The S word: Sustainability in the resource sector

The S word: Sustainability in the resource sector

Sustainability has gone from nice-to-have to necessity in the resource sector. But what does it really mean—and what will the 2020s bring?

EVERY YEAR, IN NOVEMBER, the International Energy Agency’s World Energy Outlook lands on the desks of energy industry insiders and policymakers. Its annual analyses about the future of global-energy supply and demand aren’t always bulletproof, but it’s the closest thing to a bible the industry has—and 2018’s Outlook contained very good news for boosters of Advance 2030, Newfoundland and Labrador’s plan to double the province’s oil production to 650,000 barrels a day by 2030.

The report warned of weak investment in new oil projects, with new approvals over the past three years only half of what might be needed to balance the market into the coming decade. In other words: The world could be facing a global oil-supply crunch by the mid-2020s. For a province sitting on 37 billion barrels of unexploited oil, and where the oil industry accounted for nearly one-quarter of provincial GDP just a few short years ago, it was welcome confirmation that Advance 2030’s goals were well-aligned with global energy markets.

“The IEA is forecasting demand for oil to grow to at least 2040, and if we’re not producing it, someone else will,” says Paul Barnes, the Canadian Association of Petroleum Producers’ director of Atlantic and Arctic. Barnes’ point is a common response to critiques of fossil-fuel expansion in Canada: as long as the world needs oil, it may as well be ours, produced in some of the best-regulated conditions in the world.

But there’s a catch: The IEA didn’t exactly predict that oil and gas demand will grow. Instead, as every year, it produced a number of scenarios, each one reflecting different technological and geopolitical possibilities. The “new policies scenario,” reflecting current and underway regulatory regimes, sees oil demand growing until 2040, and predicts that aforementioned supply crunch looming in just a few short years.

A very different scenario, however, suggested a very different future. And it was this scenario that the IEA graced with the magic word—sustainable—that has become indispensable for any extractive outfit seeking social license and regulatory approval.

The “Sustainable Development Scenario,” (SDS) looked at what would happen if governments and markets worldwide responded to the Paris Agreement’s pledge to keep the world’s warming at less than two degrees above the pre-industrial average. It was timely. Just weeks before the IEA’s report, the United Nations Intergovernmental Panel on Climate Change (IPCC) had released its own report, warning of consequences of warming beyond that level: ecosystem devastation, agricultural collapse, constant wildfires, flooded cities, millions of climate refugees fleeing uninhabitable equatorial regions. The economic cost would be more than $50 trillion USD—if civilization as we know it survives the rapid onset of strife, scarcity and conflict in a hotter world. Assessing pathways to a climate-stable world, the IPCC declared, “All pathways begin now and involve rapid and unprecedented societal transformation.”

The IEA, not typically a hotbed of climate alarmism, used startlingly similar language: IEA executive director Fatih Birol said the “sustainable” scenario would require “unprecedented global political and economic effort” and “systematic preference for investment in sustainable energy technologies.” Under the SDS, oil and gas demand would peak next year and decline steadily thereafter. Renewables would account for two-thirds of all global energy production by 2040, and nearly one billion electric vehicles would ply the world’s roads.

This is a very different notion of sustainability than the one offered in Advance 2030, which has little to say on it except that industry will be “stewards of our environment…dedicated to innovation to reduce project footprints and achieve the lowest carbon barrel.”

Philip Gass is a senior policy advisor with the International Institute for Sustainable Development (IISD), a think tank founded in Canada in 1990, which now operates globally. “There’s a continuum of sustainability,” he says, along which one can place these two apparently differing definitions of the word.

On one end, he describes the traditional industry definition: mitigating local impacts, lowering emissions, improving energy efficiency, etc. But a different definition is now moving from the environmentalist margins to the mainstream—at least, mainstream enough to be recognized by the IEA, and to find its way into the policy playbooks of governments around the world. This looks more like a series of wholesale paradigm shifts, a re-alignment of resource development to meet the imminent challenge of more global threats.

From oil and gas to mining, forestry to fisheries, the resource sector is at the frontlines of the ever-quickening evolution of business, technology, and the global environment—and in the decade to come, the sector will have to respond faster than ever to that evolution. As Memorial University fisheries scientist and sustainability advocate Brett Favaro described it to CBC this April, true sustainability is ”not just about sort of doing things around the margins. It’s about restructuring the way we do business.”

Sustainability and its close kin, social license, aren’t new concepts, but they have evolved dramatically in the past few decades.

