Long Lake project to draw 17,000 cubic metres a day

The operator of the Long Lake oilsands project in northern Alberta has a plan to tap up to 17,000 cubic metres per day from the Clearwater River, a proposal that has outraged environmentalists and could embarrass the province.

The steam-assisted gravity drainage (SAGD) project south of Fort McMurray, which began steaming its underground oilsands deposits in late 2008, is producing about 18,000 barrels per day, about a third of its 60,000-barrel-per-day goal.

But it’s using about 100,000 barrels of steam per day, a 5.5-to-one steam-oil ratio, when its original plan, which called for no use of surface water, envisioned an average of three-to-one over the life of the project.

“The Canadian Heritage Rivers Board designated the Clearwater River one of Canada’s leading rivers because it is remote and pristine and a precious part of Canadian history,” said Fort McMurrayarea resident Ruth Kleinbub in an article on the website of the environmental group Lake Ontario Waterkeeper.

“If a river like the Clearwater does not get the best protection possible, then there is no hope at all for less pristine areas,” added Mark Mattson, an environmental lawyer and full-time Waterkeeper based in Toronto.

David Coll, spokesman for the integrated facility owned by Nexen Inc. and Opti Canada Inc., said the original plan was to use only brackish water from wells for SAGD and fresh well water for upgrading. That hasn’t worked out due to reliability problems with both volumes and quality of water.

“Volume is certainly key. We do need water to operate, as does any large industrial facility,” he said.

The water is needed mainly for the future operation of the bitumen upgrader, he said, especially if Phase 2 of the project is sanctioned, but Coll denied it indicates a failure of the upgrader. It’s the first commercial application of a proprietary technology called OrCrude.

The water project carries a preliminary cost estimate of $75 million to $100 million and would involve building a 35-kilometre pipeline to the river before it flows into the Athabasca River at Fort McMurray.

David Taras, a political analyst with the University of Calgary, said the news is a black eye for the industry and for the Stelmach government in the wake of a report Thursday that black bears and deer have died because of the oilsands.

“This company’s timing couldn’t be worse,” he said. “I think people will be looking at these headlines and wondering what comes next.

“This has hot potato written all over it.”

Coll said the pipeline project is in the community consultation stage and no regulatory applications have been made. He said the project will need approvals from Alberta Environment, the federal Department of Fisheries and Oceans, Transport Canada, Alberta Sustainable Resource Development and the Alberta Energy Resources Conservation Board.

He added the project would take only 0.2 per cent of average river flow and would have less environmental impact than the network of roads and pipelines that would be need to be expanded for well water collection.

Analyst Mike Dunn of FirstEnergy Capital Corp. said water has been a sore spot with Long Lake for a long time, but another setback won’t likely affect the partners’ share prices.

“They’ve had a lot of water treatment problems,” he said. “That project has been a big disappointment in terms of ramp up.”

The Lake Ontario Waterkeeper article says Long Lake’s request is “unprecedented” because most in situ or thermal recovery projects in Alberta’s north don’t use surface water.

But Coll pointed out oilsands companies that have upgraders, such as miners Syncrude and Suncor, take water from a river source.

Nexen is the operator and owns 65 per cent of Long Lake. Its shares closed at $25.95, up 22 cents Thursday.

Opti, which closed at $2.24, down five cents, sold part of its original 50 per cent stake to Nexen. Last year, it put itself up for sale while it undertakes a strategic review process.