Evaluation of the Oil and Gas Sub-sub Activity


Table of Contents


EXECUTIVE SUMMARY

Purpose

This is an evaluation of the Oil and Gas Sub-sub Activity (SSA) of Natural Resources Canada (NRCan). The SSA is managed collaboratively by NRCan’s Office of Energy Research and Development (OERD), Energy Sector, and CanmetENERGY Innovation and Energy Technology Sector (IETS). It is divided into two portfolios: the Bitumen, Oil and Gas (BOG) portfolio, which is focused on the oil sands resources; and the Frontier, Oil and Gas (FOG) portfolio, which is focused on eastern offshore and northern oil and gas resources. Funding for the SSA annually comes from the Program of Energy Research and Development and ecoENERGY Technology Initiative (ecoETI).Footnote 1The evaluation covers expenditures of approximately $111.6 million on 248 projects over a six-year period from 2003-04 to 2008-09.

Objective

The objective of the Oil and Gas SSA is to provide R&D (R&D) to enable the government to fulfill its regulatory responsibilities and reduce the environmental impacts from the expansion and diversification of Canada’s oil and gas production.

Evaluation Issues and Methodology

This evaluation examined two issues: relevance and performance. The evaluation is based on evidence from a document review, in-depth case studies of 24 projects, and 62 interviews with key internal and external stakeholders. The Oil and Gas SSA is complex with two portfolios, nine programs, multiple project leaders and three funding sources. It involves eight other federal departments and agencies, provincial and municipal governments, industry, universities, and international organizations. Compiling results across these areas was a challenge.

Relevance

The SSA is aligned with Government of Canada and NRCan priorities and objectives to create a sustainable resource advantage and position Canada as a world leader on environmental responsibility in the development and use of natural resources. The SSA is also consistent with Canada’s international commitments on environmental protection.

Evidence indicates there is a need for R&D in the area of oil and gas, in order to promote the continued growth of the sector and to reduce the environmental impacts of the industry. There is a need to address technological challenges faced by industry and encourage knowledge dissemination for the good of the sector as a whole. In the Arctic and Atlantic, there is a need to address some particular challenges presented by the harsh weather conditions that can cause infrastructure problems that are uniquely Canadian.

While other private and public organizations support and conduct research in similar areas, the SSA promotes collaboration among parties. This helps to prevent large-scale duplication of work and encourages a wider dissemination of results.

Performance

Bitumen, Oil and Gas (BOG)

The BOG portfolio has largely achieved its intended immediate outcomes and is making good progress towards intermediate and ultimate outcomes. R&D activities were carried out in the areas of oil sands environmental issues affecting air, land and water, and clean air/groundwater issues in the upstream oil and gas industry.

Many projects advanced technical and scientific knowledge in a range of areas, including knowledge and information about bitumen, oil, contaminants, and environmental risks. Outputs lead to the development of various technologies, including testing and monitoring tools and software. As a result, a number of projects have been used by regulators and have influenced or led to regulations and standards. The resulting impacts of these new technologies and standards on the environment and the economy are not quantifiable, either because they are of preventive nature (in terms of avoiding environmental contamination or accidents) or because it is too early to tell. However, looking over a broader timeframe, innovations funded by BOG have led to benefits for the environment and industry over the last decade, and recent work has been well received within the field and produced positive data and test results.

Frontier, Oil and Gas (FOG)

The FOG Portfolio has largely achieved its intended immediate outcomes and is making good progress towards intermediate and ultimate outcomes. R&D activities were carried out in the areas of sustainable energy development, improving timely and economical engineering decisions and regulatory approvals, and ensuring human safety and environmentally-safe oil and gas operations in frontier regions.

The majority of projects produced technical and scientific knowledge outputs, including knowledge about oil contaminants, environmental risks, information about wind, ice and other oceanic information that is important for the industry. They also assisted in the development of various technologies which included testing, monitoring, and radar technologies. Projects have influenced or led to regulations and standards on various aspects of oil extraction and processing, including personnel safety, environmental regulations and industry standards. Impacts beyond this stage, dealing with environmental and economic issues, are difficult to quantify. However, FOG influence on regulations is expected to have a positive affect on the environment, and improved industry standards are expected to have benefits in terms of safety.

Design and Delivery: BOG and FOG projects are selected by portfolio committees, with input from advisory committees comprised of government, industry, and other stakeholder representatives. The project selection processes are deemed appropriate, but some interviewees were critical about the selection processes, either because they felt that the processes were not fully leading to strategic decisions or because they felt that there needed to be more of an industry influence.

The project reporting processes are considered satisfactory by the majority of interviewees. However, the evaluation team experienced difficulties obtaining in-depth documentation on project summaries and results. Recent improvements were introduced by the Program of Energy Research and Development (PERD) to improve project reporting.

Efficiency and Economy: The Oil and Gas portfolios and programs were delivered in a cost effective manner by a total of 259 full-time equivalent staff (an average of 64.75 per year) from 2005-06 to 2008-09Footnote 2.

Interviewees and program documentation showed that funding is leveraged from other organizations at approximately $1.5 dollars for each PERD dollar. According to program financial information, BOG programs have leveraged dollars at an average ratio of 1.44 and FOG programs 1.49. Some interviewees explained that substantial resources were leveraged from various sources, including industry, universities, associations and other organizations. While the concrete economic impacts of the programs are difficult to measure at this point, past successes of PERD research suggest that the benefits will likely surpass the investments. Past research has led to savings to industry, through more efficient bitumen treatment and more effective tailings management. Further research in these areas is also expected to lead to environmental benefits.

Recommendations and Management Responses

Recommendations Management Responses Responsible Official/Sector (Target Date)
1. NRCan should encourage the Frontier Oil and Gas and the Bitumen Oil and Gas portfolios to ensure that their project selection processes consider the views and needs of both the government and industry. Accepted. NRCan Energy Enterprise – composed of the Energy Sector (ES) and Innovation and Energy Technology Sector (IETS) – through the Bitumen Oil and Gas and Frontier Oil and Gas portfolio committees, will continue to engage the industry more and seek its participation in the planning and implementation of R&D activities along with all science-based departments and agencies. ADM/ ES
ADM/ IETS Ongoing activity and annual update can be provided.
2. NRCan (ES) should, for long-term monitoring and reporting purposes, document the impacts of past research by conducting case studies of 5-10 highly successful projects. Accepted. The Energy Sector will conduct case studies of completed projects on both Bitumen Oil and Gas and Frontier Oil and Gas portfolios to assess the impacts of R&D activities in the long term. In May 2010, the Energy Sector commissioned an independent technical review of projects completed from 2000–2009 on basin assessment under Frontier Oil and Gas portfolio; the review returned positive views on the R&D work PERD has funded. Similar case studies are planned for the two portfolio areas. ADM/ ES Ongoing activity and annual update can be provided. Case studies of completed Bitumen Oil and Gas programs will be conducted after the current funding cycle finishes in 2012-13.
3. NRCan (ES) should continue to improve and enhance the project reporting template introduced in 2009-10. Accepted. Implemented in 2010-11 for year-end reporting for 2009-10. A common project reporting template was used for all funding recipients from various federal departments to improve project data collection and information synthesis at the Program and portfolio levels to clearly track the project activities that support the planned outcomes. Refinements to the reporting templates will be continued for greater efficiency in collecting the information particularly at the project level and ensure that the information is relevant and up-to-date. ADM/ ES
ADM/ IETS Project reporting template was completed in April 2010 and has been implemented by ES/IETS for 2009-10 year-end reporting.
4. NRCan should finalize the logic models for the Frontier Oil and Gas and the Bitumen Oil and Gas portfolios and develop a combined logic model for the Oil and Gas SSA. Accepted. The Energy Enterprise will develop a combined logic model, based on existing logic models for the Bitumen Oil and Gas and Frontier Oil and Gas portfolios, with the former in draft form. Having a common long-term outcome of reducing environmental impacts and fulfilling government regulatory duties for the oil and gas industry, the combined logic model will take into account the diversity in the two portfolios in terms of resources (oil sands and offshore oil and gas), short to medium R&D needs and objectives, and geographic areas (Alberta and Eastern Canada and the North). ADM/ ES
ADM/ IETS June 2011.

1.0 Introduction

This is an evaluation of the Oil and Gas Sub-sub Activity (SSA) of the Energy Sector of Natural Resources Canada (NRCan). The evaluation covers expenditures of approximately $111.6 million on 248 projects over the six-year period 2003-04 to 2008-09. The objective of the Oil and Gas SSA is to provide science and technology research to enable the Government to fulfill its regulatory responsibilities and reduce the environmental impacts from the expansion and diversification of Canada’s oil and gas production.

This SSA is divided into two portfolios. The first is the Bitumen, Oil and Gas (BOG) portfolio. Known as the Clean Fossil Fuels portfolio until 2008, the BOG portfolio has an annual budget of approximately $9.5 million. Its objective is to provide science and technology (S&T) for the continued secure supply of affordable and cleaner fossil fuels, with little or no adverse environmental impacts in terms of greenhouse gas (GHG) and criteria air contaminant emissions, in the areas of oil sands environmental (including water), and clean air issues in the upstream oil and gas industry. Activities focus on the advancement of knowledge and technologies to mitigate the environmental impact of oil and gas transformation processes. The BOG portfolio is made up of four separate programs:

  1. Mitigating the Impact of Bitumen Production from Oil Sands;
  2. Petroleum Conversion for Cleaner Air;
  3. Upstream Petroleum Air Issues; and
  4. Soil and Groundwater Remediation Issues.

The second portfolio of the SSA is Frontier, Oil and Gas (FOG). The FOG portfolio has an annual budget of approximately $9.1 million. Its objective is to provide access to, and transport of, Canada’s eastern offshore and northern oil and gas resources by performing the R&D (R&D) needed to optimize the regulatory framework and to mitigate environmental and safety concerns. Activities focus on creating knowledge that will contribute to lower safety and environmental risk in the frontier regions, while directly supporting regulatory agencies (e.g., National Energy Board) and contributing to energy-related policy development within NRCan and other federal institutions such as the Department of Fisheries and Oceans (DFO), and Indian and Northern Affairs Canada (INAC). The FOG portfolio includes the following five programs:

  1. Offshore Environmental Factors;
  2. Northern Hydrocarbon Production;
  3. Marine Transportation and Safety;
  4. Regulatory Requirements for Offshore Drilling and Production of Wastes; and
  5. Pipelines.

A summary of the portfolios/programs of the Oil and Gas SSA is found in Table 1.

The Oil and Gas SSA is one of six strategic priorities of NRCan’s Energy Science and Technology Sub-Activity. The Oil and Gas SSA is managed collaboratively by NRCan’s Office of Energy Research and Development (OERD), Energy Sector, and CanmetENERGY Innovation and Innovation and Energy Technology Sector (IETS). The OERD is the coordinator of energy R&D activities for the federal government and is responsible for the Program of Energy Research and Development (PERD), the ecoENERGY Technology Initiative (ecoETI) and the Clean Energy Fund.

Funding for the Oil and Gas SSA annually comes from PERD and ecoETI. PERD supports R&D conducted in the field of sustainable energy in Canada by federal departments and agencies. The ecoETI is a component of the ecoACTION program, with a mandate to fund R&D activities in clean energy technologies.

The PERD and ecoETI work under a consolidated governance structure that includes an interdepartmental Assistant Deputy Minister Panel and a Director General Committee on Energy Science and Technology, and nine portfolio committees chaired by senior officers.

Oil and gas activities are carried out in several NRCan laboratories, primarily: CanmetENERGY in Devon, Alberta; Earth Sciences Sector, Geological Survey of Canada in Calgary; Mineral and Metals Sector, Materials Technology Laboratory in Ottawa (moving from Ottawa to Hamilton in 2010). In addition, research is conducted in laboratories of six other federal organizations: National Research Council; DFO; Industry Canada; Environment Canada; INAC and Transport Canada.