“Years ago social license fundamentally meant generating tax revenue, and bringing money and jobs into communities,” says Alec Crawford, a Toronto-based senior researcher with the IISD. Over time, local impacts like polluted watersheds and hazardous waste became central to the discussion.

Now climate change has been added to the list.

The result is an ever-more complex landscape for companies to navigate. And as consumers and government have demanded more, industry has increasingly stepped up.

“I have definitely noticed our engagement with business has dramatically increased,” says Mark Butler, policy director at Halifax’s Ecology Action Centre, which has for decades been both a collaborator and antagonist with Atlantic Canadian resource companies. “It used to be much more black and white: business bad, environment good. There are still a lot of battles with businesses we think don’t understand sustainability…but increasingly we’re having more conversations allied with business interests, too.”

As social license demands it, businesses can’t ignore it. JDI, for example, spends $1.5 million annually on forest research, has reduced greenhouse-gas emissions from sawmill operations by nearly one quarter since 2013, and in recent years has partnered with non-profits to monitor endangered bird species and restore wetlands.

In 2005, Husky Oil dredged a part of the sea floor in the White Rose Field, but transformed a barren area nearby into a rock reef and scallop habitat to compensate. And since 2002 it has been part of One Ocean, a liaison organization operated in partnership with Newfoundland and Labrador’s fishery sector, intended to ensure “sustainable coexistence.”

Of course, there’s always a flipside: New Brunswick regulators have found Irving Oil responsible for 19 “environmental emergencies” between 2012 and 2015 at its Saint John refinery, ranging from crude spills to an accidental release of sulfur dioxide. Last year, the company faced one of the steepest fines ever imposed on a Canadian company for environmental violations—$3.5 million for dumping improperly treated effluent into the Saint John River.

And while the energy sector has made clear and sometimes costly efforts at mitigating its offshore impacts, controversies still remain. The Committee on the Status of Endangered Wildlife in Canada, an independent federal advisory panel, released a report this past May claiming seismic operations are likely affecting several whale species’ ability to reproduce.

These kinds of impacts can undermine the good reputation and positive outcomes of sustainability efforts. But even if there were no oil spills, effluent dumps or ecosystem disruptions, many of these efforts are still what Favaro calls “playing in the margins of sustainability. They don’t engage the big-picture shifts needed.”

As an example of the latter, he points to fisheries. In 2015, three herring fisheries in Nova Scotia and P.E.I earned recognition for sustainable fishing practices from the international Marine Stewardship Council (MSC). This year, all three lost their certifications due to steep declines in fish stocks. MSC also still certifies several pelagic longline fisheries regionally, though many advocates, including the EAC’s Butler, believe the amount of bycatch produced undermines their claim to so-called sustainability.

That, believes Favaro, would look more like the high-value, low-impact hook-and-line fishery that’s taken root on Fogo Island in recent years, dishing up pricey product to high-end customers. Butler echoes Favaro’s support for that kind of low-impact, high-value fisheries. But the transition is far from simple: it’s hard to scale, profit margins are thinner, and the region’s industry is mostly equipped for an entirely different model.

Forestry is in a similar situation—but it’s also where a paradigm shift to a new way of doing things may be closest at hand.

That’s in no small part thanks to William Lahey, a former Deputy Minister of Nova Scotia’s Department of Environment and Labour, a past board chair of Efficiency Nova Scotia, and the current president of the University of King’s College. Last year, Lahey completed a comprehensive review of Nova Scotia’s forestry practices, which lent both urgency and a name to a new model of forest management: ecological forestry, which advocates aligning harvesting with natural cycles of growth and die-off. That means a lot less clearcutting, and potentially less harvest overall.

Lahey says that ecological forestry replaces the previous “philosophy of mitigation” in which foresters extract what’s needed for economic purposes, and then try to band-aid over the damage.

“The thing about that is that improved practices by individual companies are still not having the cumulative impact they need to have,” explains Lahey. “So one company might be better than it used to at figuring out where birds’ nests are and cutting around them. That’s great, but it won’t fix the overall impact the industry may have on bird populations.”

Other examples of mitigation currently required by law include watercourse buffers, which leave trees alongside rivers and streams, and wildlife clumps, stands of at least 30 trees left after a clearcut, where wildlife can find refuge. “Given their dispersion across the landscape, there’s a lot of skepticism about whether clumps produce those affects,” says Lahey. Ecological forestry, by emphasizing selective harvesting and retaining overstory, reduces the need for these little refuges.

