Climate, security concerns clash as Canada boosts oil sands production

FORT MCMURRAY, Alberta -- "The Terror of the Tar Sands," a 1968 adventure novel, pits heroic bush pilots against a crime syndicate that is trying to exploit a wealth of hydrocarbons bound in sand, clay and water under Alberta's forests.

"It's a well-known, but untapped treasure trove. An area of 30,000 square miles, with oil lying almost on the surface of the land," says geologist J. Bertram Jolliffe, one of the novel's minor characters. "But unfortunately, the name of the area should indicate the problem of tapping this treasure trove."

But in 1967, the year before the novel was published, a company now called Suncor launched a 45,000-barrel-per-day oil sands project in northeast Alberta. That venture grew and spawned others, and today, companies are producing 1.3 million barrels daily from the oil sands.

Production has doubled since 2000, and it is forecast to reach at least 3 million barrels in less than a decade and keep growing. Some of the world's largest oil companies -- such as Exxon Mobil Corp., Royal Dutch Shell PLC and ConocoPhillips -- have active or planned projects there.

Now, 40 years after "The Terror of the Tar Sands," there are new problems and a new plot here. This time, it is a nonfiction thriller about a race against time to ensure steady oil supplies without runaway greenhouse gas emissions.

Canada offers a steady, reliable oil supply at a time of U.S. anxiety about reliance on energy imported from unstable regions. And the oil sands are a massive resource, with about 173 billion barrels recoverable with today's technology and economics. The buried resources have made Canada the world's second largest holder of oil reserves, behind Saudi Arabia.

But oil sands production is under attack from environmentalists over rising greenhouse gas emissions, the clearing of boreal forests and other effects. Meanwhile, some U.S. policymakers are stepping up efforts to move away from carbon-heavy fuels.


In response, Canadian officials and the oil and gas industry are trying to buff the sands' image by highlighting programs to slow and eventually reverse the growth of carbon emissions. They say the sands are getting a bad rap, and they are expanding their public relations to counter it.

"The message we have for the United States is that we are [a] secure, reliable and environmentally responsible producer of oil," said Ron Stevens, Alberta's deputy premier and minister of international and intergovernmental relations, in a recent briefing for U.S. journalists in Edmonton.

"It is important for Americans and the American government," Stevens said, "to understand that we will be working very hard on a go-forward basis to ensure that the facts surrounding what we are doing are presented."

There is more than a hint of defensiveness here, where oil sands promoters are fighting with environmentalists over just about everything -- from emissions to water use to semantics. The government's brochures touting the sands scold those who use the phrase "tar sands" -- which, of course, is what environmentalists prefer to call them.

"The use of the word tar to describe bitumen deposits is inaccurate," a brochure says, adding that tar is man-made through the "destructive distillation of organic material." Bitumen, on the other hand, occurs naturally; hence "oil sands is the correct term for the bitumen deposits of northern Alberta."

Canada is the biggest oil supplier to the United States, providing roughly 19 percent of U.S. imports, and most of this comes from Alberta. Questions about greenhouse gases, however, are complicating this relationship a bit, and it could get messier if the next U.S. administration gets picky about the carbon content of U.S. fuels.

In a move that attracted little attention in the United States but plenty in Canada, the U.S. Conference of Mayors in June adopted a resolution encouraging cities to steer clear of "higher-carbon unconventional or synthetic fuels" for city fleets.

The resolution specifically called out the higher emissions from producing oil sands (and used the phrase "tar sands," no less). More importantly, California plans to implement a "low-carbon fuels standard," and the Democratic presidential nominee, Sen. Barack Obama of Illinois, backs the same concept at the federal level.

Indeed, elections in both countries could affect the amount of pressure on the industry to tackle greenhouse gases more aggressively. Canada's national elections are today. The platform for the Liberal Party, led by Stéphane Dion, calls for an immediate price on emissions that reaches $40 a ton in the plan's fourth year. Prime Minister Stephen Harper of the Conservative Party, which is clinging to a lead in the polls, has attacked the proposal.

Already, a big U.S. energy bill enacted last year says federal agencies cannot buy fuels that are more greenhouse gas-heavy than conventional oil. The provision was aimed largely at coal-based fuels. But it nonetheless alarmed Canadian and industry officials, who fear it will create problems for oil sands.

At the same time, native Canadian tribes, known as First Nations, are contemplating new lawsuits and pledging stepped-up campaigns against oil sands expansion, alleging that the operations are already harming the region's forests and wildlife.

Environmental groups are also devoting new resources to fighting oil sands, with an arsenal that ranges from shareholder resolutions to direct-action protests. Greenpeace employed the latter when it sneaked onto Syncrude's mining site to hang an anti-oil sands banner, drawing legal action from the company, which is seeking an injunction to keep protesters off-site and $120,000 in damages.

In recent years, the World Wildlife Fund and Greenpeace have both opened offices in Edmonton, which is 275 miles south of here, largely to do battle over the oil sands. And opponents, if anything, are getting more restless over the continued growth.

