When an Ontario cemetery operator sells a burial plot, they must side aside 40 percent of the money they receive into a "care and maintenance account". This is a way of solving a grave moral hazard problem: operators might sell plots, and then walk away from their maintenance obligations.
The same kind of moral hazard problem exists in resource extraction industries, and is solved in a not-entirely-dissimilar way. Operators are typically required to post bonds, or contribute to an "orphan well fund" or a "mine financial security program." If an company walks away from a toxic waste site once operations have ended, the funds from the security program can be used to pay for site clean-up.
The only problem is that the amounts in these clean-up funds are typically tiny relative to the potential costs of site clean-up. This point has been raised by the Pembina Institute, in their report on How Albertans Could End Up Playing for Oil Site Mine Reclamation. It's been raised in an expert panel report on Environmental and Health Impacts of the Oil Sands Industry, commissioned by the Royal Society of Canada. It has been noted by the Auditor General of Alberta and the BC Auditor General.
The risks associated with future toxic waste from the oil sands are, in some ways, more worrying than the much more widely known global warming ones. Humans could possibly adapt to a warmer climate. But the arsenic-laced water around the NWT's Giant Mine? That's unequivocally, inevitably lethal. The issue is more pressing than ever this year, given the federal government's decision to approve the Trans Mountain Pipeline, and their announcement that they will be welcoming more foreign investment (if it's hard to stop a Canadian operator from walking away from a toxic waste site, how will it be possible to stop a foreign one?).
Why hasn't more attention been paid to the environmental risks of resource extraction? My theory is that the human brain is just not very good at processing low-probability, ultra-high-cost events. We can't differentiate, at an emotional level, between someone defecating on our driveway, and someone contaminating the entire Athabaska watershed. We just can't grasp - or don't want to grasp - the enormity of the environmental disaster the oil sands could create.
My contribution to this year's Macleans "chart of the year" competition attempted to convey the environmental risks of the oil sands in a way that made them intelligible to the typical educated and informed Canadian. The chart and the post follows below. The graphics aren't great. Here are the raw numbers: Download Oil sands v tar ponds. I would welcome suggestions for alternative and better ways of presenting this data.
The following was originally published in Macleans.
"Resource extraction is profitable. Cleaning up the mess it makes is not. In the past, owners have often walked away from their operations, leaving others to pay the clean-up bill.
The Sydney Tar Ponds show how expensive that clean-up can be. Although the Sydney site totalled just over 100 hectares, the 2004-14 clean-up operations cost federal and Nova Scotia taxpayers $400 million – about $4 million per hectare.
Alberta’s oil sands are hundreds of times bigger than the Sydney Tar Ponds. To pre-commit companies to paying for the eventual costs of reclaiming oil sands sites, the Alberta government has created a “Mine Financial Security Program”. Companies wishing to mine the oil sands must post a base amount of security for each project. In theory, they could be required to post additional securities. In practice that never happens.
Right now there is $939 million deposited into the Mine Financial Security Program. That’s about $43,000 for each hectare of tailing ponds in the oil sands. The total deposits in the Mine Financial Security program would fund two Sydney Tar Pond size clean-ups. Unsurprisingly, the Auditor General of Alberta is concerned this amount is inadequate.
Suncor is the largest operator in the oil sands. In the first three quarters of 2016, it produced 1.4 million barrels from its oil sands operations. Its total cash flow was $3.6 billion. Its net new contributions to the Mine Financial Security Program? Zero."
Here are some other ways of representing the data. The first two are from Declan:
And here's one from Isaac Holloway via twitter:
I actually like Declan's second idea; the challenge is showing the areas accurately.
Sources: size of Sydney Tar Ponds: http://www.ceaa.gc.ca/052/details-eng.cfm?pid=8989; size of Oil Sands Tailing Ponds: http://www.energy.alberta.ca/Oilsands/791.asp; cost of tar ponds clean-up: http://www.tpsgc-pwgsc.gc.ca/bve-oae/rapports-reports/2014-2015/2013-602-eng.html#a3.1; size of MFSP: https://www.aer.ca/documents/liability/AnnualMFSPSubmissions.pdf; Alberta auditor general report: https://www.oag.ab.ca/webfiles/reports/OAG%20Report%20July%202015.pdf; Suncor financial statements: http://www.suncor.com/investor-centre/financial-reports/quarterly-reports