Nova Scotia has tentatively committed to ecological forestry, but clearcutting is still the fastest, cheapest approach, and most forestry operations in Atlantic Canada are equipped and trained to clearcut. A shift will mean a hit to bottom lines. Allan Eddy, from 2014 to 2016 associate deputy minister in Nova Scotia’s Department of Natural Resources, is today director of business development for Nova Scotia’s Port Hawkesbury Paper. Last year, he told CBC that the changes will “add some significant costs” for his mill.

But Eddy does say that his mill’s long-term goals are basically aligned with Lahey’s. One big challenge to implementing it is getting a landscape-level view of forests. “Five or 10 years ago people were doing strategic modelling, so you would know Y amount of X value across the landscape,” he says. “But no understanding of how that was spatially distributed. Theoretically it could be in one big blob, or it could be dispersed broadly…because you didn’t understand distribution, you didn’t understand the impact [of harvesting] on the system.”

He points to Fredericton-based Remsoft, one of the key global players in digital forestry, as one way to bridge that knowledge gap. Founded in 1992, it takes data provided by foresters, including GIS and LiDAR data, and helps create a holistic, landscape-level views of assets—and how a client’s harvesting and reforestation plans are compatible with business and sustainability goals, and local forestry regulations.

“A company can ask, ‘what if I harvest a little less here, or what if I moved where I was harvesting, would that create more caribou habitat over there?,” says Andrea Feunekes, Remsoft’s co-founder and CEO.

It also allows companies to integrate the effects of carbon sequestration, showing roughly how much carbon is released by harvesting and how much is sequestered by replanting or leaving trees alone. According to Feunekes, this kind of digital forestry makes new paradigms like ecological forestry more practical.

Either way, says Lahey, “There is a level of functionality in ecosystems that is non-negotiable. This idea we often have that we need to balance jobs versus the environment is false. They need to work together.”

Two years ago this April, Apple made what seemed like an impossible goal: to completely eliminate mining from its supply chain. In its 2017 Environmental Responsibility Report, the world’s largest information technology company declared “…our goal should be a closed-loop supply chain, where products are built using only renewable resources or recycled material.”

To that end, the company has been collecting scrap materials from its manufacturing processes, and developed a robot called “Daisy” that can rip apart iPhones and extract the metals inside, as well as the rare earth elements that traditional recycling usually can’t recover. Apple estimates that this year it will source almost a million fewer metric tons of aluminum-bearing bauxite from mining.

Apple’s move is evidence of yet another paradigm shift which could have major implications globally and locally. Ray Cote, a professor emeritus in the School for Resource and Environmental Studies at Dalhousie University, calls this “industrial ecology,” which aims to do for large-scale industrial systems what ecological forestry does for trees. “Part of the answer is circular systems,” he says, “which means collecting more material from existing products and waste, and less extraction.”

The Mines Canada’s Minerals and Metals Plan, released this year, re-affirms this, including references to a circular supply chain. Technological advances are making mineral recovery and recycling easier and cheaper, as well. Australian and Chinese researchers last year found that extracting minerals and metals from the tens of millions of tons of e-waste generated annually is becoming more cost-effective than virgin mining, and could lead to profitable, small-scale “urban mines” to offset demand for mined materials.

Which isn’t to say that a mining-free future is imminent. Even as Apple declared more progress this year toward its goal, Tesla predicted a shortage of minerals needed for electric vehicles, and called for greater investment in mining.

“We can’t transition to a low-carbon economy without mining,” says the IISD’s Crawford. He points out that Canada’s mining sector has among the world’s best environmental reputations—but also that with their potential for landscape contamination, mines are among the most contested resource projects.

That’s why the Mining Association of Nova Scotia (MANS) has launched a purpose-built website (notyourgrandfathersmining.ca, ) dedicated to exposing the socially-responsible side of an often vilified industry, highlighting the mine operators’ advances in site reclamation, water management, dust control and other efforts.

“One of the biggest challenges we face is misconceptions that are based on old practices from 100 years ago,” says MANS’ executive director, Sean Kirby. “The mining industry has come an extremely long way in terms of environmental management.”

But as with oil and gas and forestry, many of the industry’s sustainability efforts are overshadowed by less-than-flattering realities. To develop a mine, a lease holder has to provide a security to cover the cost of site remediation. A Nova Scotia auditor general’s report in 2014 found that Nova Scotia’s Department of Natural Resources was not ensuring that securities were sufficient. And a 2017 federal government study of metal mines found that even though more than 95 per cent complied with discharge limits, 76 per cent on which studies were completed showed effects on downstream fish, including changes in “survival, growth, reproduction and liver condition.”

Federal environment commissioner Julie Gelfand released an audit this April of metal mining sites nationwide. She found that neither government nor industry often addressed violations: “When environmental effects were found,” said Gelfand in a statement, “there was no requirement on anybody’s part to actually have to do anything.”