"Over the last six months, you really see a huge difference in the level of attention to the tar sands," said Aaron Freeman, the policy director of Environmental Defence, a Canadian group. "There are just a lot of people who are ramping up their opposition to what is going on there."

No dry holes in oil sands

A copy of "The Terror of the Tar Sands" sits with magazines in the office of Phoenix Heli-Flight, a helicopter tour company near the airport in Fort McMurray. Laser-wielding helicopters play a major role in the book.

A few miles north of the Phoenix hangar, the view from 1,000 feet in one of the company's helicopters shows the boreal forest giving way to the mines and tailings ponds. All day and night, all year, industrial shovels dump oil sands into massive trucks that haul them off for processing.

Driving one of the mining trucks, such as the Caterpillar 797B, which carries close to 400 tons per load, is like "driving a two-story house while looking out the bathroom window," said Brad Bellows, a spokesman for Suncor, one of the largest producers.

Just a single 13-foot-tall tire on the trucks costs $60,000. The trucks, and their massive tires, are a tourist attraction in their own right and are featured in company materials, too. "I'm like Waldo," Bellows joked, recounting how often he has been asked to stand in front of the tires for pictures. "We need some human scale. Go stand over there."

In fact, everything about the oil sands is big. They underlie roughly 140,000 square kilometers (54,00 square miles) of Alberta, an area the size of New York state. Today, mining covers about 420 square kilometers, and the area considered "mineable" is almost 3,500 square kilometers, according to the Canadian Association of Petroleum Producers.

Another kind of production called in-situ development will ultimately have to be employed for the bulk -- roughly 80 percent -- of bitumen that is too deep for surface mining.

The most common technique for developing the sands in situ, or in place, involves injecting hot steam underground to separate the hydrocarbons. Right now, this accounts for almost half the daily production. Both mining and underground separation are growing, and the latter may expand into Saskatchewan over the next few years (see sidebar).

The industry says capital spending was $18 billion last year and is forecast at $126 billion over the next five years. Expansions include Canadian Natural Resources Limited's Horizon mine, which is coming online this year.

At the mining sites, oil sands are crushed and eventually fed into machines that use hot water to separate the bitumen from the other materials. The water and wastes are poured into the tailings ponds, where they will settle for years. Bitumen from oil sands projects goes to industrial plants called upgraders that transform it into synthetic crude oil.

It takes about 2 tons of oil sands to produce one barrel of oil. The projects are also very expensive, and costs have soared alongside the price of steel and other materials.

In recent weeks, plunging oil prices -- which at around $80 per barrel are far below their $147 peak last summer -- have added a note of uncertainty to the pace of expansions.

But the oil sands remain a gigantic resource in a region where the provincial government is eager to expand production. The oil sands also provide big oil companies a friendly place to invest at a time when some major crude-producing countries have made access more difficult.

And while there may be uncertainties around costs, there are no questions about finding the resource. "You don't drill a dry hole in the oil sands," says Greg Stringham, a vice president with the Canadian producers group. "You know exactly where it is."

Battle over emissions

The oil sands are, in essence, a big experiment in whether the world's growing use of heavy oils and unconventional sources can occur without large increases in greenhouse gas emissions.

Thus far, the answer is no.

Provincial and industry officials concede that emissions from the sands will not come down anytime soon and indeed will continue rising sharply. That is because oil sands operations are expanding, even as operators are decreasing their emissions "intensity," which means the amount of emissions on a per-barrel basis.

Suncor, which has reduced per-barrel emissions sharply -- 44 percent -- since 1990, nonetheless predicts its absolute emissions will more than double between 2007 and 2012.

In Alberta, provincial officials offer two basic views of the issue.

The first is that oil sands will not make or break Canada's, or the world's, efforts to curb emissions. All of Canada represents about 2 percent of global emissions. The oil sands now account for roughly 5 percent of Canada's greenhouse gas emissions. The sands, in other words, are a small fraction of a small fraction.

The second view is that both the federal and provincial governments are taking steps that will, eventually, decrease pollution.

A provincial law enacted last year required big industrial sites to reduce their emissions intensity by 12 percent, and to buy carbon offsets or pay other fees if they do not make those reductions. Large emitters have already made reductions equivalent to taking more than a half-million cars off the road, according to Jason Chance, a spokesman for the province's energy department.

And earlier this summer, the province announced a $4 billion program to curb emissions, with half the money going toward carbon capture projects and the other half for public transit.

At the federal level, Harper's government is pushing a 20 percent reduction in greenhouse gases by 2020.

As part of the effort, in March the federal government detailed a plan in which operations coming online in 2012 and after must by 2018 meet a standard equivalent to using carbon capture-and-storage technologies. But it does not mandate their use. Instead, companies may use offsets and other means to meet the standard.

Environmentalists say the measures are too meek and are riddled with loopholes in the face of fast-growing emissions from the oil sands.

Simon Dyer, who is with a Canadian environmental group called the Pembina Institute, says the industry and government emphasis on the oil sands' contribution to worldwide greenhouse gas emissions misses the point. "Dealing with GHG emissions is a cumulative problem the world must solve -- the oil sands take us in the opposite direction," said Dyer, who heads the group's oil sands program, in an e-mail exchange.

