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Climate Change Regulation Impacts on Mineral Exploration, Avalon Advanced Materials

The Government of Canada is proposing a carbon tax on greenhouse gas (GHG) emissions that will peak at $50/tonne by 2022.  It is also requiring larger emitters to report GHG emissions and is decreasing the threshold for required reporting to 10,000 tonnes GHG/year or greater.   GHG emissions include carbon dioxide, as well as the emission of nitrous oxides, methane and others that are by-products of the burning of diesel, gasoline, propane and aviation fuel to name a few.  This tax has the potential to impact exploration activities.

To date, there is limited public information on emissions reporting requirements (accuracy, scope etc.).  Further, it is not clear whether the tax will be a direct tax on measured or calculated emissions, or an indirect tax on diesel or the other petroleum products that will be included in the purchase price, which would negate the need for additional monitoring and reporting at exploration sites.

There are a wide number of variables that can impact energy use at exploration sites.  The largest portion of the GHG emissions generated is typically from diesel and other fuels consumed in drilling and camp activities. Factors such as diameter of the core, depth of the holes, number of holes, quality of the ground (ease of drilling), water supply and use, presence, absence and size of camp electrical power and heating requirements, transportation distances and methods and climate (seasonal effect on fuel consumption especially for heating) all impact the energy required for exploration programs.  

Avalon Advanced Materials has been measuring energy use at its drill sites for six years and as a result of this work, has identified opportunities to reduce energy use and thus has made significant energy cost savings at its camp operations related to drilling.  This has also allowed Avalon to estimate the company’s GHG emissions.  Avalon has made the following metrics available as a very preliminary guide to assess exploration company risk related to GHG emissions reporting thresholds and carbon taxation policy.

Note: It must be emphasized that the following metrics apply only to this specific drilling program and are a guide only as to how and when exploration companies could be impacted by Canadian carbon tax regulation.  Given the many factors and potential ranges of emission rates, proponents are encouraged to measure their own metrics for large drilling or advanced exploration programs.  Based on the data below, only large advanced exploration drilling programs or multiple programs totaling about 200,000 metres or an advanced exploration program involving mining and bulk sampling, run the risk of exceeding the 10,000 tonne/year GHG reporting trigger.

 

Annual Metres Drilled

GHG/metre

Diesel/metre

Maximum Expenditure per year

Maximum GHG tonnes per year

Carbon Tax @ CND$50/t GHG per year

Site 1*

4,960-27,665

0.046-0.055

13.8-19.7***

$10 million

1,350

CND$67,500

Site 2**

984-3,110

0.015-0.027

4.34-5.67

 

 

 

*Site 1

Remote site in Northwest Territories in Canada, drilling during summer and winter with full camp, camp and drills on standby during fall and spring, meters drilled ranged from 4,960 to 27,665 meters drilled/year in relatively shallow holes in competent granites, mix of PQ and HQ core. (4 years of data)

**Site 2

This Nova Scotia site has road access, summer drilling program only and no camp facilities.  i.e.  no camp power required and no water heating for drill water supply. Drilling ranged from 984 to 3,110 meters/year of relatively shallow holes, HQ core in granite and metasedimentary rock types.  (3 years of data)

***Diesel use range is largely attributed to the fact that in some years, the camp and transportation energy use was proportionately larger per metre when the drilling program was smaller.  Camp diesel ranged from 30 to 70 percent of the total diesel used.