The oil sands deposit in western Canada has been called many things, but Canadian researcher and writer Alastair Sweeney may be the first to call them a “calming, stabilizing force in the world. Sweeney has written a book called “Black Bonanza: The Race to Secure North America’s Energy Future” where he argues that the 1.7 trillion barrels of goo are a bridge between a petroleum-based economy and an alternative energy-based economy. The gooey tar will be a peacekeeper between the oil producers and oil consumers, particularly the US.

If this is true, it’s very good news for oil sands developers like Suncor Energy Inc. (NYSE:SU), Royal Dutch Shell plc (NYSE:RDSA), Exxon Mobil Corp. (NYSE:XOM), China Petroleum & Chemical Corp. (NYSE:SNP), Marathon Oil Corp. (NYSE:MRO), and many others which have interests and investments in the region.

Sweeney’s view, expressed in a brief interview with the Edmonton Journal, predicts that solar energy will develop to the point that in the next 20 years it will “be huge.” The interview doesn’t offer details, but if solar power is going to dominate in the next 20 years, it will have to become bigger than huge. Way bigger.

First of all, the proven reserves in the Canadian oil sands total about 170 billion barrels, an order of magnitude less that Sweeney’s 1.7 million barrels, but that’s still not trivial. Only Saudi Arabia, with proven reserves of 262 billion barrels, has more.

Current bitumen production is around 1.5 million b/d, and forecast production by 2018 totals 3 million b/d. If production from the sands could double again in another ten years, that would total 6 million b/d, still less than Saudi production today and about two-thirds of current daily US crude oil consumption.

The world’s largest fields face fairly rapid production declines. Estimated decline rates run between 4.5%-6.5%. Development in the oil sands, even on the aggressive schedule in the previous paragraph, is growing at less than 2% annually.

Of course the oil sands aren’t the only source of new oil, but forecast production growth is never more than 2% annually, from all sources. How the Canadian oil sands can change this calculation is not apparent, and is likely in fact to be illusory.

Another point Sweeney alludes to in his interview is the failure of the environmental movement to deter development in the oil sands. Apparently the effects of the Great Recession have opened people’s eyes to the need to just “Drill, baby, drill.” That is possible, but if true, it’s a call from US citizens, not Canadians. The effects of the recession on Canada have been relatively mild, and there has not been an outcry from Canadians for more development in the oil sands.

If anything, the contrary is true. The Canadian First Nations (the name Canadians use to refer to indigenous native peoples) have strongly opposed the environmental damage caused by oil sands development. Strip mining accounts for about 60% of production, with the rest being in situ production using steam injection to heat the tarry deposit enough so that it will flow through the well pipe.

Once the bitumen is mined, it is either mixed with chemicals that make it flow through pipelines to an upgrading facility or the bitumen is upgraded on site. The upgraded bitumen is essentially crude oil and can be shipped to refineries for further processing into gasoline and other refined products.

All this digging and upgrading takes energy and water, and lots of both. The energy used to mine the oil sands emits between 130-350 pounds of CO2 per barrel of synthetic crude from strip mining and upgrading, and about 210-380 pounds of CO2 per barrel from in situ mining. These emissions figures are roughly 3-5 times the average for conventional crude production.

Developers are allowed to withdraw more than 475,000 acre feet of water annually from the Athabasca River, none of which can be returned because of the toxins that are generated in the mining and upgrading processes. All the water is sent to holding ponds, where some is reused and the rest is allowed to evaporate. The tailings that are left now cover about 130 square kilometers and none of the ponds has been reclaimed to date.

The Canadian and provincial governments have not really addressed these issues head-on, preferring instead to allow the developers to press ahead and deferring decisions on how to reduce CO2 emissions, what to do with tailings, and how to reclaim the land. Sweeney is correct to say that environmentalists have not deterred development, but that is not the same thing as to say that everyone is satisfied with the way things have worked out so far.

Just last month an environmental group had this to say about the federal government’s effort to avoid performing a thorough environmental assessment of development in the oil sands: “Over the past several years the Government of Canada has tried to dodge its responsibilities for environmental assessment of proposed oil sands developments. This has led to a number of successful court challenges in which it was deemed that the government was not fulfilling its obligation to assess projects and protect the environmental interests of Canadians.”

The Canadian oil sands are huge, but their role as a peacekeeper in the global struggle for more oil can do no more than keep things from getting worse. That may be helpful, but it’s no game-changer. Until there is some reasonable, and reasonably cheap, alternative to oil as transportation fuel, we’re stuck with the black stuff.

Paul Ausick

Photos: David Dodge, The Pembina Institute

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