Imagine for a moment that you’re an American oil executive. You’re pondering the prospects for the next big oil strike overseas — and dreaming of a place where the government is stable and compliant, the royalties are low and the environmental standards minimal.
You’re visualizing a place where you won’t have to drill thousands of feet into the earth’s crust, because the deposits are already known and readily accessible near the surface. Plus you count on at least half of the production going directly to the United States, sure to please the folks back home.
Is it just a dream? Not at all. Just look north to the tar sands of central Alberta, Canada.
Ancient fields of black gold
Used by the indigenous people of this densely forested region to waterproof their canoes, these tar-like outcroppings of bitumen-rich sands turned out to be just the tip of the iceberg. Beneath them lay many millions of cubic yards of oil-soaked sand.
Fur traders were the first Europeans to see these deposits, most of which lay underground in layers hundreds of feet thick, covered by an equal amount of sand, clay and peat bogs.
Although the Canadian government and the big oil companies have known about these deposits for hundreds of years, the extraction of oil from them was always regarded as too costly and impractical. The tar sands were basically forgotten and not even counted as part of the world’s known energy reserves.
Impractical becomes practical
As long as oil prices remained below $50 a barrel and the cost of producing crude from the tar sands was estimated to be $35 to $40 a barrel, very little was done. Interest in the exploitation of these deposits waxed and waned in sync with the world price of oil, but the prospects of tapping this energy resource remained dim.
That indifference suddenly changed, however, once the price of oil shot up. The rising price of oil made commercial exploitation feasible.
As the world price of oil broke the $50 mark, two Canadian oil companies started mining the tar sands to produce what’s known as light, sweet synthetic crude. As the price soared above $70, with little chance of falling below $60, and with conventional oil production leveling off, the handwriting was on the wall.
Global oil prices have doubled over the past three years alone. And cheaper ways of extracting the oil, now estimated to cost about $20 a barrel, have prompted oil companies from several nations to rush in, aiming to grab their share of the soil and the profits.
Vast reserves, vast profits
The Alberta tar sands deposits are huge, containing hundreds of billions of barrels of bitumen mixed with clay, sand and water. Experts estimate the potential yield from the Florida-sized fields to be about 180 billion barrels of oil, making it second in the world only to Saudi Arabia’s 262 billion barrels.
The sands are regarded as an “unconventional” source of oil because of the form in which it is found. Think of roof cement mixed with sand and water and you get an idea of what the oil companies are working with.
Although only 10 percent of these deposits are economically recoverable with today’s technology, the financial prospects of selling 180 billion barrels of oil were not to be ignored.
So, in addition to the Canadian companies, in marched Conoco Phillips, Royal Dutch/Shell, Exxon Mobil, BP, Chevron and Devon Energy, among others. All are now big players. Where else are they likely to find a more stable region with so much potential for windfall profits?
Today, oil-sands production from the area stands at more than 1 million barrels a day. It’s projected that by 2015, that figure will rise to 3.5 million barrels a day.
Canada is now the top supplier of oil to the United States, with over 2 million barrels flowing to its southern neighbor every day. It supplies about 10 percent of total U.S. oil and gas consumption. Half of that comes from the oil sands of Alberta.
Bonanza or boondoggle?
Is it an energy bonanza or an ecological boondoggle? It all depends upon whom you ask, and who most benefits from the development.
The Canadian government gets royalties amounting to only 1 percent of the price of each barrel. So that should tell you where the bulk of the money is not going.
While it’s true that the mining of the tar sands and extraction of the oil creates some jobs — including for workers who come from some of the most economically depressed regions of Canada — the environmental costs are high.
Boiling the sand to get the oil
There are two methods of extracting the bitumen from the sands.
The first method involves removing the “overburden” — the layer on top that in some cases is more than 200 feet thick, mining the tar sands, hauling it out in two-story trucks and then processing it at special refineries. The bitumen is extracted by using huge amounts of clean water and by applying intense heat from natural gas — washing and boiling the oil out of the sand.
The second method extracts the bitumen in situ, or in place, and is used for deposits too deep for surface mining. It involves drilling two holes deep into the deposits and inserting pipes. One pipe forces down steam to liquefy the bitumen; the other pipe is used to pump the liquid to the surface. It then goes through a similar refining process, again using large quantities of water (up to six barrels of water for each barrel of oil produced) and heat produced by natural gas.
The expenditure of energy in the mining and extraction of the oil leaves a much greater than average “carbon footprint,” generating large carbon emissions in the process. According to the Pembina Institute, a Canada-based nonprofit that monitors environmental issues, producing a barrel of oil in the oil sands releases an average of 189 pounds of carbon dioxide equivalent, compared with the 63 pounds generated in convention production.
It’s processing dirty oil, using clean oil, to produce less dirty oil. As one environmentalist said, “It’s akin to using lobster to make imitation crabmeat.”
In addition to the pollution and global warming aspects, the mining has taken a heavy toll. Wildlife habitat has been destroyed. And Canadians are expressing concern about the reduced summer flow of Alberta’s northern rivers, and fears about a dropping water table, attributable in part, many suspect, to the huge demand for water involved in the refining process.
As more projects come online, it is estimated that 20 percent of Canada’s natural gas production will be diverted to make the tar flow.
‘Free trade’ means extra profits
From the oil companies’ point of view, the exploitation of the sands is made easier by having a compliant Canadian government, headed by the Conservative Party, in place, along with the provisions of the North American Free Trade Agreement.
Written into the NAFTA rules is an energy-sharing clause that guarantees that half of Canada’s oil and gas production goes to the United States. It also prohibits the use of tools by governments to regulate energy exports, including the setting of export prices or export taxes, export bans or even export quotas.
A particularly onerous provision is Article 605, which limits the right of Canada to halt exports, even during times of national scarcity. Should such a situation arise, where will Canadians turn to make up for any shortfall? They will either have to import the difference or intensify their exploitation of their coal reserves.
As more and more of their clean air, clean water and natural gas is squandered on this environmentally destructive project, the citizens of Canada have to ask themselves: Are the short-term benefits worth the long-term costs?
Workers on both sides of the border have reason, once again, to call for the abolition of NAFTA.
Struggles in the U.S.
Given the requirement that half of production goes to the U.S., refineries here are upgrading their facilities to handle the stuff. As one observer said, “It sure ain’t your sweet crude of yore!”
The controversial decision by the state of Indiana to allow BP, which is expanding and upgrading its facilities in Whiting, Ind., to accept this new source of Canadian crude, has created a public outcry against allowing BP to increase its discharge of pollutants into Lake Michigan.
If anything, BP should be forced to decrease its polluted discharges into the lake, the source of drinking water for millions of people, since there are newer and better technologies available to remove pollutants from discharge water.
BP’s carefully crafted Madison Avenue image of a “green company” has been exposed. Neither it nor the other U.S. oil companies engaged in the plunder of Canada’s resources should be able to avoid public accountability, either here or there.
It’s time to create jobs by developing alternative sources of energy.
Bill Mackovich is a longtime labor activist in Chicago.