In Nova Scotia, the mining industry has weathered accusations of tone-deafness on questions of social license before. In 2017, MANS advocated to open protected land on Kellys Mountain, in Cape Breton’s Kluscap Wilderness Area, to develop a quarry. The idea was to swap it for un-protected land elsewhere. “The province protects what are obviously ecologically valuable areas,” says Kirby, “but also a lot of land that has been used for economic purposes such as clear cuts, and former quarries and pits and electrical corridors.”

At the time, Rod Googoo, the chief of Waycobah First Nation, said that the land was sacred in Mi’kmaq tradition, and to develop it would be akin to defacing a church. And environmental advocates said the whole idea of land swaps calls into question the industry’s understanding of big-picture sustainability.

In a rebuttal to the concept in Halifax’s Chronicle Herald last summer, the Ecology Action Centre’s Raymond Plourde wrote, “Protecting biodiversity means leaving areas alone, in a natural state over long periods of time, to allow natural biological processes to occur…They are not generic ‘green spaces’ that can simply be moved around the landscape like furniture.”

None of which is to suggest that resource development can’t be sustainable—especially when leveraged toward a renewable future.

Brian Dalton is president and CEO of St. John’s-based Altius Minerals. “How many devices are in front of you right now?,” he asks. “Mining isn’t evil, it just has to be done right.”

Altius is a mining royalty company with interests in 15 mines in Canada and Brazil. It’s also regarded as a sustainability leader in Atlantic Canada’s mining sector. Several years ago, it helped launch ROLES (Restoration of Labrador Exploration Sites), a program that saw legacy mine sites throughout Labrador cleaned up.

More recently, the company has created Altius Renewable Royalties, a subsidiary tasked with taking coal royalties that are running out the clock, which the company acquired as an add-on to a potash deal in western Canada, and investing them into new wind-energy projects in Texas, Nebraska and Illinois. “All of our metals exposures are about to get a big demand boost, in part because renewable energy is also incredibly metals intensive,” says Dalton. “Coal is not in that situation. We’ve essentially converted the sunsetting coal royalties into a new dawn of renewables.”

But enormous impediments remain. As with the transition to low-impact fishing or ecological forestry, shifting from fossil fuels to renewables means both new capital costs and generally lower rates of return. Energy consultancy Wood Mackenzie last year found North American onshore oil projects generate an average 22 per cent rate of return at $65 USD per-barrel oil prices. Solar and wind projects, on the other hand, run in the single digits.

And last year, U.K. organization CDP Worldwide (formerly the Carbon Disclosure Project), analyzed capital expenditures among 24 major energy companies. It found that since 2010, only 1.3 per cent of their combined capital expenditures went to alternative energy projects. North American companies were especially laggard. It did highlight Equinor, which aims for 15–20 per cent of its investments in renewables by 2030, as an exception.

“Equinor is diversifying its business and preparing for a different world,” says Delia Warren, a former oil and gas worker who’s now the Newfoundland and Labrador representative with Iron & Earth, a non-profit made up of former oil-and-gas workers who advocate for a managed transition to renewables. “I don’t understand why more companies aren’t preparing for the possibility that the rate of adoption of renewables happens more quickly than expected.”

Warren advocates for a sustainability paradigm shift too, but that’s no simple matter, especially in Newfoundland and Labrador. “For a lot of people in our province, the only prosperity we’ve known is in oil and gas,” she says. “That has a tendency to close us off to other possibilities.”

Today, the notion of sustainability and social license is forever shifting underfoot. The next federal election, which will be contested in large part around pipelines and Bill C-69, will help dictate which definition of sustainability the Canadian resource sector responds to in the short term.

But the long term will be dictated by bigger, global trends: political and popular pressure to take action on climate change, technological innovation and even plays like Apple’s mining-free ambitions.

Market forces will play a role too, especially the speed of electric vehicle adoption and the continued decline in the price of renewable energy.

Dalton likens the rapidity of change in his industry, and the resource sector broadly, to another unprecedented transition that swept the world, a century ago. He describes a pair of famous photos, both depicting Fifth Avenue in New York City in the early 20th century. The first image, taken in 1900, shows a street packed with horses and buggies, with one early motor vehicle lost among the hooves and swishing tails. Then next image, taken in 1913, depicts the same street, clogged with Model Ts.

“I don’t think anyone at the time of the first photo would have guessed how fast that would occur,” says Dalton. “But things are going to change so much faster than people imagine today. We need to be ready.” |nrm

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