Table 1: Summary of Oil and Gas Sub-sub Activity Programs, 2003-04 to 2008-09
Bitumen, Oil and Gas Portfolio
Program Description Objective Management Approximate Expenditures ($M)
Mitigating the Impact of Bitumen Production from Oil Sands Research into technologies to reduce the environmental impacts of bitumen extraction from oil sands for sustainable development of the industry. Provide knowledge to reduce the impact of oil sands development on water, air, and land through research and application of this knowledge to demonstrations of relevant technologies. CanmetEnergy Devon, the National Research Council and Industry Canada. 13.7
Petroleum Conversion for Cleaner Air Focused upon the oil sands industry structure and industry research needs directed toward standards, regulations and policy knowledge; and research for the public good. Find new, improved, cleaner and more efficient solutions to reducing emissions by developing and disseminating new knowledge and technologies on petroleum conversion. CanmetEnergy Devon; OERD; National Research Council Canada; Industry Canada; and Environment Canada. 22.3
Upstream Petroleum Air Issues A coordinated research initiative to reduce or eliminate the greenhouse gas and potentially harmful criteria air contaminant emissions associated with the upstream oil and gas sector (i.e. exploration mining and recovery) industry. Provide effective air emissions R&D in support of clean energy production in the upstream oil and gas sector. Petroleum Technology Alliance Canada (PTAC), Health Canada, Industry Canada, representatives from industry associations and regulators, and federal and provincial government agencies. 2.8
Soil and Groundwater Remediation Issues Research initiatives that aim to increase the knowledge of contaminant transport and transformation; advance improved remediation technologies; and develop methods to determine acceptable levels of oil and gas industry by-products in soils and groundwater. Address groundwater and soil remediation issues related to the bitumen, oil and gas industry that will contribute to a sustainable energy production sector. S&T Branch of Environment Canada. 5.8
BOG Sub-total 44.6

Table 1: Summary of Oil and Gas Sub-sub Activity Programs, 2003-04 to 2008-09 - Frontier, Oil and Gas Portfolio
Program Description Objective Management Approximate Expenditures ($M)
Offshore Environmental Factors A research initiative that supports the development of tools and understanding of the factors required to address the design, operational and regulatory needs of the oil and gas industry off Canada’s east coast and in the north. Activities within the Program focus on issues in winds and waves, ocean currents and circulation, sea ice and icebergs, ice-structure interaction, seabed stability and basin assessment. To determine the range and variability of offshore environmental factors for regulatory, design, safety, and economic purposes. The management committee is composed of the sub-program leaders and a technical advisory committee consisting of stakeholders representing industry and the regulatory authorities. 18.0
Northern Hydrocarbon Production Provide scientific expertise and advice to increase safety and reduce environmental risk of petroleum-related exploration and production facilities in the North. Provide the S&T to enable the Government to fulfill its regulatory responsibilities and reduce the environmental impacts from the expansion and diversification of Canada’s oil and gas production. Federal and territorial government departments and the private sector. 8.0
Marine Transportation and Safety Focuses on offshore safety, marine operations and ship design in support of energy and sustainable development, and help improve human safety and ensure environmentally safe oil and gas operations. To carry out R&D in aid of regulatory requirements for the safe and efficient transportation of oil and gas by tankers, and occupational and personnel safety standards for offshore operations. Environment Canada, National Research Council, DFO, Transport Canada and NRCan. 5.7
Regulatory Requirements for Offshore Drilling and Production of Wastes The Program focuses on R&D related to offshore oil and gas exploration and production, addressing the potential impacts of drilling wastes and produced water on marine communities, and remediation strategies to combat offshore discharges and spills. Provide regulatory requirements for offshore drilling and production wastes, assessment of cumulative effects, and remediation of accidental offshore discharges and spills. The National Energy Board, the Canadian Association of Petroleum Producers, DFO, Environment Canada, and NRCan. 5.3
Pipelines R&D work related to the safety and security of Canada’s pipeline infrastructure. To supply high-priority S&T information on the regulation and maintenance of aging pipelines, and construction of new pipelines to help fulfill regulatory responsibilities and environmental impacts. Industry Canada, National Energy Board, NRCan, DFO, INAC, Canada-Nova Scotia Offshore Petroleum Board, Canada-Newfoundland and Labrador Offshore Petroleum Board. 8.7
FOG Sub-total 45.7
Total (PERD) 90.3

Source: Oil and Gas Program Management, October 23, 2009
Note: Expenditures exclude approximately $21.3 million (CCTI 19.5 million and ecoETI $1.8 million).

1.1 The Oil and Gas Sector

Crude oil and natural gas are found in sedimentary rocks formed over millions of years by the accumulation of sand, silt, mud and the remains of living creatures in sedimentary basins. Canada has seven distinct regions or domains of sedimentary rocks. Every province and territory includes at least a portion of a sedimentary basin. The most productive hydrocarbon area is the Western Canada Sedimentary Basin, which includes most of Alberta and Saskatchewan, in addition to parts of British Columbia, Manitoba, Yukon and the Northwest Territories.Footnote 3 The crude oil potential of these areas has been known since the 19th century, but the first modern drilling expeditions only began in the 1960s.Footnote 4

The Atlantic Margin extends along the East Coast from the United States border to the coast of Baffin Island. This area is the site of major crude oil and natural gas deposits discovered since the 1970s. It is an increasingly important contributor to the nation’s petroleum supply. Substantial crude oil and natural gas resources have also been identified in the Arctic Islands, Beaufort Sea and the Mackenzie Valley.

Canada is currently the world’s eighth largest producer of crude oil, producing on average more than 2.7 million barrels per dayFootnote 5 from onshore conventional, offshore and oil sands operations. In 2006, oil sands production passed one million barrels per day and is projected to reach 3.5 million barrels per day by 2020, while total production for the industry will reach 5 million barrels per day. This level of growth would make Canada the third or fourth largest oil producer in the world.Footnote 6

Canada is currently the world’s third largest producer of natural gas with production of approximately 6.3 trillion cubic feet per year, and new reserves of natural gas continuing to be discovered in Canada’s northern frontiers and offshore areas. Canadian companies own and operate the world’s longest pipeline network of over 100,000 km which transports Canadian oil and natural gas production throughout North America.Footnote 7

Canada’s oil and gas industry accounts for approximately $80.7 billion in annual revenue and employs approximately 230,000Footnote 8 people within two main sectors:

  • Services Sector: prospecting, contract drilling, pumping, pipeline services, field processing, transportation, engineering, geomatics, marketing, and other services ($55.5 billion in 2005).
  • Manufacturing Sector: production of drilling equipment, drilling consumables, pipeline equipment, storage, and oil sands equipment ($13.9 billion in 2005).

The oil and gas industry is predominately comprised of small and medium-sized companies with approximately 2,000 firms in operation.Footnote 9

By 2030, world primary energy demand forecasts to be 40% higher than in 2007. Fossil fuels are expected to remain the dominant sources of energy worldwide, accounting for 77% of the demand increase from 2007 to 2030.Footnote 10

1.2 Technology Needs and Development

The future demand for energy and the depletion of currently developed resources is expected to drive onshore and offshore oil and gas exploration and production in Canada. This work will require the oil and gas industry and governments to focus on research initiatives aimed at protecting and improving the environment, the health and safety of the public, and long-term sustainability of the industry itself.

With the anticipated oil and gas industry activity in the North, it is expected that exploration may occur offshore in closer proximity to landfast iceFootnote 11, creating new challenges with structures and equipment. Off the east coast, in the long-term, the industry may move further out to deeper waters. These environments will produce challenges related to wind and waves, ocean currents and circulation, seabed hazards, sea ice and iceberg threats, and ice structure interaction. This will necessitate improved designs for offshore structures.

The expansion of oil and gas activities to more remote locations will result in issues related to security of supply and transportation to market. Increased reliance on longer pipeline and tanker routes to transport oil and gas to markets will require the environmental hazards in uncharted areas to be fully understood. New technology and systems will have to be adapted for uniquely Canadian conditions.Footnote 12 This work may feed into regulatory improvements for safer navigation, better ship design and reduced uncertainty in transporting oil and gas in cold climates.

Despite the obvious need for large investments in R&D, the oil and gas industry alone is unlikely to conduct an optimum level of R&D. According to a 2006 report by Industry Canada, large private firms often have a financial incentive to retain possession of data, and primarily focus on very specific issues related to current needs and problems. Smaller companies often have little R&D capacity and rely on public research to address key issues. In total, slightly more than half of active firms (52.6%) spend between one and five percent of their revenues on R&D. However, 28.9% of firms do not contribute any funds towards R&D work.Footnote 13

Governments have a role to play as R&D also supports the environmentally-responsible development of oil and gas resources. The development and implementation of guidelines and regulations to protect the environment are the responsibility of government regulatory agencies, and this along with the improvement of existing guidelines, standards and regulations requires information generated through R&D.

1.3 Collaboration

Research activities under the Oil & Gas SSA include extensive national and international collaboration with industry as well as universities in the United States, Russia, Germany, England, Norway, Denmark, Finland, Australia and Mexico. Researchers are connected individually to university laboratories in these countries and collaboration occurs on many levels, from expert advice given to the federal researchers, to model development and testing. There is recognition by researchers that it is important to share information internationally to avoid duplication and to build on the current state of knowledge. Canada is able to lead globally in a number of areas, particularly with respect to oil and gas issues in cold climate and harsh environment research, while also working to adopt technologies from abroad for use domestically.

International collaboration is needed in areas of shared responsibility, particularly with respect to codes and standards. Marine transportation is an international activity with ships operating in multiple jurisdictions. The Canadian government has significant input to the development of rules with respect to ships operating in ice, and is a world leader in terms of R&D on navigation and offshore safety in cold waters. Collaborative research projects help ensure that there is a common basis of knowledge for regulations, standards and codes.

2.0 Overview of the Oil and Gas Sub-sub Activity

2.1 Bitumen, Oil and Gas (BOG)

The Bitumen, Oil and Gas portfolio (renamed from the Cleaner Fossil Fuels portfolio in 2007-08) is a R&D initiative falling under NRCan’s PERD and ecoETI. The objective of the portfolio is to provide R&D for the continued, secure supply of affordable and cleaner fossil fuels, with little or no adverse environmental impacts in terms of greenhouse gas (GHG) and criteria air contaminant emissions in the area of oil sands environmental (including water), and clean air issues in the upstream oil and gas industry.

BOG is managed by a portfolio committee comprised of representatives from federal science- based departments including NRCan, Environment Canada, National Research Council, DFO and Industry Canada. The role of the portfolio committee is to act as a forum for planning and the exchange of information, review project results and make appropriate adjustments when needed.

In addition, the portfolio committee consults with an external advisory committee made up of representatives from the private sector, other levels of government and academia with direct interest in oil and gas.

Each program within BOG has a program leader responsible for overall coordination of the research program, and individual external program advisory committees. These program advisory committees, composed of representatives from the private sector, the provinces, research institutions and government departments across Canada, review and make recommendations on all projects annually to ensure that they are on track. Program advisory committees also review and vote on new proposals. Project managers are responsible for completing projects on time and within budget, according to approved technical work plans. Managers also provide semi-annual status reports, annual presentations on progress and annual project plan revisions for the upcoming year.

BOG programs are delivered mainly by researchers at CanmetENERGY Devon, and federal laboratories at Environment Canada, the National Research Council and CanmetENERGY Ottawa.

The BOG Portfolio focuses on the oil production chain as a whole; from reservoir to pump. This includes production of upstream oil and gas, transmission of oil and gas via pipelines and upgrading and refining to clean transportation fuels. All projects under this portfolio are assessed according to criteria, including whether they meet the program and portfolio objectives, their scientific merits, and if they have identifiable deliverables.

The BOG Portfolio covers S&T needs to achieve continued, secure supply of cleaner fossil fuels in the oil and gas industry with a focus on the oil sands sector. All work under the portfolio falls under one of three theme areas; water management, air quality, and land management.

From 2003-04 to 2007-08, there were 118 projects under the BOG Portfolio and all projects were completed for this cycle. A new cycle began in 2008-09 (the final year of the evaluation period), and as such it was too early to evaluate these new projects. NRCan expenditures from 2003-04 to 2008-09 were about $57.2 million, 51.3% of the total expenditures in the Oil & Gas SSA. Funding for individual projects varied from about $20,000 to $800,000.

Clean Energy ecoETI funding was also provided under the BOG Portfolio. In 2008-09, ecoETI contributed $1.8 million to the BOG Portfolio for seven projects, representing 3.1% of BOG’s annual budget. As these projects had only just begun during the evaluation, there were no results available for them and they were not reviewed thoroughly.

