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16.01.10

Peak Water Theory in the Athabasca and the Non Renewable Planet

Article ; 2 written for the Oil and Gas Network Magazine May 2009

Peak Water Theory in the Athabasca and the Non Renewable Planet

The acute demand for resources renewable and non renewable will be the driver of extreme volatility in financial markets until passive alternatives are found. Humanity has evolved and existed for thousands of years using renewable sources of energy as the cornerstone of consumption.  Non-renewable resource dependence is a modern day preoccupation in most sectors of our daily commerce and a source of political, social, and economic addiction around the globe.  The peak oil debate boils down to the timing of an economic limit in delivering a finite resource to the energy consumer. 

Despite the short term volatility in oil markets and the suggestion that demand destruction will play prominently in energy consumption throughout North America, it is abundantly clear the contango seen in the oil futures market since the financial debacle is applying continued upward pressure on hydrocarbon products.  This means continued pressure on all resources. Pondering this struggle between the bears and the bulls in the energy markets leads one to speculate on constraint of both finite and unlimited resources.  What if the demand for resources, once considered unlimited, reach a bottleneck in the systems natural capacity to deliver?  Specifically what if the demand for clean drinking water or fresh air became so intense capacity peaked?  For almost two billion inhabitants on the planet access to clean drinking water is a daily struggle, and for most large city dwellers air borne particulates linked to adverse health effects are a concern.  Suddenly renewable resources appear finite.

It is not a stretch to contemplate a Peak Water Theory.  The well documented case of the Colorado River supported by the Ogallala Aquifer spanning from Texas to South Dakota frequently running dry is a case in point.  The aquifer has encountered a capacity limit in the natural earth systems ability to recharge given the agricultural, residential, and industrial uses within the rivers drainage area.  At the 6th Biennial Rosenberg International Forum on Water Policy after determining the effects of more than 70 river basins globally being closed to new water licenses...the idea of "rethinking water supply and maximizing the benefits that water provides" are likely to be profound metrics of economic wealth in the near future.

Closer to home in the Athabasca abundance in every capacity is striking.  The vast river systems, riparian areas, boreal forest and supporting waterscapes, and of course the oil are seemingly endless. The reserve life for heavy oil and oil sands production is projected to last over fifty years with anticipated production rates of 2.5 - 3.5 million barrels of oil per day by 2020.  The looming national debate over system capacities has found opinion in almost every household and town hall in North America.  Consumers understand the need to extract the primary resource, but most have grown impatient and suspicious of the methods.  The concern largely rests in measuring and putting limits on resources that were once considered unlimited, or at the very least renewable.  Carbon Capture and an associated tax or scheme of trade, seem to present a palatable option for 'the greening' of clean air needs.  Maybe solutions to this problem are manageable because the resource cannot be seen.  Exporting carbon offsets around the globe as easily as a stock broker executes a trade for any of the thousands of public stocks, if nothing else offers an image of doing something.  Water on the other hand is inherently more complex.  Offsetting water from a natural water course requires infrastructure as intricate as the network to deliver crude oil or natural gas.   In addition the right of access to clean air is not in question.  The right of access to clean drinking water has been threatened by physical limits in numerous communities in every country around the globe.  In the Athabasca region every barrel of synthetic crude oil produced requires a minimum of three barrels of fresh water drawn either from ground water or surface withdrawals from the Athabasca River drainage area.  (This metric is published in the business plans of both mining and SAGD operations.  Recycling through closed loop systems means the actual water requirement per barrel is three to four times the above number).  Three million barrels per day of sco will require 9 million barrels of permitted fresh water withdrawal every day to engage in the cumulative business plans of the Athabasca Oil Sands Operations.

A detailed review of the Alberta Government's Water for Life Strategy and supporting documents such as the Draft Directive for Thermal Insitu Recovery Schemes show where the holes are in the systems natural capacity to supply fresh water and maintain a standard and right of access to clean drinking water for every Albertan.  Legislation in the proposed directive based on various guidelines for water conservation in the province of Alberta state that;

a)      fresh water is defined as having less than 4000 milligrams of Total Dissolved Solids (TDS) per litre of water,

b)      brackish water is defined as having greater than 4000 milligrams of TDS/litre of water.

Recent academic forums, with representatives from both industry and government have discussed the need to increase the definition of fresh water up to 10,000 milligrams TDS per litre of water. This is required due to anticipated demand for this essential resource.  The Pembina Institute advocates a charge for industrial water use.  The ERCB has officially stated that companies will have to compete for water and disposal space in the future.

On January 21, 2009 using data from Alberta Environment's Water Management Framework CNRL, Suncor, Syncrude, and Shell's Albian Sands projects were asked to reduce the amount of water taken from the lower Athabasca downstream of Fort McMurray.  A low river advisory, likely induced by ice jams, was a possible explanation for this reduced withdrawal.  Subsequent data published by Alberta Environment showed several weeks of low river flows.   The spring of 2009 will be remembered in Alberta for the drought conditions affecting agriculture, forestry, and oil production.  I will reword the question postulated above, is it a stretch to consider a Peak Water Theory in the Athabasca?

A true definition of a 'draconian measure' is to simply evaluate water needs by a yard stick stuffed in the river bank. The parade of elementary students at the June 2009 Calgary's Major's day Expo featuring the City's water infrastructure could tell you 'groundwater systems are the life blood of a river and our communities'.

A sophisticated investor perusing the business pages of any Wall Street or Bay Street publication would be familiar with the financial metrics advising on the best energy companies to own stock in.  An index on oil sands operations may weigh investment choices based on production performance, P/E ratios, chart patterns, forecasts, and guidance.  None have considered the outcome if there was simply not enough water to execute the cumulative business plans of these operations.  Market speculation might lead one to hypothesize the best investments are based on the most sustainable processes.  There are numerous companies using technologies to mitigate this risk in limited water supply.  The simple suggestion that a Peak Water Theory in the Athabasca is a possibility,  far exceeds the view of a thirsty post mortem inquiry on how Alberta failed to measure its most precious 'renewable resource'. 

Without any further delay these investments include production systems that significantly reduce or eliminate water use. Such as in situ air injection/combustion technologies, and heavy to light oil upgrading at the well head offers hope. Absorption technologies for tailings pond clean up and management.  Electrically induce heat radiation technologies used in shale oils also appear to be likely candidates for sustainable investment in this field. Biomass gasification processes that produce clean high energy sources are the likely choices for short and medium run success, both satisfying investor returns and generating capital for solutions to this obvious need.  Over the long run Albertans' will have to ask is the investment in nuclear technology justified to ensure long term viability of oil sands production or is the investment a clean energy source for every day access to power that is potentially fatal if mismanaged?   Nuclear power posses its own threat to a manageable fresh water supply if any of the above arguments hold true.

Alberta's future is anything but green and likely brackish if peak water theory in the Athabasca becomes a reality. Responsible consumption of both renewable and non-renewable resources is essential.  Investment in sustainable processes are a likely modern day financial metric that could become vogue, and heavy oil and mining processes that mitigate peak water risk deserve attention for both access to capital and future access to clean drinking water.