Alberta's oil sands industry is dependent upon the Athabasca River to provide water for both mining operations and in situ production of bitumen. The amount of water and the rate at which water can be withdrawn from the Athabasca by oil sands operators is regulated by Alberta Environment ("AENV") under the Water Act. Approved oil sands mining operations are currently licensed to divert 349 million m3 of water each year from the Athabasca River. This volume is expected to increase significantly as a result of the rapid expansion of the oil sands industry.
The Water Act enshrines the "first in time, first in right" priority system of water diversion in Alberta. All licences issued under the Water Act are assigned a priority, which corresponds to the date and time an application is filed (s. 29). Licences issued under prior legislation were grandfathered under the Act and "deemed" to retain their original priority. Deemed licensees are permitted to exercise their right to divert water subject to the terms and conditions of the original licence even if those conditions are inconsistent with the Water Act. Deemed licensees include Syncrude Canada Ltd. and Suncor Energy Inc. Both companies have priority rights to use water from the Athabasca River for their oil sands mining operations. Syncrude asserted this priority right in CNRL's Horizon Oil Sands Project Application.
In the Joint Panel Report (Decision 2004-005) for the Horizon Project, the Panel noted, inter alia, that while AENV recognized the priority rights of all water users under the Water Act, it had the ability to revise all water licences regardless of priority. The Panel also stressed that the timely development of an instream flow need ("IFN") recommendation for the Athabasca River was necessary to preserve the future integrity of the River (IFN is defined as the amount of water, flow rate, water level, or water quality that is required in a river to sustain a healthy aquatic ecosystem). The Joint Review Panel in the subsequent Shell Jackpine Project application (Decision 2004-009) reiterated this need.
In July 2006, AENV and Fisheries and Oceans Canada ("DFO") issued the draft Water Management Framework: Instream Flow Needs and Water Management System for the Lower Athabasca River (the "Framework"). The stated goal of the draft Framework was "to minimize risk to the aquatic ecosystem while balancing water requirements for human use." The final Framework, issued in February 2008, establishes maximum withdrawals and strict limits on how much water oil sands companies can divert from the lower Athabasca River.
The Framework will be implemented in two phases. Phase 1 (which will be implemented on July 1, 2008) establishes three categories (green, yellow or red) of naturally occurring flow conditions, as well as maximum limits on how much water can be diverted from the River during each flow condition. The green condition allows water withdrawals up to 15 per cent of River flow. Water withdrawals proceed with caution and are limited in yellow flow conditions. All water withdrawals are restricted under red conditions to minimize loss of fish habitat.
Phase 2 will involve stakeholder consultations and additional scientific research needed to modify the IFN to ensure it meets environmental and socio-economic goals over the long term. It is possible that a more restrictive withdrawal regime may be required to protect the River. Implementation of Phase 2 recommendations will begin no later than September 2010. However, the Framework explicitly allows for an adaptive management process indicating the need for ongoing review and modification of the IFN in the future. The Framework is required to be used in all future regulatory decisionmaking, however, it does not contain specific enforcement provisions. The details of how the Framework is to be administered are to be considered during the development of the Phase 2 implementation plan.
The draft Framework required that the oil sands industry provide AENV with a plan for water sharing, and collectively meeting Phase 1 requirements by January 31, 2009. The plan submitted by oil sands mining operators provided that licence holders (including Syncrude and Suncor) would collectively manage all net instantaneous withdrawals from the Athabasca during yellow and red periods to meet the restrictions under the Framework. What is more, Syncrude and Suncor agreed to limit their withdrawals during red and yellow conditions to "a maximum of rates equal to their average annual allocation rate." This is noteworthy given that Syncrude and Suncor's current licences allow for a combined peak withdrawal rate of close to double the average allocation rate. It remains to be seen what effect the Plan and the Framework will have on the "first in time, first in right" principle in Alberta.
Despite the fact that the Plan did not contain specific information (such as water use rates or a methodology for apportioning water among industry users), it was accepted by AENV and DFO. Both government and industry have committed to working together to determine how the Plan will be applied on an ongoing operational basis.
This article originally appeared in the June 15, 2007, issue of The Lawyers Weekly published by LexisNexis Canada Inc.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
