When King Edward VIII abdicated the throne to marry Wallis Simpson it was scandalous. When the Alberta government abdicated the regulation of Alberta’s natural resources to an industry-led agency nobody raised an eyebrow.
The new Alberta Energy Regulator (AER) is 100% funded by industry. It’s chaired by an industry lobbyist, Gerry Protti, and managed by a former deputy minister, Jim Ellis, who achieved notoriety when his department illegally barred environmentalists from participating in energy project applications.
This less than inspiring crew is investigating the CNRL Primrose problem.
The Primrose problem
CNRL, a global oil and natural gas company, uses fracking to extract bitumen at the Primrose oil sands site near Cold Lake Alberta. CNRL injects steam under high pressure into a reservoir. The heat softens the bitumen, the water separates it from the sand and the pressure creates cracks through which the bitumen flows back into wells which bring it to the surface.
In 2013 CNRL had four uncontrolled bitumen releases—seepages that made their way to the surface. Similar large and uncontrolled releases occurred in 2009 and 2006.
CNRL reported the first two releases to the AER on May 21. It reported the third on June 8 and the fourth on June 24. It was only after CNRL’s fourth report that the AER issued a bizarre press release saying it would “hold the responsible party accountable for the incident and its impacts.”* Responsible party?? Let me guess…CNRL?
CNRL didn’t know what caused the releases but assured its shareholders that production at Primrose would be unaffected.
In July the AER ordered CNRL to suspend steaming on part of the site and restrict steaming on another and to enhance monitoring and accelerate cleanup.
Jim Ellis, the AER’s CEO, described these measures as precautionary, noting that “there have been no risks to public safety”. ** A bold statement given that the AER had no subsurface groundwater test results in hand at the time.
CNRL said the cause of the release was “mechanical” (ie caused by wellbore failure) and assured its shareholders that the Primrose Problem would not impact its annual thermal in-situ production results.
On Sept 24, three months after CNRL first reported the releases, AER issued an Environmental Protection Order requiring CNRL to drain a 53 hectare lake in order to mitigate the impact of the release.
Jim Ellis, AER CEO, once again spoke on behalf of the company. He said that seepage was expected to continue indefinitely until the pressure in the reservoir subsided.
He ventured that there may be a bigger problem. “We are kind of hopeful…that this is a mechanical failure. If it is not mechanical it is a reservoir issue”.***
It’s not clear who the royal “we” was, but it certainly wasn’t CNRL who immediately rejected the suggestion that the cause could be a reservoir issue and repeated its assertion that the cause was “mechanical” (defective wellbores).
On October 21, the AER finally issued an Environmental Enforcement Order requiring CNRL to determine the impact to subsurface groundwater and find the root cause of all four bitumen releases.
Now we’re getting somewhere. This will bring the causation issue to a head. Is it defective wellbores (a relatively easy fix) or a reservoir issue which could shut down the Primrose reservoir and negatively impact CNRL’s bottom line?
CNRL stakes out its position
At its third-quarter investor call, CNRL president, Steve Laut, described the Primrose problem as “a technical, operational challenge that is totally solvable.”****Another way to put this is: we’ve had seepage problems since 2006 and haven’t done a thing about it, but rest assured it’s NOT a reservoir problem.
He outlined the steps CNRL will take to avoid seepage in the future: (1) examine 31 legacy wells and repair if necessary, (2) set up an “enhanced monitoring” system to identify “infrequent subsurface release signals from the Clearwater in the Grand Rapids” and trigger an “enhanced response” and (3) modify the steaming process.
Ah, could you run that second one by me again, slowly?
CNRL’s “enhanced monitoring” system
Apparently three major rock formations act as barriers preventing bitumen from escaping from the Clearwater Sands formation. These are the Clearwater Shale formation, the Grand Rapids zone and the Colorado Shale Group.
If by some fluke bitumen does escape from the Clearwater Sands formation into the Clearwater Shale formation and from there finds its way to the Grand Rapids zone, CNRL’s “enhanced monitoring” system will kick in and CNRL will reduce reservoir pressure so the bitumen can’t go through the last barrier, the Colorado Shale Group.
Having said all that, if CNRL fails to register the seepage on its “enhanced monitoring” system, the bitumen can travel through cracks in Grand Rapids and Colorado Shale to the surface. But CNRL is confident this will never happen unless there’s a defective wellbore lying around waiting to carry the bitumen to the surface.
What about the ERCB report?
There’s just one small hitch.
When the ERCB investigated CNRL’s 2009 bitumen release it found that the first barrier, the Clearwater shale formation, was “likely breached by high-pressure steam injection not related to a wellbore issue, that the Grand Rapids Formation…did not act as a diverter, and that a pathway found through the Colorado Group likely involved a wellbore or a series of pre-existing faults”.*****
In other words, the ERCB found a “reservoir issue”.
The acid test
CNRL is adamant that these four releases are a “mechanical” problem resulting from faulty wellbores.
The ERCB is on record saying the 2009 Primrose release was not caused by wellbore failure but a “reservoir issue”.
And it’s up to the AER to review the evidence and decide whether the four releases are a “mechanical problem” or a “reservoir issue”. Which way do you think the industry dominated AER will go?
Right. And that’s why the Alberta government’s abdication of its regulatory responsibility is beyond scandalous. It’s reprehensible.
*Daily Oil Bulletin July 2, 2013
**DOB July 19, 2013
***DOB Sept 25, 2013
****DOB Nov 8, 2013
*****ERCB Investigation Report, issued Jan 8, 2013