Key Kearl oil sands permit dries up in wake of Federal Court decision

Posted by Andrew Lord

The federal government reportedly revoked Imperial Oil's permit to take water for the planned Kearl oil sands project. Imperial Oil's legal challenge of that decision is expected to be heard in May. Imperial predicts that the battle to recover the permit to take water could delay the start of production by a year or more. The $8 billion project was scheduled to start producing 100,000 barrels of bitumen a day in 2011.

The decision to revoke the permit, which was made by the Department of Fisheries and Oceans, cited a recent ruling by the Federal Court concerning the environmental assessment ("EA") of the project. The Federal Court did not take issue with any conclusions in the EA about water. However, the court did find that the EA failed to justify the conclusion that the project would produce an insignificant quantity of greenhouse gases. It ordered the joint Alberta-Federal panel to provide cogent reasons for that conclusion. For more information about the Federal Court decision, particularly its implications for the federal government's climate change policy, see this posting on the Davis LLP Renewable Energy and Sustainable Development blog.

These recent developments are significant set-backs for Imperial Oil's Kearl project. They may also signal that the federal government is beginning to scrutinize the overall environmental impact of the development of the oil sands more closely.