Solutions to the high costs of future water restrictions for new oil sands industry along the Athabasca River

Figures & data

Table 1. Water conservation regulation for the lower Athabasca River^a.

River flow condition^b	Limit on total water withdrawals by oil sands industry
Green	15% of instantaneous flow.
Flow is above HDA80^c and Q90^d
Yellow	10% of the average of the HDA80 and Q95.
Flow is below HDA80 or Q90, and above Q95	Seasonal limits ^e:
	15 m^3/s in winter
	Lesser of 5% of the HDA80 flow and 34 m^3/s during spawning
	34 m^3/s in summer.
Red	5.2% of historical median flow in each week.
Flow is below Q95	Seasonal limits:
	15 m^3/s in winter
	Lesser of 5% of the HDA80 flow and 34 m^3/s during spawning
	34 m^3/s in summer.

a . Lower Athabasca Water Management Framework, Phase I. Source: Alberta Environment and Fisheries and Oceans Canada (2007, Table 1).

b . The flow condition is determined by the background flow in the Athabasca River less extraction. Flow measurement depends on the section of river (e.g. reach 4 is the sum of daily flows from the Athabasca River gauge below Fort McMurray and the gauge at the mouth of the Steepbank River).

c . HDA80 refers to the flow level that corresponds to 80% habitat area exceedance (i.e. the flow level at which the habitat area is available at least 80% of the time). Applies to the highest HDA80 value for aquatic species for which data are available.

d . Q90 refers to 90% flow exceedance (i.e. the Q90 flow is equalled or exceeded 90% of the time); similarly for Q95.

e . Winter is from late October (week 44) through to early April (week 15) of the following year. Summer is from April (week 16) to October (week 43). Fish spawning occurs from April to early June (week 16 through to week 24).

Table 2. Licensed water-use, seniority rank of licences and modelled forecast water demand by year 2020 (approx.) by oil sands firm.

Oil sands firm	Water licences held			Production and water demand assumption ~ year 2020
	Licensed water use	Licensed average water use	Licence seniority rank	Oil production	Water demand
	(GL/year)	(m^3/s)	(1 = most senior)	(m^3 per year)	(m^3/s)
Firm 1^a	0.176625	0.006	10	16,000	0.006
Firm 2	51.02	1.618	8	92,000	1.618
Firm 3	60.4415	1.917	2
	1.2335	0.039	3	94,000	1.956
Firm 4	35.3	1.119	7	48,000	1.119
Firm 5	30.8375	0.978	1
	28.98725	0.919	4
	3.0	0.095	9	70,000	1.992
Firm 6	55.1	1.747	5	43,000	1.747
Firm 7	39.27	1.245	6	30,000	1.245
Firm 8	80.0	2.537	11	48,000	2.537
Total	385.37	12.22	N/A	441,000	12.22

^a Use of steam assisted gravity drainage (SAG-D) technology to extract oil.

Figure 1. Marginal willingness to pay by oil sands industry for water supplied from the Athabasca River (~year 2020). Excludes technology options and steam assisted gravity drainage (SAG-D) outlier.

Table 3. Parameters tested by sensitivity analysis (applied to all options).

Parameter	Value	Sensitivity analysis		Comment
		Low value	High value
Oil price	$70 per barrel	$30	$110	Peak and trough of Canadian heavy oil benchmark price (Western Canada Select) between 2005 to 2008, rounded to nearest $10.
Background flow	10% less than historic	20% less than historic	Historic	Refer to Mannix et al. (2010)

Figure 2. Modelled average frequency of the flow conditions necessary to trigger water restrictions in each week over the calendar year.

Figure 3. Modelled proportion of demand that receives supply (%) and the supply shortfall (m³/s).

Figure 4. Likelihood and magnitude of water restrictions assuming Athabasca River flow is 10% less than historic records and 12.2 m³/s water demand (~year 2020).

Figure 5. Distribution of firm revenue as a proportion of full production under prior allocation system. Firm productivity of water use from Athabasca River shown on the secondary axis (log scale).

Figure 6. Marginal willingness to pay for water, measured in dollars per m³.

Figure 7. Likelihood of marginal values of water under efficient water allocation, measured in dollars per m³.

Figure 8. Distribution of firm revenue as a proportion of full production under efficient water allocation. Firm productivity of water use from Athabasca River shown on the secondary axis (log scale).

Figure 9. Likelihood and magnitude of supply shortfall (~year 2020) with use of consolidated tailings and increased recycling, as compared to prior allocation.

Figure 10. Marginal willingness to pay by oil sands industry for water supplied from the Athabasca River (~year 2020) with use of consolidated tailings and increased recycling, as compared to efficient water allocation.

Figure 11. Likelihood of marginal values of water from the Athabasca River under efficient water allocation with consolidated tailings and increased recycling, as compared to efficient water allocation only.

Table 4. Net present value of policy and technology options, $ million.

Ref.	Option	Present value of costs	Present value of benefits	Net present value
-	Prior allocation (base case)	-	-	-
1	Efficient water allocation	-	2900	2900
2	Consolidated tailings and water recycling	250	3000	2700
3	Storage	50	6400	6300
1 + 2	Efficient water allocation plus consolidated tailings and water recycling
	Incremental effect of consolidated tailings and water recycling	240	2100	1900
	Total - combined option	240	5000	4800
1 + 3	Efficient water allocation plus storage
	Incremental effect of storage	50	4200	4200
	Total - combined option	50	7100	7100

Figure 12. Net present values of policy and technology options compared to base case of prior allocation, $ million.

Figure 13. Distribution of firm revenue as a proportion of full production, comparison of prior allocation and efficient water allocation. Firm productivity of water use from Athabasca River shown on the secondary axis (log scale).

Table 5. Sensitivity analysis of policy and technology options, $ million.

Ref.	Option	Net present value
		($ million)
		Historic flow	–20% historic flow	$30 per barrel oil price	$110 per barrel oil price
-	Prior allocation (base case)	-	-	-	-
1	Efficient water allocation	1500	5200	230	5500
2	Consolidated tailings and water recycling	1700	4400	30	5400
3	Storage	3600	10400	460	12100
1 + 2	Efficient water allocation plus consolidated tailings and water recycling	2700	8000	240	9400
1 + 3	Efficient water allocation plus storage	4000	11700	520	13600

Alberta Environment, and Fisheries and Oceans Canada. 2007. Water management framework: In-stream flow needs and water management system for the lower Athabasca River. Alberta Environment and Fisheries and Oceans Canada, 37 pp.

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Mannix, A. E., C. Dridi, and W. L. Adamowicz. 2010. Water availability in the oil sands under projections of increasing demands and a changing climate: An assessment of the lower Athabasca water management framework. Canadian Water Resources Journal 35 (1): 29–52.10.4296/cwrj3501029

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