Office of Chemical Emergency Preparedness and Prevention, U.S. Environmental Protection Agency, through a cooperative agreement

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The Lower Athabasca Water Management Framework limits water extractions by the oil sands industry near Fort McMurray, Alberta. To increase water-use efficiency and minimise the cost of water restrictions, several policy and technology options were developed and assessed using quantitative and qualitative methods. Selected options were the policies of water trade and pricing with refund, and the technologies of storage, and consolidated tailings and increased recycling. Options were designed based on year 2020 demand and assessed relative to prior allocation. Using linear programming and static optimisation, it is shown that an off-stream storage sized to avoid water restrictions, in combination with efficient water allocation (e.g. water trade), is most cost-effective, although provides no ongoing incentive to increase water-use efficiency. Only the policy options provide equal incentives across firms to increase efficiency. To achieve both objectives of increased water-use efficiency and minimised costs, a combined policy and technology approach is recommended. / Agricultural and Resource Economics