The BOG Portfolio had a total of 160 full-time equivalent NRCan staff from 2005-06 to 2008-09 for an average of 40 per year.Footnote 14

2.2 Frontier, Oil and Gas (FOG)

The Frontier, Oil and Gas Portfolio (renamed from the Pipelines Portfolio in 2007-08) is also a R&D initiative falling under NRCan’s PERD. The objective of the FOG Portfolio is to carry out R&D which will optimize the regulatory framework and mitigate the environmental and safety concerns of Canada’s offshore and northern oil and gas resources. Research activities of the portfolio focused on creating knowledge that will contribute to lower safety and environmental risk in the frontier regions; directly support regulatory agenciesFootnote 15 and that support energy-related policy development within NRCan and other federal departments.Footnote 16 R&D is directed at sustainable energy development, improving the ability to make timely and economical engineering decisions and regulatory approvals, and helping to ensure human safety and environmentally-safe oil and gas operations in frontier regions.

The activities of the portfolio provide R&D information related to regulatory processes and environmental protection that falls under five areas. These areas are: northern oil and gas development; pipeline maintenance and construction; tanker and personnel offshore safety standards; offshore environment factors; and drilling and production wastes.Footnote 17

The Frontier Oil and Gas Portfolio committee was designed as a two-tier committee comprising program operations and strategic advice. The program operations committee includes the five program leaders and the science and technology advisor under FOG. The strategic advisors committee includes representatives from the two offshore petroleum boards, National Energy Board, INAC, Frontier Lands Management Division of NRCan and industry representation from the Canadian Association of Petroleum Producers.

Knowledge, tools and development are the primary outputs of the portfolio, with only a portion of activities contributing to technology development (in the area of pipeline materials and design).

The Portfolio delivers on R&D which aligns with PERD priorities. This work is conducted through federal S&T facilities and public-private co-funding arrangements, involving the federal government, provincial/territorial governments, industry, and universities working together on an opportunity basis in areas of common interest.

From 2004-05 to 2007-08, 130 FOG projects were completed. The new three-year funding cycle began in 2008-09. As this was the final year of the evaluation period, it was too early to evaluate these projects. The portfolio expenditures from 2004-05 to 2008-09 were about $54.4 million, 48.7% of the total expenditures in the Oil & Gas SSA. Funding for individual projects varied from about $15,000 to $598,000.

The FOG Portfolio had a total of 99 full-time equivalent NRCan staff from 2005-06 to 2008-09 for an average of 24.75 per year.

2.3 Resources

NRCan’s Oil and Gas SSA is funded by three sources: (1) PERD; (2) Climate Change Technology and Innovation (CCTI), (2003-08); and (3) ecoETI.

As shown in Tables 2 and 3 and Figure 1, the Oil and Gas SSA approximate expenditures totalled $111.6 million from 2003-04 to 2008-09. The BOG Portfolio was $57.2 million (51.3%); and the FOG Portfolio was $54.4 million (48.7%). In addition to funding from PERD for the various programs, the SSA also received funding from ecoETI for salaries and government laboratories ($1.8 million), and CCTI funding ($19.4 million) in support of industry-funded projects.

Table 2: Approximate Total Bitumen, Oil and Gas Expenditures,
2003-04 to 2008-09 ($M)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Total % of Oil and Gas
Mitigating the Impact of Bitumen Production from Oil Sands 2.2 2.3 2.3 2.3 2.3 2.3 13.7 12.3%
Petroleum Conversion for Cleaner Air 3.6 3.9 3.7 3.7 3.7 3.7 22.3 20.0%
Upstream Petroleum Air Issues 0.6 0.4 0.4 0.4 0.4 0.6 2.8 2.5%
Soil & Groundwater Remediation Issues 0.8 1.5 0.9 0.8 0.9 0.9 5.8 5.2%
PERD Sub-total 7.2 8.1 7.3 7.2 7.3 7.5 44.6 40.0%
CCTI 1.0 1.4 2.7 3.0 2.7 - 10.8 9.7%
ecoETI 1.8 1.8 1.6%
Total BOG 8.2 9.5 10 10.2 10 9.3 57.2 51.3%

Source: Oil and Gas Program Management, October 23, 2009.

Table 3: Approximate Total Frontier, Oil and Gas Expenditures,
2003-04 to 2008-09 ($M)
Table 3: Approximate Total Frontier, Oil and Gas Expenditures,
2003-04 to 2008-09 ($M)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Total % of Oil and Gas
Offshore Environmental Factors 2.7 3.1 3.1 3.1 3.0 3.0 18 16.1%
Northern Hydrocarbon Production 0.6 1.2 1.2 1.2 1.8 2.0 8 7.2%
Marine Transportation and Safety 0.7 1.0 1.0 1.0 1.0 1.0 5.7 5.1%
Regulatory Requirements for Offshore Drilling and Production of Wastes 0.8 0.9 0.9 0.9 0.9 0.9 5.3 4.7%
Pipelines 1.3 1.4 1.5 1.5 1.5 1.5 8.7 7.8%
PERD Sub-total 6.1 7.6 7.7 7.7 8.2 8.4 45.7 40.9%
CCTI 0.7 0.7 2.3 2.3 2.7 - 8.7 7.8%
Total FOG 6.8 8.3 10 10 10.9 8.4 54.4 48.7%
Total (BOG & FOG) 15.0 17.8 20 20.2 20.9 17.7 111.6 100%

Source: Oil and Gas Program Management, October 23, 2009.

Figure 1: Oil and Gas Approximate Expenditures by Funding Source, 2003-04 to 2008-09

Figure 1
Text version - Figure 1

Figure 1 shows a pie chart with the distribution of the approximate expenditures by Funding Source for the Oil & Gas Sub-sub-Activity from 2003-04 to 2008-09. NRCan’s Oil and Gas Sub-sub Activity is funded by three sources: (1) Program of Energy Research and Development (PERD) $ 90.8 million, or 81.1 % of the total expenditures; (2) Climate Change Technology and Innovation (CCTI) $ 19.4 million, or 17.3 % of the total expenditures; and (3) EcoEnegry Technology Initiative (ecoETI) $ 1.8 million, or 1.6 % of the total expenditures.

 

3.0 Evaluation Scope and Methodologies

This evaluation examined the Oil & Gas SSA’s relevance and performance (effectiveness, efficiency and economy). The evaluation included a document review, in-depth case studies of 24 projects, and 62 interviews with key internal and external stakeholders.

The 24 case studies investigated the activities and outcomes of projects funded by the program areas. Information was gathered through two or three additional key informant interviews per case, typically with a project leader and stakeholders/partners, as well as a review of project documentation. As some projects were related, some case studies were clustered together as part of multi-project case studies.

The 62 interviewees included:

  • 17 NRCan;
  • 19 representatives of other federal departments and agencies;
  • 4 representatives of provincial and municipal governments;
  • 8 representatives from industry; and
  • 14 key external interviewees.

Projects were selected for the interviews and case studies by the evaluation team in consultation with NRCan staff, based on impact, range of activities, budget, relationship among NRCan, project partners and stakeholders, and the potential for lessons learned.

Limitations

The Oil and Gas SSA is complex with two portfolios, nine programs, multiple project leaders and three funding sources. It involves eight other federal departments and agencies, provincial and municipal governments, industry, universities, and international organizations.

The analysis of results was conducted at the Portfolio and SSA levels. Given the scope of the evaluation, the validity of results is limited at the program level as no more than three projects were assessed for each program. Within the performance section of this report, case study examples are used to highlight specific achievements of the two portfolios. These are simply tangible examples of the impacts created by the BOG and FOG portfolios. A summary of the information for all case studies projects can be found in the Annex.

4.0 Evaluation Findings

The evaluation issues of relevance and performance (effectiveness, efficiency and economy for the SSA are addressed in the following subsections. Results on the achievement of outcomes have been divided between the two portfolios.

4.1 Relevance – Oil & Gas Sub-sub Activity

Summary

The SSA is aligned with Government of Canada and NRCan priorities and objectives to create a sustainable resource advantage and position Canada as a world leader on environmental responsibility in the development and use of natural resources. The SSA is also consistent with Canada’s international commitments on environmental protection.

There is a need for research in the area of oil and gas, in order to promote the continued growth of the sector and to reduce the environmental impacts of the industry. There is a need to address technological challenges faced by industry and encourage knowledge dissemination for the good of the sector as a whole. In the Arctic and Atlantic, there is a need to address some particular challenges presented by the harsh weather conditions that can cause infrastructure problems that are uniquely Canadian.

While other private and public organizations support and conduct research in similar areas, the SSA promotes collaboration among parties. This helps to prevent large-scale duplication of work and encourages a wider dissemination of results.

Are there ongoing needs for the Sub-sub Activity?

Yes. The oil and gas industry is a major contributor to the Canadian economy, and produces large scale environmental impacts. The federal government is best positioned to lead R&D on the issues that extend beyond the scope of other levels of government and the private sector into the national and international community. New technologies and innovation support continued growth of the industry.

The oil and gas industry is challenged by a number of environmental issues. The oil sands, in particular, present a number of challenges, including high water usage, GHG emissions, land disturbance and tailings management. The production of bitumen and synthetic crude oil leads to considerable GHG emissions, with total emissions from all oil sands refining projected to average 67 megatonnes (Mt) per year by 2015.Footnote 18 The federal government has a role to invest in research to lessen the environmental impacts of oil sands production.

The industry is also confronted with challenges associated with northern and offshore oil exploration. Infrastructure, transportation, construction, and drillings concerns exist due to the unique nature of northern and offshore environments. In many cases, generally accepted technologies and methods within the global industry are incompatible with the harsh conditions of the Canadian ecosystem. With the possibility of increasing activity in the Arctic comes increased risk of environmental contamination, including spills from leaking tanks and pipelines. There is a need to develop cost-effective clean-up approaches. There is also a need for current contamination monitoring methods to be adapted for the northern and offshore context in order to properly assess effects on the environment.

Are the Sub-sub Activity’s objectives consistent with government priorities and NRCan strategic objectives?

Yes. The SSA contributes to the departmental strategic objective to improve the quality of life for Canadians by creating a sustainable resource advantage, and positioning Canada as a world leader on environmental responsibility in the development and use of natural resources. The outputs of the Oil and Gas SSA provide critical information for the development of public policy, standards and regulations, improvement of public safety and security, and increased economic competitiveness.

The 2010 Speech from the Throne outlines the government’s continued focus on leveraging Canada’s energy resources for both economic advantages and to “secure [the country’s] place as a clean energy superpower.”Footnote 19 In 2008, the government noted that “energy is vitally important to our country. Our geography and climate mean that Canadians depend on affordable and reliable energy. The development of our rich energy resources is an important source of wealth and Canadian jobs.”Footnote 20

Sustainable development of Canadian energy production and consumption is also a key departmental priority. Under this priority, NRCan is administering the major new Clean Energy Fund, announced in Budget 2009, for substantial investments in R&D and large-scale demonstration of clean energy technologies. The R&D outputs of the SSA feed into this work. NRCan’s work related to sustainable development are consistent with the Federal Sustainable Development Act, which calls for the ecologically-efficient use of natural resources and acknowledges the need to integrate environmental, economic and social factors in making all decisions by government.Footnote 21

The work of the SSA also responds to a number of international environmental commitments Canada has made, including the Kyoto Protocol and the 2002 World Summit on Sustainable Development in Johannesburg, South Africa.

Is there a legitimate, appropriate and/or necessary role for the federal government in the Sub-sub Activity?

Yes. Interviewees indicated that there is a need for “seed” money to encourage industry to develop technologies to more fully mitigate environmental impacts. Such work is ordinarily not cost-effective for small firms in a highly-competitive sector. According to program management, industry in general will not completely fund research to mitigate impacts on the environment but is often willing to contribute once government is involved.

Interviewees also indicated that the federal government has a major role in the support of marine transportation and safety research activities, as this work ties directly into federal regulation and national standards. Additionally, the government must be actively involved in offshore safety issues that fall under federal jurisdiction. Many of the projects under the SSA produce outputs that feed directly into safety and standards areas.

