Looking deeper at SAGD and the community

Thanks to Treys suggestion, I looked deeper into the SAGD steam injection process that will be used to convert the heavy crude into light. The first question we must ask is, where does this water for HTL technology come from? The region is known for its abundance of rivers, which attract tourists and sustain local communities. Water for steam injections will be taken from the rivers, posing a huge threat to the already-diminishing water levels. The combination of climate change and illegal mining projects turning up along the rivers of Napo has made noticeable differences. February is the heart of rainy season here in Tena. In years past the Tena river, which runs through the middle of the town has nearly flooded over into the street. Right now, still in rainy season, the water is so low there are banks of rocks on the shores on either side. SAGD steam injection has the potential to drain up to 65% of the closest water source. According to hydrogeologist, Ken Campbell, heavy oil extraction in Canada and the U.S. has put major strain on water supply in the regions because most of the water used for oil extraction never returns to the river.In Eastern Utah where most U.S. tar sands are concentrated, there are concerns that the development of a commercial extraction industry could have significant social and economic impacts on local communities, Campbell said in his blog on water usage in heavy oil extraction ( http://www.heavyoilinfo.com/blog-posts ). The option to recycle water is dangerous because residual industrial chemicals may not be fully extracted in the Management and Treatment phase to recycle water used in the SAGD process, mentioned in Ivanhoes Environmental Impact Study. The study states that, The surface water factor is one of the most vulnerable elements with regard to industrial activities. (Chapter 6, 3.3 Activities that Can Impact Factor). Yet in the Valuation of Impact section, the EIA states that Given the conditions that the identified activities are carried out under, the impacts on this factor are largely irrelevant. How can the impact on water be irrelevant if water is considered one of the most vulnerable elements? The language used to describe the possible impact is vague. What are the conditions that the identified activities are carried out under? Why do these conditions make possible water contamination irrelevant?The study seems to say that the risk of water contamination (not to mention river-drainage) is potentially high, yet the report does not give specifics as to how it will address the problem when it comes up. The rivers are a life source for the people, plants and animals of the region. The impact that the SAGD process would have on water sources cannot be deemed ecologically friendly when the ecosystem is heavily dependent not just on rain but surface and groundwater.As for the economics of the project, I am worried that claims that HTL is moreeconomical has led Ivanhoe and its investors to believe that the project can and will move forward without sufficient funding. This is risky for the project and investors alike. Due to lack of funding, officials have said that Ivanhoe will solicit help from a Chinese company. Is this the kind of progress investors are being informed about? Heavy oil extraction is significantly more costly and technologically challenging than light oil exploitation. This is why the region has remained untouched by petroleum companies for decadesno one saw the economical benefit in exploring for one of the heaviest types of crude in the world. In addition, lack of funding poses an added to risk to environmental impact. If there were a spill, would Ivanhoe be able to clean it up?According to the environmental management plan, the budget for the remediation of possible disasters during the construction phase is only $10,000. The Ecuadorian Ministry of the Environment says that clean up for secondary forests costs $25/hectare and for primary forests $35 per hectare. Ivanhoes remediation budget is about half to one-fourth of what is needed for just the one-hectare drilling platform.Trey, I was glad to have my questions about funding and the number of wells for the project answered. As an investor you clearly have information that is not made available to the public, whether American, Canadian or Ecuadorian. Transparency is key to upholding corporate responsibility. When I ask people here who are interested or involved in the project, they cannot tell me how many wells Ivanhoe has planned for the project. Ivanhoe representatives have thrown out other figures for the number of wells, including 30 and 100 in public meetings here.

Last Friday I went to a community meeting in Yutzupino where Ivanhoe has just bought the 4-hectare terrain for the next well site. Local government authorities and community members alike expressed frustration about being kept in the dark about the details of the project. If anyone should know how many wells are going in and the real possible impacts of SAGD to the rivers it should be the people who will be affected. In the meeting a local government leader from Puerto Napo explained that while hed like to give the community answers about the project, every time they have scheduled a meeting with Ivanhoe representatives, they have failed to show up. Instead, they send a government representative who cannot answer the technical questions about the project, leaving local government authorities without the necessary information to relay to communities.

People in the Yutzupino community want to know what is this supposed compensation they will receive. Ivanhoe has already begun excavating on the land without talking to the community. Surely the people do not know the risks of the project if they dont even know how they can benefit. From my perspective this is in no way a win-win situation.