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Reactions mixed to oilsands approval pause

Reactions mixed to oilsands approval pauseAn oil sands facility seen from a helicopter near Fort McMurray, Alta., on July 10, 2012. Environmental groups are giving Alberta's energy regulator a rare pat on the back over its decision to delay approvals for certain types of oilsands projects over concerns about the intensity of development. THE CANADIAN PRESS/Jeff McIntosh

EDMONTON - Environmental groups are giving Alberta's energy regulator a rare pat on the back over its decision to delay approvals for certain types of oilsands projects over concerns about the intensity of development.

"It's encouraging that the (regulator), despite the pressure to increase development, is willing to take a pause when it's required," said Erin Flanagan of the Pembina Institute, an environmental think-tank.

In late January, the Alberta Energy Regulator announced it would delay approval for all oilsands proposals in a 1.2-million-hectare region around Fort McMurray that planned to use unconventional steam injection to recover bitumen from shallow deposits. The regulator said it was increasingly concerned non-conventional drilling in the area could be degrading the ability of subterranean rock to keep bitumen trapped underground.

"The intensity of development is increasing and we don't see it slowing down," said spokesman Darin Barter. "We're seeing increased applications and increased development in that area and we want to make sure that, going forward, we're not playing catch-up."

Developments using steam to extract bitumen are expected to ultimately be responsible for up to 80 per cent of Alberta's production.

Barter said the regulator is trying to avoid blowouts or seepages of bitumen forced through the rock layer by steam injection.

Flanagan said the method causes the layer, called caprock, to flex slightly. It's not clear what effect that constant flexing from hundreds of wells is having, she said.

"You're expanding and contracting the deposit, so it becomes more fragile. The integrity of the deposit changes over time. That's why the question of appropriate pressure becomes a critical one."

The consequences of too much pressure can be catastrophic. A 2006 blowout at a Total site left a 300-metre crater in the forest.

"This is really to ensure we don't have future issues," said Barter.

Barter said the approvals pause is not related to an ongoing leak at a Canadian Natural Resources (TSX:CNQ) site near Cold Lake, where bitumen forced by steam has seeped up from cracks in the earth.

Five companies have been affected by the approvals pause. That's a small fraction of 195 steaming applications the regulator received in 2013, which included 190 applications for changes to existing projects and five applications for new thermal projects.

One of the affected companies, Southern Pacific Resource Corp. (TSX:STP), doesn't expect the delay will change its project's timing.

"It's not going to affect our timeline," said spokesman Greg Foofat.

Southern Pacific will have to submit more detailed information on the structure of the caprock in its area. But Foofat said the company anticipated the regulator's bulletin and built it into its schedule.

Another company, Silver Willow Energy (TSXV:SWE), said it was disappointed in and surprised by the regulator's action. The move could delay the company's project by up to two years, said president Howard Lutley.

"We had heard a bit of industry chatter, but there was nothing that we saw that warned us of that," he said. "We are not convinced at this stage that this concern is justified.

"Having said that, it is quite appropriate that the regulator can satisfy itself and satisfy the public that any current projects and any proposed projects are operating safely. We're sort of caught in the necessities of the regulator to do its job."

Barter said the regulator will talk with industry and other stakeholders to come up with new regulations governing steam injection and caprock integrity. He said it's too early to know when the approval delay will be lifted.

"It will take some time because it's fairly technical," he said. "It is a priority for this organization."

Note to readers: This is a corrected story. A previous version said the regulator was concerned development in the area was degrading the ability of subterranean rock to keep bitumen trapped underground.

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