A government presence in research also brings together various private and public sector players. This helps to reduce duplication of research across jurisdictions and ensures that outputs remain in the public domain so that the sector as a whole can benefit from new knowledge and technologies. Federal research also produces publically-available data. Research tied to the federal government is generally in the public domain and accessible by all players within the industry. In addition, federal R&D work is used to advise the National Energy Board during its project approval process.

Do other levels of government, other federal departments, private, voluntary and academic sectors have similar objectives, programs or activities? Is there duplication?

According to documents and interviews, other organizations, both public and private, support and conduct research in similar areas. The majority of other involved players in the sector are universities and provincially-funded labs that work hard to avoid duplicating work and favour collaborating with outside groups. However, interviewees had little concern over duplication.

While there will always be some overlap, the majority of interviewees consider this to be “healthy overlap” which assists in moving the knowledge base of the sector forward. It was noted that given the size of the sector, system-wide collaboration is difficult to achieve as it is very time consuming to involve all the major players. Despite this, multiple private and public sector involvement in research helps disseminate results. This ensures that results are more readily available to regulators and other stakeholders, thereby facilitating their adoption.

Based on the competitive nature of the sector, private firms may duplicate R&D work in an effort to keep results “in-house”. The Oil and Gas SSA helps to mitigate duplication, to an extent, by making high-level researchers and facilities available to private companies. The research conducted at the CanmetENERGY labs in Devon, for example, involves multiple industry players working out of the same facilities, making use of the same experts, and sharing data and results which could not be achieved single-handedly. Without the active collaboration fostered by the SSA, the various firms would be even more entrenched in their own silos.

4.2 Performance – Oil and Gas Sub-sub Activity

Performance results for the Oil and Gas SSA are presented below. Results on the achievement of outcomes have been divided between the BOG and FOG portfolios.

Summary

Achievement of Outcomes: In accordance with the document review, interviews and case studies, projects reviewed and funded by the BOG and FOG portfolios have led or are considered likely to lead to impacts in knowledge advancement, changes to regulations, environmental protection (e.g., reduced use of freshwater, and reduced emissions of GHG and particulate matter), and greater efficiencies. Many benefits are not quantifiable either because they are of a preventive nature (in terms of avoiding environmental contamination or accidents) or because it is too early to tell. However, over the last decade, innovations funded by the BOG Portfolio have led to benefits for industry, and recent developments funded by the BOG and FOG portfolios are considered likely to achieve benefits at a similar scope. These benefits are consistent with the programs’ logic models and the objectives of the Oil and Gas SSA.

The main factors influencing program success are collaboration and partnerships among research teams, industry, and other stakeholders. These partnerships ensure relevant and timely research, additional resources and valuable in-kind industry contributions. A number of interviewees stated that their projects were challenged by human resource issues, as these projects experienced difficulties finding and retaining qualified researchers to complete the work.

Design and Delivery: BOG and FOG projects are selected by portfolio committees, with input from advisory committees comprised of government, industry, academia and other stakeholder representatives. The project selection processes are deemed appropriate, but some key interviewees were critical about the selection processes, either because the processes are not leading to strategic decisions or because of the lack of industry influence.

The project reporting processes are considered satisfactory by the majority of interviewees. However, the evaluation team experienced difficulties obtaining in-depth documentation on project summaries and results. Recent improvements were introduced by PERD to improve project reporting.

Efficiency and Economy: The Oil and Gas portfolios and programs were delivered in a cost effective manner by a total of 259 full-time equivalent staff (an average of 64.75 per year) from 2005-06 to 2008-09.

Interviewees and program documentation showed that funding is leveraged from other organizations at approximately $1.5 dollars for each PERD dollar. According to program financial information, BOG programs have leveraged dollars at an average ratio of 1.44 and FOG programs 1.49. Some interviewees explained that substantial resources were leveraged from various sources, including industry, universities, associations and other organizations. One program leader mentioned that one-third of his program resources were leveraged from industry.

While the concrete economic impacts of the programs are difficult to measure at this point, past successes of PERD research suggest that the benefits will likely surpass the investments. Past research has led to savings to industry, through more efficient bitumen treatment and more effective tailings management. Further research in these areas is also expected to lead to environmental benefits.

4.2.1 Achievement of Outcomes – Bitumen, Oil and Gas

To what extent have intended immediate, intermediate and ultimate outcomes been achieved as a result of the BOG portfolio/programs?

The BOG Portfolio has largely achieved its intended and immediate outcomes and is making good progress towards intermediate and ultimate outcomes. R&D activities were carried out in the areas of oil sands environmental issues affecting air, land and water, and clean air/groundwater issues in the upstream oil and gas industry. The portfolio is designed to fulfill federal government responsibilities while maximizing economic benefits and reducing the environmental consequences from the expansion and diversification of Canada’s oil and gas production.

Results of the BOG Portfolio’s outcomes are presented below under four categories: a) R&D; b) regulations and standards; c) environmental; and d) economic.

Where applicable, examples of outputs and outcomes from the 13 BOG case studies have been included. These examples are illustrations of the wide range of outputs produced by the four programs under the portfolio: Mitigating the Impact of Bitumen Production from Oil Sands; Petroleum Conversion for Cleaner Air; Upstream Petroleum Air Issues; and Soil and Groundwater Remediation Issues.

a) R&D Impacts:

The BOG Portfolio has advanced scientific knowledge, primarily through patents and publications based on the document review, interviews and case studies. A total of 944 peer-reviewed publications were produced by the Portfolio over the course of the evaluation period (2003-04 to 2008-09). Table 4 offers a breakdown of these publications by program. These publications dealt with all aspects of the bitumen lifecycle, from extraction to the processing of oil sands derived products.

Table 4: BOG Publications by Program, 2003-04 to 2008-09
Program 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Total
Mitigating the Impact of Bitumen Production from Oil Sands 74 52 63 50 51 59 349
Petroleum Conversion for Cleaner Air 83 78 31 37 54 64 347
Upstream Petroleum Air Issues 0 0 0 6 14 31 51
Soil and Groundwater Remediation 35 23 15 34 23 67 197
Total 192 153 109 127 142 221 944

Source: Oil and Gas Program Management, June 22, 2010.

The outcomes of the BOG portfolio research work have positioned NRCan researchers as credible experts on areas related to oil sands R&D. Project participants have made numerous presentations at national and international conferences, and have been called upon to provide expert advice to federal, provincial and municipal policy makers. The outcomes have shown that the Portfolio has addressed the areas of concerns it was designed to examine. Results are widely disseminated and representative of oil and gas production activities, positioning NRCan as a global leader in bitumen R&D.

The BOG projects under the Portfolio attracted a great deal of interest of national and international groups. The range of stakeholders willing to become partners with NRCan on the specific projects reviewed by the evaluation include federal departments and agencies (including Environment Canada and the National Research Council), Canadian and American universities, industry organizations (such as the Canadian Crude Quality Technical Council and the Canadian Association of Petroleum Producers), private companies, and governments around the world. The interest in the work of the Portfolio expressed by such a wide range of stakeholders highlights the scientific achievements of the BOG Portfolio, as it has helped to position NRCan as a recognized world leader in the bitumen R&D.

The networks established by the Portfolio allow for the global dissemination of research results. The BOG Portfolio has played an important role in developing new knowledge for bitumen production and has encouraged free information exchange. Knowledge has been widely disseminated, which has further influenced research work beyond the scope of the Portfolio. BOG has produced and freely provided reliable, scalable data for the implementation and deployment of new technologies and innovations, positioning NRCan as a key player in the technology development and deployment cycle for the oil sands and heavy oil industry.

The majority of projects reviewed in-depth for case studies during the evaluation were found to have developed new knowledge, as expressed in the number of publications and presentations made in conferences. Eight of the 13 BOG case studies demonstrated high impact in terms of advancement in science and knowledge through research results and publications. Four of these same projects led to new applications through R&D work. Examples of these advancements, as well as other contributions to more applied knowledge, are illustrated in the four projects reviewed below.

Removal of Napthenic Acids; ETPS-Devon; $387,000; Partners with the National Center for Upgrading Technology (NCUT), University of Alberta, and the Florida State University (FSU)/ National High Magnetic Field Laboratory (NHMFL); 2005-06 to 2008-09

This project dealt with research on the structure of naphthenic acids in bitumen, specifically related to the corrosive structure of the acids. Lead by NRCan, this project identified all naphthenic acid molecules and other potential corrosive species in Athabasca bitumen for the first time ever. In addition to this itself being an important scientific discovery, the data generated by the project has allowed for comparison with naphthenic acids present in known corrosive crudes, creating new research possibilities within the sector.

Air Emissions and Fuel Quality; ETPS-Devon; $175,000; Partners with CanmetEnergy, Pacific Northwest National Laboratory and Oak Ridge National Laboratory of the U.S. Department of Energy; 2005-06 to 2008-09

This research focused on the quality of oil sands-derived fuels and the impact on air quality and meeting new diesel engine standards. The objective of the project was to develop more detailed chemical speciation of diesel fuel in order to explore the relationships between fuel chemistry and advanced combustion technologies. Fuel used for transportation is a major contributor to GHG and criteria air contaminant emissions. R&D work on improving the quality of fuels derived from the oil sands, alongside work on improving the pollution standards of new engines, contributes to the marketability and economic and environment viability of oil sands-derived fuels. Project results indicate that oil sands-derived fuels are not a problem for operating in new engines at the new ultra low sulphur standards. These results were presented in October 2008 at the International Association for Stability and Handling Fuels Conference. It is expected that this will have an impact on oil refining standards which would permit the greater use of oil sands products in future transportation fuels.

Direct Coke Fuel Cells; NRCan CanmetENERGY – Ottawa; $150,000; Partners with Gencell, NRC Institute for Chemical Process & Environmental Technology; 2005-06 to 2008-09

This project advanced knowledge in a potential energy power generation device based on fossil fuel that could be used in transportation. The objective of this research project was to improve the operating characteristics of direct coke fuel cells in order to improve the viability of this fuel cell technology. Direct coke fuel cells convert carbon to carbon dioxide (CO2) electrochemically without generating heat, and therefore achieving extremely high conversion efficiencies. The cells use carbon particles obtained from many sources such as coke-derived from coal, biomass (charcoal) and petroleum coke. Direct coke fuel cells provide a promising way to produce clean electricity and pure CO2 from by-products and/or waste, such as the coke which is produced as a by-product from oil sands processing.

There are however a large number of issues with the use of these cells. Direct coke fuel cells operate at very high temperatures, in the range of 800-900°C, to generate high-power output, making them impractical for wide-scale use. In addition, continuous operation of the cells results in a steady build up of contaminants, impacting efficiency and eventually operation. While the project was able to reduce this temperature by 150°C, researchers still considered the work to be decades away from producing a large-scale demonstration. As a result, funding for the project was terminated following the completion of the most recent cycle. This project serves as an example of BOG balancing long-term scientific knowledge and the need to provide short-term tangible value to the public.

Characterization of Soot Optical Properties; CanmetENERGY, Devon; $323,000; Partners with the Canadian Association of Petroleum Producers, Environment Canada, the National Research Council's Institute for Chemical Processes and Environmental Technologies, the National Science and Engineering Research Council, and Carleton University's Department of Mechanical and Aerospace Engineering; 2005-06 to 2008-09

Natural gas produced at oil well sites is captured only when it is economic to do so, otherwise it is usually burned or "flared". This flaring produces particulate matter emissions in the form of soot. These emissions have important health implications, and emissions above a certain threshold must be reported by operators to Environment Canada's National Pollutant Release Inventory. The objective of this project was to identify the fundamental properties of combustion generated soot at conditions relevant to emission and transport into the atmosphere. The project was successful in developing the equipment and the protocols that enable the quantitative measurement of flare-generated soot under controlled conditions for the first time ever. While there had been a guide for reporting on emissions, it was based mainly on methane produced from the burning of garbage in landfills. There was no valid, science-based emission factor for particulate matter in flares until this project.

b) Regulations and Standards Impacts:

The BOG research impact on regulations and standards led to changes and improvements to regulations related to environmental protection and standards for industry across Canada.