Pembina prefers another metric: The oil sands will be responsible for almost half of Canada's emissions growth between 2003 and 2010. The country is already far from meeting its targets under the Kyoto Protocol. Also, Dyer said, the fight over the oil sands is important because of "what they represent as the first significant foray into unconventional sources of oil."

Either way, the province estimates emissions growth from the oil sands until the 2020 time frame, and then reductions, coming largely from implementing carbon capture-and-storage technologies. The government is betting that oil sands operators can -- and will -- eventually trap and store their emissions.

"It is not a question of whether it works or not," said Mel Knight, Alberta's minister of energy. "The question would be whether or not you can make these types of projects viable and economic on the scale that they need to be done on in order to satisfy our requirements here to bring down our emissions levels."

Producing a barrel of oil from the sands is hugely energy-intensive, requiring large amounts of natural gas and processing. Producing each barrel of oil from the sands generates three times as much greenhouse gases as producing a barrel of conventional oil.

Examined on a well-to-wheels basis -- that is, considering production, transport, refining and use in engines -- the oil sands lead to roughly 10 to 15 percent more greenhouse gas emissions, according to the Canadian industry group, while a new RAND Corp. study put the number at roughly 20 percent (Greenwire, Oct. 8).

Canadian officials say they are taking concrete steps to get a handle on the emissions. "We believe we will get to a point in the not-too-distant future here where the bitumen production on the full-cycle accounting will be equal to or less than oil produced in other parts of the world by other means," Knight said.

On a recent helicopter tour of the region, Suncor's Brent Stuart said oil sands companies are working on technologies that will enable reduced energy use and address the projects' impacts on the land.

These include the exploration of turning petroleum coke, a byproduct of the upgrading, into synthetic gas, thereby conserving natural gas that is currently used as a heat source at the oil sands projects. He also touts technologies that would allow faster de-watering of tailings ponds.

"Some really exciting technology is being pushed here in Alberta," Stuart said.

'Slow it down'

The trails cutting through Gateway Hill, north of Fort McMurray, are flanked by jack pines, white spruce, saskatoon berry and other vegetation.

The 1-square-kilometer area was once part of the black-grey mines but has since been restored -- or "reclaimed" -- by Syncrude, which is currently the oil sands' biggest producer.

According to the Alberta government, 65 square kilometers of oil sands have been reclaimed or are undergoing restoration. Gateway Hill is the first, and thus far only, area to receive an official reclamation certificate, which happened last March, although many other areas have been replanted but have not yet received the official sign-off.

Ann Dort-MacLean, a Fort McMurray resident for three decades, likes walking through Gateway Hill.

But Dort-MacLean -- who heads the Fort McMurray Environmental Association -- says the comparatively modest size of the reclaimed areas and the time it takes to replant and grow forests are another sign that oil sands expansion must stop. "Sure, it can be done," she said during a walk around the area last summer. "You can see examples of it.

"[But] that is not the issue," Dort-MacLean added. "It is the timelines and the sheer volume of the disturbance."

For environmentalists, there is something wrong when research into improving oil sands development and new projects are happening together. They say policymakers are allowing development to grow even as they are trying to get a grasp on what the environmental effects will ultimately be. Activists want to halt oil sands expansion.

"Slow it down," Dort-MacLean said. "Slow it down until you know what you are doing."

Provincial and federal officials say they are indeed taking a suite of steps to address the impact of the oil sands on Alberta's forests. These include research into faster remediation of tailings ponds and other areas.

Earlier this year, the province unveiled a draft land-use framework that, once complete, would guide development. The framework, aimed at addressing issues including the cumulative environmental effects of development, divides the province into six planning regions.

All six plans are slated for completion by 2012, and the plan for northeast Alberta, the oil sands region, is on a "priority" track and set for completion in early 2010, according to the provincial government.

When the draft framework was announced in May, Ted Morton, Alberta's sustainable resource development minister, said it would promote "responsible growth, a future with plentiful opportunities and a healthy environment."

For critics of the projects within the multiple First Nations communities in Alberta, concerns range from diminished wildlife to volumes of water withdrawn from the Athabasca River to reports of rare cancers in Fort Chipewyan, which is downstream from the projects.

"I have traveled the Athabasca River for many years. I have noticed things are gone that were there for many years," said Edouard Trippe De Roche, a member of the Athabasca Chipewyan First Nation, citing what he says have been declines in species ranging from water insects to muskrats.

Melody Lepine, a member of the Mikisew Cree First Nation, questions the logic of land-use planning occurring, at best, in parallel with project expansions.

"In two to three years, all of the big projects will be approved. They want to plan around everything being approved," she said. Lepine directs the Mikisew Cree's Industry Relations Corp., which is a liaison between the Mikisew Cree, industry and the government.

"What is going to be left for us to plan with?" she said. "There will be nothing."

Click here to see a map of current and proposed oil sands projects in Alberta.

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