Record profits coupled with little or no regulation of the oil industry, and it’s off to the races once again in Canada as far as natural resources versus the health of the environment are concerned. This time the triggering mechanism is the tremendous petroleum reserve contained in Canada’s oil sands (formerly known as tar sands). Fueled by the U.S.’s insatiable desire for gasoline, and its historical dependence on natural resources from Canada, the current boom is only expected to escalate in profit-taking frenzy.
Skyrocketing prices for crude oil have started a rush that has made exploiting the sands profitable. The industry has been producing oil for as little as $24 a barrel, creating huge profits when prices hit $50 a barrel, or even $70.
The oil industry demanded, and was given, major tax breaks and sweetheart royalties by the provincial and federal governments for oil sands development. Under a new royalty schedule recently announced by Alberta, companies will pay a minuscule one percent on oil sands production.
A report by conservation biologist Brian Horejsi of Western Wildlife Environments Consulting covers the magnitude of habitat fragmentation currently in Alberta from oil and gas development: more than 225,000 wells have been drilled; one-million miles of seismic road access and more than 300,000 miles of pipeline right-of-way have been cut; and 450,000 miles of all-weather road access have been built. None of this construction is or was subject to environmental assessment. Reserves at or near the surface are recovered through large-scale strip-mining. Huge mounds of oil sand are excavated and moved by trucks weighing 240 tons and standing three stories high. Two tons of sand produce one barrel of oil.
Environmentalists are, not surprisingly, aghast at the magnitude of this fast growing and earth-despoiling industry. “Tar sands oil is to conventional oil what crack cocaine is to ordinary cocaine powder,” says Elizabeth May, executive director of the Sierra Club of Canada. “It’s more harm to global climate through increased greenhouse gas emissions, more destruction of boreal forests, more toxic tailings and more air and water pollution.” The club estimates that the expected doubling of tar sands production by 2010 will produce 70 megatons of global warming gasses annually—12 percent of Canada’s Kyoto target for that year.
U.S. officials are focusing on this rich resource. Vice President Dick Cheney had planned to visit Canada’s sands last September until Hurricane Katrina forced him to postpone the trip. The recently passed federal energy bill calls for research and the start of a commercial leasing program on government lands to speed up the U.S.’s own development of oil shale reserves in Colorado, Utah and Wyoming, in part by tapping into Alberta’s expertise. Oil shale is similar to oil sands, but the process of extracting crude is more difficult. Oil sands are impregnated sands that yield mixtures of liquid hydrocarbon and require further processing other than mechanical blending before becoming finished petroleum products.
Oil sands currently represent 40 percent of Alberta’s total oil production and about one-third of all the oil produced by Canada. They are deposits of bitumen: viscous oil that through rigorous treatment becomes an upgraded crude oil that can be used in refineries to produce gasoline and other fuels. Bitumen is about 10 to 12 percent by volume of the actual oil sands. The remaining 80 to 85 percent is mineral matter, including clay and sands, and around four to six percent is water.
While conventional crude oil is either pumped from the ground or flows naturally, oil sands must be mined or recovered in place. Oil sands recovery processes include extraction and separation systems to remove the bitumen from the sand and water. Although tar sands occur in more than 70 countries, the two largest deposits are in Canada and Venezuela.
The majority of Canada’s wealth of oil sands is found in four different areas of Alberta: Athabasca, Wabasha, Cold Lake and Peace River. The sum of these regions covers an area of nearly 30,000 square miles, with a technologically retrievable reserve that is today estimated at 280 to 300 billion barrels. Total reserves for the province, including oil not recoverable using current technology, is estimated at 1.7 to 2.5 trillion barrels.
Concerns over environmental damage from mining and processing the material are varied and on the rise. Huge amounts of natural gas and water are used to extract and upgrade the crude, and greenhouse gas emissions are high. In mining operations, environmentalists worry that the land—which companies are required to restore—may never come back to a truly “natural state.” The process also turns large amounts of water into a toxic mixture, forcing companies to create large lake-like impoundments.
“We’re dealing with a form of oil extraction in which the intensity of environmental impacts is at an order of magnitude greater than any other form of oil extraction we have seen on the planet,” says Dan Woynillowicz, an environmental policy analyst with the Alberta-based Pembina Institute for Appropriate Development. “There’s a fever among energy executives and senior bureaucrats and politicians.”
Companies that mine oil sands say that while production is, by necessity, intensive, they have had some success in lowering the amount of natural gas and water used to produce a barrel of oil, and officials say they are seeking further reductions.
At Syncrude, which spent $15 million on restoration of former mining land last year, a 10-year-old reclamation project at a former mining site shows the beginnings of a viable ecosystem, with tree saplings, sedges and wildflowers growing, but it will take years to know if it will truly be sustainable.
The Canadian Association of Petroleum Producers (CAPP) admits there are legitimate concerns. Its stakeholders, CAPP says, “tell us that they are concerned about the effect our industry’s activities have on air, land and water. Some worry the industry is growing too quickly, without fully understanding the various consequences of this growth. CAPP’s goal is to lighten our industry’s environmental footprint and to return the land to an equivalent state when production is complete.”
With the sands, Canada has the second-largest reserves of crude in the world behind Saudi Arabia. Investors have pledged more than $70 billion to triple output to three million barrels a day by 2020. Riverbanks near Fort McMurray seep with what locals call “black gold,” the tar-like amalgam that is bitumen. Demand for this oil has increased the city’s population by nearly 75 percent in the last decade, to 60,000. It’s an old-fashioned boom town, in every sense of the word.