The Canadian Council for Ministers of the Environment (CCME) has adopted the work of the Portfolio in the development of Canada-wide standards. The western provinces and the territories continuously review and update standards, guidelines and regulations that apply to the oil and gas sector, and the outputs from the BOG Portfolio are consistently sought in this work. For instance, the Alberta Energy and Utilities Board and the National Energy Board serve on the BOG advisory committees for certain projects and programs in order to help direct research towards improvement of environmental standards.

BOG’s regulation and standards research has received international recognition as leading to implementable, science-based regulation. The work done by NRCan has positioned the Department as a world leader in improving current standards and regulations in other countries, and as a key player in the development of internationally-accepted methodology for international regulations.

In addition, the work of the Portfolio created expertise in identifying opportunities and threats in the oil sands and heavy oil market, thereby assisting policy makers and regulatory bodies in developing standards and regulations. Direct attribution in these cases is difficult, as numerous other information sources can feed into the decision making process, but the role played by BOG should not be discounted. Evidence from interviewees and key documents indicated that scientific results from the Portfolio have fed directly into the development of federal and provincial environment and emissions standards.

Collaborative research has also expanded based on the results of BOG projects, which has created opportunities for new projects that are aligned to both federal and provincial energy standard initiatives. Portfolio results have, in some cases, led to new methods of data quantifying and verification, which have been adopted by regulators in order to improve upon current or develop more scientifically-stringent regulations. Data for this purpose have been adopted not only across Canada, but also in the United States and China as a direct result of project partnership agreements and international presentations and workshops.

Case study evidence indicates that many projects led to concrete changes in regulations. Of the 13 BOG projects reviewed, five had effectively influenced standards and regulations, and an additional four were considered likely to do so in the future. Two of these case studies are described below.

Literature Review on Process Water Management; ETPS-Devon; $205,000; 2005-06 to 2008-09

The objective of this literature review was to summarize the latest scientific knowledge in the measurement of criteria air contaminants and GHG gases in tailing pond water and their atmospheric release rates, including the limitations of these measurements. This would establish benchmark criteria for innovative water treatment technologies to treat releases and tailing pond water from oil sands operations. The production of bitumen from oil sands involves the use of a considerable amount of freshwater and solvents as well as the release of various contaminants. About three to four barrels of freshwater are required for each barrel of bitumen produced from the oil sands. Used water in tailings is contaminated by various chemicals and metals. There was no single compilation of all current scientific information about the contaminants in the tailings produced by the bitumen extraction process and potential technologies to reduce them.

Regulations were formed with knowledge generated directly from the project. The results of the research gave confidence to the Energy Resources Conservation Board of Alberta to approve Directive 074 that will regulate the tailings. To comply with the directive (that will come in force gradually over four years), industry will need to ensure that the tailing ponds are trafficable (surface is solid enough to allow for motorized traffic and eventual reclamation) one year after deposition.

Toxicity Test Methodologies for the Assessment and Remediation of Impacts from Contamination on Boreal Forest, Taiga and Northern Soils; Environment Canada; $180,000; Partners with the Saskatchewan Research Council, Stantec, University of Guelph, and international collaboration with researchers from Denmark, the U.K., the U.S. and Germany; 2005-06 to 2008-09

Various methods and tests have been used to monitor and prevent contaminants in soil and guide regulatory activities. There was, however, no standardization of soil testing methods for non-agronomic soil systems such as boreal forest, taiga and other northern regions of Canada (which represent more than 70% of Canada's land mass). The objective of this project was to develop, validate and standardize biological test methods for evaluating the effects of hydrocarbon and salt contamination in soils of boreal forests, taiga and northern wetlands, in order to correct this knowledge gap.

The project led to the development of a suitable plant method and two soil invertebrate test methods. It also led to the development of two new toxicity methods for assessing contaminants in agricultural soils. While the project did not aim to produce new standards or regulations, results from it were adopted by Environment Canada to be used in the Canadian Council of Ministers of the Environment guidance document on derivation of soil quality criteria; the review of the Canada-Wide Standard for Petroleum Hydrocarbons – Ecological, Direct Soil Contact Guidance; as part of CCME Tier III site-specific risk approach; and as part of the information needed for derivation of Site Specific Remediation Objectives, following the new Alberta Environment Tier 2 Eco-contact Guideline Derivation Protocol.

c) Environmental Impacts:

The BOG Portfolio has achieved environmental impacts, indirectly, as a result of generation of new knowledge and R&D, and creation of new standards and regulations (as discussed in the previous sections). While the results of many BOG projects are expected to have clear environmental benefits, it is difficult to quantify these before they are widely adopted. Given the nature of the Portfolio in conducting early-stage R&D work, full-scale adoption of new technologies cannot be expected to occur until years after the projects have been completed.

Despite this, it is possible to examine some of the environmental benefits that have been created by the work of the Portfolio. Projects have produced valuable tools and data had positive environmental impacts (e.g., reductions of GHG emissions and the risk of spills and contamination) reducing air and water pollution, and development of improved fuel qualities. For example, numerous projects under the BOG Portfolio have dealt with the tailings produced through the bitumen extraction process. Researchers have successfully developed new handling technologies that reduce the number of barrels of water required to produce a barrel of bitumen. These technologies increase the amount of water recycled, providing the opportunity for great environmental benefits. However, until the technologies have been fully embraced across the sector, these benefits will not be fully realized.

The work conducted by researchers under the BOG Portfolio has positioned them as experts on all environmental issues surrounding the oil sands. Researchers have been called upon by all levels of government, international organizations, and private sector groups to share their knowledge of the field. Environmental information and discoveries have been disseminated to the scientific and industry communities, with the publication of peer-reviewed papers and presentations at national and international conferences.

Case study evidence also indicates that the projects had extensive impacts on the environment. Six projects out of 13 are considered likely to produce positive outcomes on the environment if the results are adopted throughout the sector.

Best Management Practices for Managing Fugitive Emissions; ETPS-Devon; $237,000; Partners with the Canadian Association of Petroleum Producers, the Alberta Energy Resources Conservation Board, EUB, SEPAC, Environment Canada and Clearstone Engineering; 2004-05 to 2007-08

Fugitive emissions are emissions of gases or vapours from pressurized equipment due to leaks and various other unintended or irregular releases of gases. The control of fugitive emissions is a matter of minimizing the potential for big leaks and providing early detection and repair. Until recently, industry was not actively managing fugitive emissions due to the capital costs and increased maintenance requirements. Controlling emissions by detecting and repairing leaks is essential for resource conservation, local air quality control and climate change.

The objective of the project was to provide guidance to companies on the most significant cost-effective emission reduction opportunities based on best available information and empirically-developed using sound scientific methods. Results identified a list of potential technologies for the detection of leaks, including manual sniffers (handheld device) and infrared cameras. As a result, the Alberta Energy and Utilities Board made implementation of the Best Management Practice a regulatory requirement in January 2007. In addition, the offshore oil and gas industry off the east coast is currently reviewing its Waste Treatment Guidelines and is considering incorporating the Best Management Practice.

d) Economic Impacts:

BOG projects did not lead directly to economic impacts. Some of the economic impacts anticipated to be produced by the Portfolio were based around protecting and improving the economic viability and long-term sustainability of the oil and gas industry in Canada.

The work of the BOG Portfolio demonstrates the potential benefits of new technologies on a small scale. Partnering with industry, and proving that new methods and technologies can be both ecologically and economically-efficient, allows the Portfolio to improve the economic viability of the oil sands. For example, projects related to the improvement of remediation and re-vegetation of bitumen processing tailings create large potential savings in the costs of remediation, even though environmental concerns are the first priority.

A few projects led to intended and sometimes unintended economic impacts. Six case study projects (out of 13) are considered likely to lead to positive economic impacts.

Froth Separation Technologies and Analytical Methods; NRCan CanmetENERGY – Devon; $669,000; Partners with industry (including Shell, Imperial Oil, and Suncor Energy) and University of Alberta; 2005-06 to 2008-09

One project focussed on the froth treatment involved in the bitumen processing as shown below. Past research at Devon in this area produced significant impacts, and current research is expected to lead to future improvements. Froth is a mixture of oil, solids and water that result from the initial bitumen extraction process from oil sands. The objective of this project was to improve processes to remove emulsified water from froth. Bitumen is partially separated from the oil sands using a hot water/solvent solution. This process produces a froth which has a bitumen concentration level around 60-65% in comparison to the original 10-12% in the oil sand. A froth treatment is then used to remove the remaining sand, water and fine clay from the froth to make clean bitumen suitable for upgrading. Improving the froth treatment will result in cleaner bitumen, with ultra low water and solids content, and reduced levels of less desirable asphaltenic components. The bitumen produced from the process is a better fit for downstream refiners. Research on froth treatment at Devon has produced considerable savings for industry since the 1990s. Technological improvements developed at Devon are being implemented in the designs of new oil sands operations. An Impact Assessment of Froth Treating Technology Developments in March 2003Footnote 22 found that the paraffinic solvent-based froth treatment process developed under this program resulted in an increase in net revenue of $2 on then bitumen barrel price of $18.

Tailings Management and Waste Utilization; NRCan, CanmetENERGY – Devon; $570,000; Partners with the Alberta Research Council, University of Alberta, and Syncrude; 2005-06 to 2008-09

The production of bitumen from oil sands involves significant amounts of water. In the extraction process, hot water is mixed with the oil sands to extract bitumen. Air attaches to the bitumen, causing it to float and separate from the sand, clay, and water. Currently, three to four barrels of freshwater are required for each barrel of oil produced from the oil sands. While part of the water is recycled in the process, large quantities are released in tailing ponds surrounded by sand dikes. These tailings are toxic and emit GHG gases. The objective of this research project was to develop technologies that reduce the quantity of water in the tailings through centrifugal forces and through a rim-ditching approach.

The project team developed bench models and larger models of centrifugal machines capable of extracting water from tailings, and with the assistance of Syncrude, a model was piloted in Utah, U.S.A. An industry partner tested the technology and another is presently setting up a centrifuge drying plant.

It is too early to tell if the new technology will have a definite economic impact. To date, the models developed as part of this project submitted the fluid tailings to high pressure centrifugal force and managed to remove about 50% of the water from the tailings. If the technology is commercialized, it could lead to significant savings for the industry.

Clean Energy ecoETI Funding

In 2008-09, ecoETI contributed $1.8 million to the BOG Portfolio for seven projects, as detailed in Table 5 below, representing 3.1% of BOG’s annual budget. This funding will continue for two additional years. As these projects had only just begun during the evaluation, there were no results available for them and they were not reviewed thoroughly. Of the seven projects, research was conducted for six at the CanmetENERGY—Devon and work was carried out for one at the National Research Council.

Project Title FTEs Total
Dewatering of Tailings: The Effects of Surfactants and Polymers 1.7 239
Technology Transfer/Method Development: Large Pilot and Commercial Scale Support for Dry Stackable Tailings Technology Development and Automated Clay Activity Determination. 1.8 247
Volatile Organic Compounds: Fate of Volatile Hydrocarbons in Oil Sands Development 3.1 458
Water Management: Oil Sands Water Quality and Implications for Oil Sands Operations and the Environment 2.7 348
Processability of Oil Sands Materials with Innovation for Energy Efficiency and Reduced Environmental Impact in Processing 1.6 246
Novel Extraction: Non-aqueous Bitumen Extraction Process Development 0.3 86
Air Emissions: Diesel Fuel Standard and Surrogate for Emissions Evaluations 1.0 147
Total 12.2 1,771

Source: Program documentation.

ecoETI funds were only provided for salaries in government laboratories, so the scope was narrower than PERD. This stream of funding did not require industry support.

According to documents and interviews, project activities were aligned with and complemented PERD and CCTI objectives.

4.2.2 Achievement of Outcomes – Frontier, Oil and Gas

To what extent have intended immediate, intermediate and ultimate outcomes been achieved as a result of the FOG Portfolio/programs?

The FOG Portfolio has largely achieved its intended and immediate outcomes and is making good progress towards intermediate and ultimate outcomes. R&D activities were carried out in the areas of sustainable energy development, improving timely and economical engineering decisions and regulatory approvals, and ensuring human safety and environmentally-safe oil and gas operations in frontier regions. The Portfolio is designed to provide access to and transport of Canada’s offshore and northern oil and gas resources by carrying out R&D to optimize the regulatory framework and to mitigate environmental and safety concerns.

