Oil companies cooperate on toxic task in Canada

FORT McMURRAY, ALBERTA - Decades of open-pit mining have scarred northern Canada's forested landscape with massive, toxic ponds that are an eyesore for the oil industry and a flash point for environmentalists.

Now, facing a backlash, oil companies are combining forces to jointly develop technology for cleaning up the wet tailings -- a porridge of water, hydrocarbons, sand and clay left behind when a tar-like hydrocarbon called bitumen is extracted from mined oil sands.

The group effort is unprecedented among companies that pride themselves on guarding any information that might give competitors an edge.

"I can't think of any other collaboration of this magnitude, of this nature -- anywhere," said Eddie Lui, a 30-year industry veteran and the vice president of oil sands research and development at Alberta-based Imperial Oil, which is majority owned by Exxon Mobil Corp.

Imperial Oil and six other companies spent more than a year negotiating the details of their plan to join forces before agreeing last spring to create the Oil Sands Tailings Consortium. Under the final deal, they will pitch in money and research over the next five years -- even though it means sharing potentially lucrative intellectual property.

"We were very uncomfortable initially," Lui said of the discussions. "I wasn't too sure we were ever going to get there."

The collaboration already is spurring breakthroughs that could eliminate the need for more tailings ponds and speed up retirement of existing ones.

Shared problem

In a unique collaboration, companies participating in the mining-focused Oil Sands Tailings Consortium have committed to spending more than $90 million this year to address their shared environmental problem. They are facing new Canadian regulations that require them to reduce the amount of wet tailings from their mining operations, as well as mounting pressure from shareholders to preserve and restore the landscape.

But environmental advocates dismiss the endeavor as window dressing. "These technologies [have] promise, but to count them as a fix is basically green-washing," said Danielle Droitsch, a senior adviser for international programs at the Natural Resources Defense Council. "They could eventually make a small dent in the growing problem, but that's only if they become universal in tar sands operations, and that's just not happening. There's actually way more public relations hype around the research and development than actual, on-the-ground performance."

In 2010, 22 percent of U.S. oil imports came from Canada, much of it from the country's vast oil sands reserves. Those numbers could jump if the Obama administration approves -- over the objections of environmentalists and some landowners -- the Keystone XL pipeline that would carry crude from Alberta to refineries on the Texas Gulf Coast.

The biggest challenge from four decades of oil sands mining has been the silt, water and hydrocarbons left after hot water is used to extract the bitumen. The tailings have been stored in massive ponds. Eventually, most of the sand and clay drop to the bottom of the ponds. A middle layer of "mature fine tailings" remains suspended in the water for decades.

Companies have been searching for ways to reduce the amount of tailings and the time it takes to dry them. The dry material can be used to backfill open mines.

Suncor, which owns Canada's oldest oil sands mine, is adding a chemical agent called a polymer flocculent to the mature fine tailings and spreading them out to dry in 14 days. It has allowed Suncor to cancel plans to build five new tailings ponds at its Millennium mine north of Fort McMurray, and it hopes to reclaim seven of its eight existing lakes.

Suncor has opened its research to competitors.

"The fact that they're not going to patent that process, or try to make others pay licensing fees to use it, is a big change in how technology has been developed in the past," said Jackie Forrest, an expert with the research firm IHS CERA. "That's a sign of things to come."

ConocoPhillips, which plans $1.5 billion in oil sands investments this year and claims Alberta oil sands reserves containing an estimated 15 billion barrels of oil equivalent, is working on ways to reduce the amount of steam used to soften the sticky, viscous material.

"If you can reduce the steam-oil ratio, it requires less steam, it requires less natural gas to heat up the steam, and it [generates] less greenhouse gas emissions," said Nick Olds, a ConocoPhillips senior vice president.

But Droitsch, the Natural Resource Defense Council adviser, cautions that any technological improvements have to move beyond the drawing board or the number of tailings ponds will increase.