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Shell Testing New Waste Technology For Canada’s Oil Sands

THE WALL STREET JOURNAL

AUGUST 26, 2010

By Edward Welsch Of DOW JONES NEWSWIRES

CALGARY (Dow Jones)–Royal Dutch Shell PLC (RDSA) said Thursday it began a commercial demonstration of a new technology to reduce the waste pools created by Canada’s oil sands mining industry, and that it will make it freely available to competitors.

However, Shell executives said they are still uncertain whether the technology will meet a new directive set by the Alberta government to reduce the waste pools, called tailings ponds.

Tailings ponds are a mixture of sand, silt and residual oil created when hot water is used to separate the oil from the oil sands mined in northeastern Alberta. Without technology, the ponds can take hundreds of years to fully dry.

The oil sands industry is trying to halt the growth of the tailings ponds, which are the most visible sign of the industry’s effect on the environment. They cover more than 50 square miles in northeast Alberta and are set to grow along with the oil sands industry, which is a key source of U.S. oil supplies expected to double in size to more than three million barrels a day this decade.

Shell’s new technology, called Atmospheric Fines Drying, uses thickening agents and flocculants to speed the solidification of the tailings, which are then rolled down a sandy slope to extract water. The water is then reused in the oil sands operation.

The demonstration project at Shell’s Muskeg River Mine will dry out about 250,000 metric tons of tailings this year. That is only a small fraction of the waste created by the Muskeg River Mine, given that it can produce about 150,000 barrels of oil a day, and about two metric tons of sand are mined to create one barrel of oil. Shell’s Muskeg River tailings pond covers nearly nine square miles.

But Shell says it will use results from the project this fall to see if it can be adopted on a wider scale at Muskeg and its nearby Albian Jackpine oil sands mine.

Shell will also allow competitors to use Atmospheric Fines Drying and other tailings reduction technologies it has developed free of charge.

“We’ll make it available, no strings attached, no [intellectual property], no expectation of money,” said John Broadhurst, Shell Canada’s vice president of development, at a press conference Thursday. “We need to do our part in terms of delivering effective tailings solutions and doing it more rapidly than we’ve been able to do in the past,” he said.

However, Shell’s existing tailings plan don’t appear to meet the strict directive set by Alberta regulators, which last year asked oil sands producers to cut tailings production by 20% starting in July, and ramp up to a 50% annual reduction by 2012.

Suncor Energy Inc. (SU), Canada’s largest energy company, is the only one so far to meet those requirements. However, tailings management plans submitted by Imperial Oil Ltd. (IMO) and the Syncrude project, which is managed by Canadian Oil Sands Trust (COS.UN.T), were approved despite not reducing tailings enough to meet the directive.

The Alberta government is still reviewing tailings management plans submitted by Shell and Canadian Natural Resources Ltd. (CNQ).

“We think it’s really positive that Shell is moving forward with a new technology to reduce tailings…but it’s on a path to not meet the directive,” said Terra Simieritsch, an oil sands technical and policy analyst for environmental think tank the Pembina Institute.

Simieritsch said Alberta regulators “are sending mixed messages because they are approving plans that don’t meet the standards they set out.”

Shell is the 60% owner of the Muskeg River Mine; Chevron Corp. (CVX) and Marathon Oil Corp. (MRO) each own a 20% stake.

-By Edward Welsch, Dow Jones Newswires; 403-229-9095; [email protected]

WSJ SOURCE ARTICLE

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