven disposal capacity, the AER noted that there was nothing on the record of this proceeding demonstrating that it will not be able to secure the required capacity. Irrespective of the outcome of the proceeding for Pure’s Hangingstone Project, the AER did not have evidence to demonstrate that Pure could not obtain sufficient disposal capacity and saw no basis for rescinding the approval because disposal had not yet been proven.
The AER noted that the issue of disposal capacity also raised the issue of how Pure made its applications for the Hangingstone Project. Pure’s decision to file its applications for the Hangingstone Project in a staggered manner caused considerable regulatory inefficiency. The AER noted that it encouraged applicants to bundle their applications whenever possible. Considering and deciding on related applications together creates a more effective process that allows the AER, applicants, and the public to address a proposed development as a whole. The result is a more efficient use of public resources and greater transparency within the AER’s proceedings.
Approval of the Hangingstone Facility Is Consistent With the AER’s Regulatory Mandate and is in the Public Interest
The AER found that that approval of the Hangingstone Facility is consistent with the AER’s mandate and in the public interest. It, therefore, confirmed AER Authorizations’ decision to approve application 1910941 and issue approval WM 211, subject to the conditions outlined in its decision report.