Results of the FOG Portfolio’s outcomes are presented below under four categories: a) R&D; b) regulations and standards; c) environmental; and d) economic.

Where applicable, examples of outputs and outcomes from the 11 FOG case studies have been included. These examples are illustrations of the wide range of outputs produced by the five programs under the portfolio: Offshore Environmental Factors; Northern Hydrocarbon Production; Marine Transportation and Safety; Regulatory Requirements for Offshore Drilling and Production of Wastes; and Pipelines.

a) R&D Impacts:

The FOG Portfolio has advanced scientific knowledge, primarily through patents and publications based on the document review, interviews and case studies. A total of 1,389 peer-reviewed publications were produced by the Portfolio over the course of the evaluation period (2003-04 to 2008-09). Table 6 offers a breakdown of these publications by program. These publications dealt with all areas surrounding oil and gas work in the frontier regions, including exploration, extraction, transportation, and environmental and personal safety.

Table 6: FOG Publications by Program, 2003-04 to 2008-09
Program 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Total
Offshore Environmental Factors 45 53 76 168 87 117 546
Northern Hydrocarbon Production 127 34 12 45 22 64 304
Marine Transportation and Safety 24 0 0 15 19 22 80
Regulatory Requirements for Offshore Drilling
and Production of Wastes
93 0 0 47 53 57 250
Pipelines 21 0 0 53 78 57 209
Total 310 87 88 328 259 317 1,389

Source: Oil and Gas Program Management, June 22, 2010.

The outcomes of the FOG Portfolio research have established NRCan researchers as globally-recognized experts on areas related to offshore and northern oil and gas issues. Project participants have made numerous presentations at national and international conferences, and have been called upon to provide expert advice to federal, provincial and municipal policy makers. The outcomes have shown that the Portfolio has addressed the areas of concerns it was designed to examine. The Portfolio has achieved research results that advanced the knowledge and understanding of oil environmental science and widely-disseminated findings to relevant national and international stakeholders.

The FOG Portfolio plays an important role in providing national and international coordination of R&D work within the sector, developing knowledge within a strategic approach to sustainable development of offshore resources. This role requires engaging stakeholders at all stages in developing new technologies. Scientific outputs from the Portfolio feed directly in to offshore regulatory authorities and are used to refine environmental assessments. In addition, data collected by the FOG Portfolio is continually requested by industry, provincial governments, and international agencies in order to supplement and improve environmental studies.

Collaboration between industry and the research community that have been established by the Portfolio have allowed for the global dissemination of research results. R&D outputs from the Portfolio have been disseminated through workshops and conference presentations. This has helped to spur further science and technological advancements in Canada’s offshore oil and gas production. High capital investment costs associated with the development of offshore resources requires investment in R&D to mitigate costs and allow for the continued, environmentally-safe development of these resources.

For the FOG Portfolio, 11 in-depth case studies were conducted. Overall, a number of the projects analyzed contributed to advancements in R&D. Five produced significant new knowledge and an additional three produced significant R&D outputs. A number of these projects dealt with structural designs for northern conditions, and potential environmental impacts of offshore oil exploration and extraction.

Bergy Bit influence on Marine Transportation; NRC Institute for Ocean Technology; $113,000; Partners with Memorial University of Newfoundland, NRC IOT, ACOA, the Canadian Coast Guard, oil companies, Transport Canada, NRC Canadian Hydraulics Centre, and C-CORE at MUN; 2005-06 to 2008-09

Bergy bits are floating pieces of ice that can cause major harm to vessels and offshore structures. Most of these bergy bits are difficult to see, as only 12% of their volume is above the water, and they tend to bob up and down in the swells. These smaller chunks of ice are almost invisible to a ship’s radar. The bergy bits can weigh up to 10,000 tonnes, and are large enough to tear a hole in the steel plating of a ship’s hull. Most significant sea collisions in the last 25 years with ice have involved bergy bits. The objectives of this project were to measure the forces and pressures generated during controlled collisions of an instrumented ship with bergy bits of various shapes and sizes for a range of ship speeds.

New impact panel and the numerical models have been developed as a result of this research. Twenty-five papers on the research have already been presented to international groups. Two patents related to surface pressure sensing apparatus were obtained as a result of this project.

Assessment Model for Environmental Effects of Drilling Wastes; DFO; $90,000; Partners with Ecological Risk of Produced Water Discharges (Bedford Institute of Oceanography), United States Office of Naval Research, Dalhousie University; 2005-06 to 2008-09

Offshore drilling operations are potentially harmful for the environment. This FOG project focused on the environmental impacts of drilling. A quantitative methodology already exists for estimating the potential impacts of discharged drilling mud. This project’s aim was to extend the scope and improve the availability of the dispersion models developed earlier under DFO/NRCan funding as a quantitative framework for assessing impacts of drilling wastes on seabed life. This would improve decision-making by industry, regulators and government agencies on environmental impact assessment and interpretation of environmental effects monitoring programs.

The research team partnered with another FOG project, Ecological Risk of Produced Water Discharges, to share the ship costs for field research. The team also worked with the United States Office of Naval Research and Dalhousie University. The project led to the development and completion of a quantitative assessment model. The source code and executable modules are freely available online, and will be incorporated into a circulation model for the Gulf of St. Lawrence.

Exploration impacts on the seal population in the Beaufort Sea; DFO; $90,000; Partners with Environmental Studies Research Fund; Department of Indian and Northern Affairs; 2005-06 to 2008-09.

Numerous FOG Portfolio projects assessed frontier and offshore oil and gas impacts on wildlife, including fish, shellfish and seals. These projects produced valuable scientific information on the potential environmental impacts of the sector’s extraction activities. This particular project was based on aerial surveys that had shown that significant numbers of seals can be found basking on the ice of the Beaufort Sea in the area where offshore gas exploration activity takes place. This can be problematic because offshore gas exploration activity occurs around the same time the seals are nursing their pups.

The objective of the project was to evaluate the potential impacts of offshore industrial activities on the resident seal populations, with a view to providing advice on any mitigating measures and monitoring studies which might be employed effectively in the future. The study provided important baseline information on the use of the near shore Beaufort Sea by ringed seals during spring, and can be used as a benchmark for any future studies involving multiple or longer term drilling operations. Results suggest that one season of drilling by industry had no detectable effect on ringed seals in the study area. However, the effects of longer exposures to industrial activity, or exposure to multiple industrial sources, remain unknown. Primary publications based on the data collected by the project are expected in 2011.

b) Regulations and Standards Impacts:

While the FOG Portfolio produced outputs primarily related to R&D, many projects had or are expected to have impacts on regulations and standards. Several project results were considered when industrial standards were revised, such as standards for pipelines and offshore platforms.

The work of the FOG Portfolio has been used directly by the Standards Council of Canada for the development of Canada-wide standards and in contribution to the International Organization for Standardization. Outputs from the FOG Portfolio are used consistently in the review and updating of oil and gas sector standards and regulations by the federal departments, the Atlantic Provinces, and the territories. For example, statistical data generated by the Portfolio on ice thickness, ice drift and ocean current statistics in the Gulf of St. Lawrence feed directly into the International Organization for Standardization Offshore Codes. Research on ice loads and the factors affecting these loads has been spurred on by the work of the Portfolio. Three PERD iceberg databases have been updated with new information, and data has been widely disseminated through workshops and presentations to industry regulators.

The FOG Portfolio has received international recognition as leading to implementable, science-based regulations. NRCan has been recognized as a world leader in expanding standards and regulations for improved personal and environmental protection, and as a key information source for international standard makers. The high value of the data produced by the Portfolio has ensured that a Canadian perspective is incorporated into the debate and development of offshore and Arctic international regulations.

The work of the Portfolio has also led to the development of NRCan’s expertise in identifying areas of concern in the offshore and frontier regions. Researchers from the Portfolio are regularly called upon to assist policy makers and regulatory bodies in developing standards and regulations. As with the BOG Portfolio, direct attribution in these cases is difficult to ascertain, as this work draws upon the overall knowledge base of researchers rather than the specific outputs of individual projects. Evidence from interviewees and key documents indicates that scientific results from the Portfolio have fed directly into the development of offshore environment and safety standards. Portfolio results have, in some cases, led to new methods of data quantifying and verification, which have been adopted by regulators in order to improve upon current or develop more scientifically-stringent regulations. For example, data produced from the Portfolio has fed directly into the DFO National Science Data Management Committee regulatory and compliance strategy.

Of the 11 case study projects reviewed, four demonstrated significant and concrete impacts in developing standards and regulations, while four others were considered likely to lead to similar outcomes in the future. Projects produced information crucial for current and future oil exploration and extraction activities offshore and in the North. They contributed to the Canadian Standards Association and International Organization for Standardization standards for offshore structures.

Beaufort Sea Wave Design Criteria Project; Environment Canada Climate Research Division; $235,000; Partners with Fisheries and Oceans, National Energy Board, Nova Scotia and Newfoundland and Labrador Offshore Petroleum Boards, Bedford Institute of Oceanography, Meteorological Service of Canada, Geological Survey of Canada, and the National Research Council; 2005-06 to 2008-09

There is a renewed interest in the Beaufort Sea in connection with planned offshore and near coastal resource development. Among the various knowledge gaps in the area, little is known about the wind and wave conditions in the Canadian Beaufort Sea. The objective of this project was to produce a wind and wave hindcast for the Canadian Beaufort Sea.

The project generated a 25-year compendium of wind and wave conditions. The hindcast results contributed to the Canadian Standards Association (CSA) and the International Organization of Standardization standards for offshore structures. Data from this project specifically contributed to the ISO 19901-1: 2005 code for offshore structures. The applied research is also being used by various federal regulators including DFO, INAC, the National Energy Board, and the offshore petroleum boards of Nova Scotia, and Newfoundland and Labrador who are concerned with regulation of offshore oil and gas exploration and operation.

Analysis of Ice Interactions with Structures; DFO; $183,000; Partners with Public Works and Government Services Canada, the Bedford Institute of Oceanography, eight oil industry partners; four government regulators, and Ice/Structure Interaction Advisory Committee; 2005-06 to 2008-09

This FOG-funded project impacted CSA standards for offshore structures. In the initial stages of oil exploration in the Beaufort Sea, knowledge of actual ice loads on wide structures was virtually non-existent, although there was a general consensus that the structures were often over-designed for ice loads. The objective of this project was to develop a solid base of knowledge of ice loading on offshore oil and gas production structures, and to translate this knowledge into codes and standards for use by operators and regulators.

Research results were incorporated into the newly revised CSA Offshore Code, specifically the Code CAN/CSA-S471 “General Requirements, Design Criteria, the Environment, and Loads”, which involves the design, construction and installation of fixed offshore structures. Results are also proposed to be incorporated into ISO Arctic Offshore Structures Code; the National Energy Board and the Canadian National Offshore Petroleum Board refer to codes in their regulations, and operators use codes in the preliminary design of offshore systems. These new standards for offshore structures will likely reduce the tendency to “overdesign” structures. This will presumably translate into savings for industry, fostering further development.

Ice Rubble Generators for Offshore Structure; National Research Council; $375,000; Partners with Devon Energy, ConocoPhillips Canada, National Energy Board, Canadian Hydraulics Centre, Indian and Northern Affairs Canada, and the Canadian Space Agency; 2005-06 to 2008-09

Broken ice tends to accumulate around offshore structures in the North. Analyses of ice load data over the last decade have shown that these ice rubble fields can be very beneficial to reduce the force of ice loads on structures, which is an extremely important finding for future production structures in the Beaufort Sea. Ice rubble generators have the potential to reduce ice loads by stabilizing the ice rubble surrounding offshore structures. The objective of the project was to identify and explore appropriate ice rubble generators design concepts for offshore structures in the Beaufort Sea. Research findings informed the new ISO Arctic Structures Code, which includes a section related to emergency escape, evacuation, and rescue from Arctic structures. The project also helped to identify feasible design concepts for offshore structures.

c) Environmental Impacts:

It is anticipated that the majority of projects under the FOG Portfolio will have long-term environmental impacts by helping industry reduce its environmental footprint from spillage, impacts on wildlife and GHG emissions. As with the BOG Portfolio, it is too early to be able to measure these types of results for projects that began during the evaluation period.

