April 23, 2010 / 2:56 PM / 9 years ago

UPDATE 2-Syncrude faces multimillion-dollar tailings costs

* Aimed at reducing environmental impact of toxic waste

* Syncrude, Fort Hills plans must meet new standards

* Regulator reviewing other applications (Adds comments from board, Syncrude, think tanks)

By Jeffrey Jones

CALGARY, Alberta, April 23 (Reuters) - Syncrude Canada Ltd, the country’s largest oil sands producer, will spend hundreds of millions of dollars building two plants to reduce toxic waste under recently tightened regulations, it said on Friday.

The plants, which will employ new technology to process tailings from oil sands production, are conditions of approvals by the Alberta Energy Resources Conservation Board, the first under a directive issued in February 2009.

Syncrude and the ERCB said the new rules are tough, but at least one environmental group said the approvals impose weaker targets than what were spelled out in the directive.

The board approved tailings ponds — expansive man-made lakes that hold water, leftover bitumen, clay and heavy metals from the oil sands production process — for both Syncrude and the yet-to-be-built Fort Hills project. The nods came with several conditions.

“This is the first time we’ve laid down specific criteria that the companies had to meet with respect to managing their tailings ponds,” ERCB Chairman Dan McFadyen said in an interview.

“They were performance criteria. It didn’t say how to do it. It said here’s what you have to do to meet the management of tailings ponds to get them toward what we call a trafficable surface so they can then be reclaimed.”

Under the new rules, operators must report on the ponds annually, cut the accumulation of fluid tailings and specify dates for construction, use and closure.

The ponds came to symbolize the battle between environmental groups and the oil sands industry in 2008, when 1,600 ducks were killed when they landed on a tailings pond at Syncrude’s operation in northern Alberta. Syncrude has pleaded not guilty to federal and provincial charges over the incident and the case is now being tried.

For its ERCB approvals, it will build one commercial scale tailings plant by August 2012 at its Mildred Lake site, and another at its Aurora North mine, the board said.

Syncrude must also meet annual targets for capturing tiny particles, called fines, in the tailings.

The cost of the compliance, including building the plants, is in the hundreds of millions of dollars, said Syncrude spokeswoman Cheryl Robb.

“They’re holding us to the plan that we submitted, which we considered an aggressive plan,” Robb said.

Simon Dyer, oil sands director for the Pembina Institute, an environmental think tank, said the approval conditions do not go far enough.

“Despite the tough talk about tailings, Alberta has accepted a plan from Syncrude that doesn’t comply with its own rules to clean up tailings waste,” Dyer said.

He said the targets for capturing fines, 9.3 percent next year, climbing to 34.6 percent by 2014, are lower than what the directive requires.

ERCB executive manager Terry Abel said the board insisted on tougher measures than what Syncrude initially proposed.

For its approval, Fort Hills, a consortium that includes Suncor Energy Inc (SU.TO), Teck Resources TCKb.TO and UTS Energy UTS.TO, must apply to use new technologies six months before testing them and have no fluid-like deposits of tailings left when it closes the mine.

Last week, environmental groups launched a complaint against Canada under the North American Free Trade Agreement, saying the country has failed to enforce rules governing tailings ponds and their safety.

Critics charge that the ponds are being allowed to leak and contaminate ground water, damaging the environment and endangering the health of local residents.

Even the province’s government has said it wants to see the ponds eliminated altogether.

The board said it is reviewing applications Albian Sands Energy Inc, Canadian Natural Resources Ltd (CNQ.TO), Imperial Oil Ltd (IMO.TO), Royal Dutch Shell (RDSa.L) and Suncor.

$1=$1 Canadian Reporting by Jeffrey Jones; editing by Rob Wilson

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