In spite of this, the FOG Portfolio has produced numerous tangible environmental benefits. Data and statistics generated by FOG projects are used by authorities from all levels of government and industry in conducting environmental assessments. Private companies, in particular, were found to be very interested in using FOG-produced data to aid in these assessments, as the use of government data is considered to increase public confidence in private environmental review processes. The quality of FOG data outputs has also attracted interest from other countries. United States research groups (including the U.S. Army Engineering Research and Development Center, U.S. Coast Guard, and the U.S. Environmental Protection Agency) have continually approached FOG with interest in cross-boarder research collaboration projects, as both countries face similar issues with exploration and development in the North and the offshore.

The work conducted by the FOG Portfolio has improved environmentally-sustainable exploration operations in the ice-infested waters of the Arctic. Work completed by the Portfolio has, for instance, increased the accuracy of sea ice distribution forecasts, and improved detection techniques for sea ice hazards. The Portfolio has also improved the accuracy of mapping variable ocean currents, providing data that led to improved design safety of offshore structures. Forecast data are also used by the Canadian Coast Guard for search-and-rescue planning and the oil industry for environment monitoring. This produces more reliable estimates of spill trajectories and potential negative environmental impacts.

Projects under the FOG Portfolio have also directly focused on industry impacts on wildlife, producing valuable scientific data. Numerous scientific publications on key offshore environmental issues have been produced using this research, and data have been made publically-available to the wider research community. As with BOG, the high quality of results produced have positioned researchers as credible experts in issues surrounding offshore environmental safety, and their input has been sought by government, industry and media on issues such as oil spill remediation and potential seismic impacts.

Three case study projects are considered highly likely to have an impact on the environment, and six other projects are likely to lead to positive environmental impacts. Two of these appear below.

Assessment of Extreme Ice Scouring Processes on Arctic Marine Pipelines; NRCan-CANMET; $85,000; Partners with oil and gas industry, Geological Survey of Canada, Natural Sciences and Engineering Research Council of Canada Canadian Arctic Shelf Experiment Study, National Energy Board, INAC Oil and Gas Directorate and Canadian Seabed Research Ltd; 2005-06 to 2008-09

Ice scouring occurs when sea ice forms pressure ridges into the seafloor, causing scours (or cuts). This naturally-occurring event has the potential to significantly damage pipelines in seabed trenches or on the seabed. The objective of this project was to assess the effects of extreme ice scouring on Arctic marine pipelines in the Beaufort Shelf using repetitive mapping surveys and multi-beam sonar technology.

The research results informed ice-pipe modeling research that is used to determine what would happen if an ice keelFootnote 23 hit a pipeline. This has ensured cost effective and appropriate pipeline burial depths to prevent failure by the action of ice keels. Environmentalists and biologists also used research findings from this project to inform their seafloor research.

Ecological Risk of Produced Water Discharge; DFO – Bedford Institute; $295,000; Partners with Environment Canada, Concordia University, Dalhousie University, Memorial University and Queen’s University; 2005-06 to 2008-09

The objective of this project was to understand the chemical properties of produced waterFootnote 24, and its biological and environmental impacts. With the development of Canada’s offshore oil and gas reserves, large volumes of produced water and displacement watersFootnote 25 may be discharged into the ocean. To achieve maximum oil recovery, water is often injected into the oil reservoirs to help force the oil to the surface. Both the formation water and the injected water are eventually made along with the oil. Produced water is anaerobic and hot (60ºC), contains bubbles of oil and gas, and is discharged over the duration of the typical 25-year lifespan of an oil rig.

The research provided the science necessary for revisions to Canada’s regulatory Offshore Waste Treatment Guidelines. The concentration of oil within the discharged produced water is measured and monitored, and industry is limited by the amount of oil that can be discharged within the produced water. The biological and environmental impacts of produced water have been reduced through better cleaning processes and through the establishment of limits for its disposal.

d) Economic Impacts:

In the area of economic impacts, the FOG Portfolio was seen as a contributor to economic benefits primarily through more effective testing methods and approaches; increasing costs savings to industry by reducing the use of materials and energy for structures and avoiding accidents; and opening or ensuring access to markets.

The Portfolio achieved economic impacts indirectly as a result of R&D, and inputs to standards and regulations. Projects reviewed did not lead directly to economic impacts, nor were they expected to given the nature of the Portfolio. Economic impacts dealt with protecting and improving the economic viability and long-term sustainability of the frontier and offshore oil and gas industry.

For example, research results from the Portfolio have been used to develop guidance products used by tankers operating in iceberg-infested waters. The improved ability to detect hazardous ice created by the work of the FOG Portfolio has been widely adopted. As a result, private companies have safer access to far-North structures, and deeper exploration of the Arctic is more economically viable. Thus, while the direct outputs of the Portfolio may not generally lead to economic impacts, they improve the economy of the industry.

Four of the 11 case study projects are considered likely to lead to economic benefits as both intended and unintended outcomes. These case studies are presented below.

Testing for New Advanced Radar Technologies to Detect Small Ice Objects; Transport Canada; $127,000; Partners with Environment Canada, Rutter Technologies, and the Transportation Development Centre; 2005-06 to 2008-09

Small ice objects afloat at sea represent a threat to navigation during specific times of the year in large areas of the North Atlantic including waters near the Hibernia and Terra Nova oil and gas fields. Because of the inability of conventional shipboard radar to reliably detect small objects in sea clutter, there is a risk of accidents resulting in high repair costs. The objective of this project was to evaluate the ability of new advanced radar technologies to detect small ice objects and to compare their performance with conventional radar systems.

Technologies tested include a modular radar interface marketed under the trade name Sigma S6 and a high speed radar scanner developed by Transportation Development Centre of Transport Canada. The Sigma S6 is considered to be a significant improvement over conventional marine radar technology. The manufacturer’s Annual Report 2007 indicated that sales increased as vessel operators began to see the business value attached to its ice navigator radar.

All three of the Newfoundland’s offshore platforms (Hibernia, Terra Nova and White Rose) are using the company’s ice navigator. German research vessels, Russian tankers and icebreakers, and vessels with the Swedish, Norwegian and Canadian Coast Guards have all adopted the Ice Navigation System.

Seabed Stability Research; Geological Survey of Canada; $160,000; Partners with the NEB; INAC, ConocoPhillips Canada, Imperial Oil Limited, Talisman Energy Inc, Devon Canada; 2005-06 to 2008-09

This project was connected to the further economic development of oil exploration and extraction activities in the Beaufort Sea. Knowledge of the distribution of ice-bearing sediments beneath the shelf is important for estimating the potential degree of thaw settlement under oil and gas production structures and loss of support around well casings. Understanding the properties, behaviour and distribution of seabed sediments provides a framework for assessing unstable foundation conditions for bottom-founded exploration and production structures in the Beaufort Sea. The objective of the project was to assess the nature and extent of subsea permafrost and seabed foundation conditions across the Beaufort Shelf.

New technology was developed to produce this data. The National Energy Board utilized the research findings to feed into their evaluation process (i.e. for assessing feasibility of industry proposals for development), as well as by private firms. Data from this research have provided for more accurate economic evaluation of potential drilling sites which may lead to greater production activity in the area.

Research on Fast Ductile Fracture Control (for Pipelines); NRCan-MMS; $85,000; Partners with TransCanada Pipelines Ltd, TransCanada, National Energy Board, the US National Institute of Standards and Technologies; 2005-06 to 2008-09

Fast ductile fractures can result in long damaging cracks in pipelines. In some cases, the fractures can propagate for kilometres. Fast ductile fracture is a particular concern for gas pipelines, especially those passing through remote areas where repair conditions can be difficult. The objective of this research was to develop a reliable toughness test for fast ductile fracture of pipelines and approaches to estimating crack driving force. Improved materials for pipelines construction is likely to lead to cost savings, due to more efficient pipeline design. It will also help reduce the risks of pipeline leaks and environmental incidents.

As a result of the research, a test for high-strength, high-toughness steels through experimental tests of laboratory-scale specimens has been developed. The improved understanding of material properties and fast ductile fracture will allow a more efficient design of the pipeline, which will reduce costs. As well, thinner and stronger pipeline materials are less costly to transport on pipeline construction sites, and can potentially reduce transportation costs.

4.3 Design and Delivery – Oil & Gas Sub-sub Activity

To what extent does the design and delivery of the programs facilitate the achievement of its outcomes?

The design and delivery of the programs was found to be a key factor behind the achievement of the Oil and Gas SSA outcomes. The project priority and selection processes – being conducted by committees comprised of government, industry and other stakeholder representatives – led to work being focused on areas most likely to produce results related to government priorities while still being of interest to industry. There were some complaints about the design of the program lacking in facilitating strategic decisions and the composition of the selection committees needing to have more of an industry influence.

Twelve to six months before the funding cycle begins, a call for proposals is made through the portfolio committee to federal departments. There is either a single or two-stage screening process before evaluation is made. A single stage process involves call for proposals, evaluation and selection for funding. Evaluation criteria are developed initially at OERD and reviewed by the portfolio committee. A two-stage process involves a call for short-form proposals or letters of intents, which are screened, and then selected proposals are asked to provide a full project proposal for the second round. At each of the two stages, portfolio-specific criteria are developed.

Once proposals are received they are sent out to their respective programs within the Portfolio. Each program has its own technical advisory committee (with representatives from federal and provincial governments, universities, and industry) that evaluates and ranks the proposals based on initial criteria. The program leader reports the results of this evaluation to the Portfolio, including the projects selected for funding. The entire process takes between four to eight weeks.

The reporting and monitoring process is considered to be appropriate by interviewees, with scientific articles and papers being published as a result. The majority of researchers and representatives felt that the priority setting and project selection processes were both fair and effective. A minority of interviewees outside of government thought that the reporting requirements were excessive, but this was largely due to their focus on their own specific projects rather that the Oil and Gas SSA as a whole.

In the views of an NRCan senior management representative, the flexibility given to the Portfolio committees on how to manage their activities has allowed them to tailor the departmental processes to specific program needs, facilitating greater achievement of outcomes. Interviewees also noted that receiving advice, recommendations, and information from external advisors is helpful in shaping priorities and plans to derive the maximum benefit from federal expenditures.

Interviewees indicated that committee members are considered objective and use science-based criteria to evaluate proposals, making use of peer reviews by multiple stakeholders from industry, regulatory, and research organizations. Proposals for funding are also reviewed by the funding partners in order to balance competing needs to ensure that project selection is based on issues of highest priority. The mix of individuals on the committees provides an objective and balanced view. The committee structure also provides a broader overview of the work of the SSA, grouping similar projects to pool research and efficiently utilize resources.

External interviewees largely considered the committees to be knowledgeable about policy and the regulatory context, which assisted greatly in helping to shape successful proposals. Both internal and external interviewees noted that the committee structure helped promote regular communication between researchers and committee members during projects and for reporting purposes, which was considered mutually useful and a best practice.

Despite all of this, a few interviewees expressed the view that the selection processes could be improved and should be taken at a more strategic level. A small portion of interviewees from industry felt that the project selection process needed to be more weighted towards industry. Some additional interviewees expressed a desire to see research results more widely distributed, such as through a periodic newsletter. These complaints focused primarily on the need to fund more long-term research and ensure long-term federal support, which helps ensure longer involvement from other project stakeholder partners. The linking of payment to deliverables and requiring that project partners are actively involved in the monitoring of results was seen as being excessive by close to a third of external interviewees, though this group was primarily made up of external stakeholders who would be expected to be less concerned with federal reporting requirements.

4.4 Effectiveness – Oil & Gas Sub-sub Activity

What are the internal/external factors influencing the effectiveness of the programs?

The key factors influencing program effectiveness were collaboration and partnerships among research teams, industry and other stakeholders, and human resources issues. Having access to skilled researchers produced successfully-funded projects, however a number of project leaders indicated that finding and retaining researchers for projects was a challenge.

Interviewees generally agreed that partnerships and collaborations established between the research teams and various partners and stakeholders were key factors in project success. These partnerships included different roles including advisory, a funding/in-kind contribution, and active research. In addition, many private sector organizations provided sites and equipment for pilot-testing new approaches or for monitoring an environmental issue.

Partnerships established with the industry also provided insights allowing research teams to better focus their projects to meet industry needs and to yield timely results. Interviewees involved in northern area projects also noted the importance of the involvement of First Nation communities, specifically related to the commitment, skills and experience of members of the community in dealing with technology in this unique environment.

Interviewees noted that dissemination was also a key factor in project success, though some noted that there was room for improvement in this area. The majority of findings are disseminated through reports and publications, though this can be a slow process. Interviewees from industry noted that there are market pressures to ensure that firms have the most current data, as it feeds into further research work. As a result, the longer the delay in data being disseminated from NRCan, the longer it would take to produce new tools and practices.

Another factor identified by some interviewees was related to human resources. A number of respondents mentioned that their projects were challenged by human resource issues, mainly attracting and retaining qualified researchers, as a number of researchers left for other organizations. Turnover is an issue at all levels, from the researcher to management levels.

4.5 Efficiency – Oil & Gas Sub-sub Activity

How could the efficiency of the programs be improved? Are the programs the most economic means of achieving the intended objectives?

Evidence from the document review, interviews and case studies showed that the oil and gas portfolios and programs were delivered in a cost effective manner by a total of 259 full-time equivalent staff from 2005-06 to 2008-09.

Overall, interviewees felt that PERD dollars were well used. Interviews and program documentation showed that funding is leveraged from other organizations and approximately $1.5 dollar is leveraged for each PERD dollar. Some respondents felt that more partnerships would leverage additional dollars and that more work could be done to achieve greater impacts, such as applied research and better communications to industry. Interviewees and case study respondents were asked to discuss the efficiency of programs. Many indicated that program funds are generally well used. Some explained that substantial resources were leveraged from various sources, including industry, universities, associations, and other organizations. One program leader mentioned that one-third of his program resources were leveraged from industry. Program documentation supports this finding. According to program financial information, BOG programs have leveraged dollars at an average ratio of 1.44 (where every PERD dollar is matched by 1.44 dollar) as indicated in Table 7.

Table 7: Leveraging Factors of BOG Programs (2003-04 to 2007-08)
Program Name Average
Leveraging
Factor1
Mitigating the Impact of Bitumen Production from Oil Sands 2.40
Petroleum Conversion for Cleaner Air 1.30
Upstream Petroleum Air Issues 1.22
Soil and Groundwater Remediation Issues 0.86
Average 1.44

Source: Oil and Gas program documentation.

1 Leverage = funds from all other sources/PERD funds, where funds from all other sources exclude in-kind contributions. These funds can includes A-base funding from science-based departments and agencies, university and private sector contributions, etc.

As indicated in Table 8 below, the FOG programs have leveraged an average ratio of 1.49 (where every PERD dollar is matched by 1.49 dollar).

Table 8: Leveraging Factors of FOG Programs (2003-04 to 2007-08)
Program Name Average
Leveraging
Factor1
Offshore Environmental Factors 1.52
Regulatory Requirements for Offshore Drilling and Production Wastes 1.81
Northern Hydrocarbon Production 1.37
Marine Transportation and Safety 1.04
Pipelines 1.73
Average 1.49

Source: Oil and Gas program documentation.

1 Leverage = funds from all other sources/PERD funds, where funds from all other sources exclude in-kind contributions. These funds can include A-base funding from science-based departments and agencies, university and private sector contributions, etc.

Annex 1: Case Studies by Portfolio

Bitumen Oil & Gas Case Studies
Title Location Cost ($000’s) Partners Period Results and Main Impact
Tailings Management and Waste Utilization CanmetENERGY Devon 570 The Alberta Research Council; University of Alberta, and Syncrude. 2005-06 to
2008-09
Research produced scaled-up, effective model that reduces tailings, being implemented by industry (main impact: economic).
Literature Review on Process Water Management IETS/
CanmetENERGY – Devon, AB
205 The sub-project was financed by PERD alone. 2005-06 to
2008-09
Literature review compiled information on contaminants and technologies to reduce tailings (main impact: regulations and standards)
Froth Separation Technologies and Analytical Methods IETS/
CanmetENERGY – Devon, AB
669 Industry, including Shell, Imperial Oil; Suncor Energy and University of Alberta 2005-06 to
2008-09
Results show significantly improved process that could lead to significant savings to industry (main impact: economic).
Aromatic Ring Opening IETS/
CanmetENERGY – Ottawa, ON
269 The National Centre for Upgrading technology (an Alberta NRCan research alliance). 2005-06 to
2008-09
Project demonstrated the feasibility of selective aromatic ring opening, reducing GHG emissions and improving economics of diesel fuel production (main impact: R&D).
Direct Coke Fuel Cells IETS/
CanmetENERGY – Ottawa, ON
150 Gencell, NRC ICPET (Institute for Chemical Process & Environmental Technology). 2005-06 to
2008-09
Research removed some barriers to practical application of coke fuel cells (main impact: R&D).
Air Emissions & Fuel Quality IETS/
CanmetENERGY – Devon, AB
175 CanmetEnergy; Pacific Northwest National Laboratory (PNNL) and Oak Ridge National Laboratory (ORNL) of the U.S. Department of Energy. 2005-06 to
2008-09
Research increased characterization information of oil-sands derived fuels, will help oil exports (main impact: R&D).
Best Management Practices for Managing Fugitive Emissions IETS/
CanmetENERGY – Devon, AB
237 The Canadian Association of Petroleum Producers (CAPP); the Alberta Energy Resources Conservation Board (ERCB), EUB; SEPAC and Environment Canada and Clearstone Engineering. 2004-05 to
2007-08
This study of best practices had impact on guidelines and regulations and is highly likely to have economic/environmental impacts (main impact: regulations and standards).
Development of an Interactive Web-based Nodal Analysis for Identifying and Tracking Emission Reduction Opportunities IETS/
CanmetENERGY – Devon, AB
104 The Petroleum Technical Alliance of Canada (PTAC); Clearstone Engineering Inc. of Calgary; The Methane-to-Markets Partnership in Washington; D.C , The United States Environmental Protection Agency in Washington, D.C., and Environment Canada. 2004-05 to
2007-08
Development of interactive, web-based Nodal Analysis of the upstream oil and gas industry (main impact: R&D).
Removal of Naphthenic Acids IETS/
CanmetENERGY – Devon, AB
387 NCUT, University of Alberta, and the Florida State University (FSU)/ National High Magnetic Field Laboratory (NHMFL). 2005-06 to
2008-09
Characterized naphthenic acids and developed measurement methods will help oil exports (main impact: R&D).
Characterization of Soot Optical Properties for Novel PM Diagnostics IETS/
CanmetENERGY – Devon, AB
323 The Canadian Association of Petroleum Producers (CAPP); Environment Canada; The National Research Council's Institute for Chemical Processes and Environmental Technologies (NRC-ICPET); The National Science and Engineering Research Council (NSERC), and Carleton University's Department of Mechanical and Aerospace Engineering. 2005-06 to
2008-09
Project developed equipment and protocols for measurement and characterization of soot in natural gas flares (main impact: R&D).
Toxicity Tests for the Assessment of Impacts from Hydrocarbons EC 180 Environment Canada (EC), The Saskatchewan Research Council; Stantec, University of Guelph; and International collaboration with researchers from Denmark, the U.K., the U.S, and Germany. 2005-06 to
2008-09
Tests and methods will be used in risk assessments and guidelines. Expected to lead to better tailored and less costly remediation (main impact: regulations and standards).
Microbial Community Characterization and Profiling in Northern Sites NRC 240 Biotechnology Research Institute; National Research Council of Canada, Montreal; Department of Natural Resource Sciences; McGill University; Environment Canada; Public Works and Government Services Canada; DFO the Centre for Offshore Oil, Gas and Energy Research (COOGER), and the Department of National Defense. 2005-06 to
2008-09
A scientific approach towards bioremediation under specific circumstances has been established (main impact: R&D).
Fouling in Biodiesel Fuel Mixtures NRC-ICPET 670 NRC-ICPET and The Alberta Research Council (ARC) 2004-05 to
2007-08
Research yielded information on effects of biodiesel ratios on fouling (main impact: R&D)
Ice Rubble Generators for Offshore Structure NRC Ottawa, ON 375 Devon Energy; ConocoPhillips Canada; National Energy Board;
Canadian Hydraulics Centre; Indian and Northern Affairs Canada; NRCan; the Canadian Space Agency.
2004-05 to
2007-08
Project identified viable ice rubble generator design concepts for arctic leading to potential cost savings for industry. Also informed ISO code (main impact: regulations and standards).
Beaufort Sea Wave Design Criteria EC 235 NRCan; Environment Canada; Fisheries and Oceans; National Energy Board (NEB); Canada-Nova Scotia; Canada-Newfoundland and Labrador (CNSOBB, COBB); Bedford Institute of Oceanography; Meteorological Service of Canada; Geological Survey of Canada, and National Research Council. 2005-06 to
2008-09
Project produced wind and wave models and design criteria, used by regulators, industry (main impact: regulations and standards).
Analysis of Ice Interactions with Structures Bedford Institute of Oceanography – DFO, Dartmouth, NS 183 Public Works and Government Services Canada (PWGSSC); the Department of Fisheries and Oceans (DFO); the Bedford Institute of Oceanography (BIO);
Eight Various oil industry partners; four Government Regulators, and Ice/Structure Interaction Advisory Committee.
2005-06 to
2008-09
Project provided data and predictive models useful for industry. Led to revised CSA standards (main impact: regulations and standards).
Seabed Stability Conditions in Arctic Offshore Geological Survey of Canada 160 The NEB; INAC; ConocoPhillips Canada; Imperial Oil Limited; Talisman Energy Inc., and Devon Canada. 2005-06 to
2008-09
Project provided data on seabed and permafrost, used for guidelines and industry for platforms (main impact: economic).
Exploration Impacts on Seal Population in Beaufort Sea DFO 90 ESRF (Environmental Studies Research Fund); Dept. of Indian Affairs and Northern Development (DIAND); Dept. of Fisheries and Oceans (DFO). 2005-06 to
2008-09
Study completed and indicated limited short term impacts on seals (main impact: R&D).
Bergy Bit Influence on Marine Transportation NRC-St-John’s, NL 113 Memorial University of Newfoundland (MUN); NRC IOT; ACOA; the Canadian Coast Guard; oil companies; Transport Canada; NRC Canadian Hydraulics Centre (CHC); C-CORE at MUN. 2005-06 to
2008-09
Research provided collision testing results and development of impact panel. Information used by industry (main impact: R&D).
Testing For New Advanced Radar Technologies To Detect Small Ice Objects TC 127 Transportation Canada; Environment Canada and Rutter Technologies, and the Transportation Development Centre. 2005-06 to
2008-09
Radar system was successfully tested with a strong feedback from the users that piloted its use (main impact: economic).
Assessment Model for Environmental Effects of Drilling Wastes Bedford Institute of Oceanography – DFO, Dartmouth, NS 90 Ecological Risk of Produced Water Discharges (Dr. Ken Lee at the Bedford Institute of Oceanography), United States Office of Naval Research (ONR) and Dalhousie University. 2005-06 to
2008-09
A model of benthic dispersion was developed and is used by researchers and at least one private sector firm (main impact: R&D).
Ecological Risk of Produced Water Discharges Bedford Institute of Oceanography – DFO, Dartmouth, NS 295 Research partners include DFO; EC; Concordia University; Dalhousie University; Memorial University, and Queen’s University. 2005-06 to
2008-09
Research shows significant impacts of water discharges from oil rigs on wildlife. Research impacted guidelines (main impact: environment).
Assessment of Extreme Ice Scouring Affecting Arctic Marine Pipelines NRCan-CANMET 85 Oil and gas industry; Geological Survey of Canada; NSERC Canadian Arctic Shelf Experiment Study; National Energy Board; INAC Oil and Gas Directorate; Inuvialuit, and Canadian Seabed Research Ltd. 2005-06 to
2008-09
Research on ice scouring informed regulatory standards and engineering design (main impact: environment).
Fast Ductile Fracture Control NRCan-MMS/
CanmetENERGY MTL – Ottawa, ON
85 TransCanada Pipelines Ltd; TransCanada; National Energy Board (NEB); the US National Institute of Standards and Technologies (NIST). 2005-06 to
2008-09
Research increased knowledge in fast ductile fractures; developed tests for high-strength, high toughness steels (main impact: economic).