Canadian Oil Sands: An Introduction
By Chris Pedersen
Over spring break, a group of nine students and I from the Center of Global Affairs took part in a field-intensive study to the oil sands in northern Alberta, Canada. With the support of a grant from the Canadian government, we spent a week in Fort McMurray to see the oil sands production process and then visited Calgary, Canada’s booming energy metropolis. Why Canada and the oil sands? The United States imports more oil from Canada than any other country in the world. Canada’s oil reserves are the second largest in the world, leading one to believe that the US-Canada energy relationship will be crucial in overall bilateral relations and geo-politics on a global scale.
First, some facts on Canada’s oil sands. When one thinks of oil, they usually visualize a desert somewhere in the Middle East with oil rigs pumping oil out of the ground. This type of oil is a light sweet crude oil, the easiest oil to turn into gasoline. In contrast, Canada produces oil from a rock-like material called bitumen. The bitumen is processed and turned into synthetic crude oil in two ways. The first is mining the earth, using the world’s largest trucks to dig up the earth that contains varying amounts of bitumen. Massive diggers load dump trucks that drop their loads of soil into a processor that breaks down the earth. As the earth is broken down into smaller pieces, boiling water is mixed with the earth. The water separates the bitumen (oil) from the rest of the dirt.
CAT 797 Dump Truck
The second way to get bitumen out of the ground is a process called “in situ” which means drilling in place. Like surface mining, the bitumen that is deeper under ground is solid and needs to be heated so that it can be extracted. To heat the oil, one pipeline delivers natural gas down to the bitumen area until it heats up into liquid from. Then a second pipeline takes the hot liquid bitumen underground and delivers it to the surface to be processed. The oil sands produce 1.3 million barrels of oil each day and about half of that goes to the United States.
It is expensive and energy intensive to turn bitumen into synthetic crude oil. Until recently, the oil sands were not economically viable because low oil prices and worldwide availability to produce oil was much easier in other parts of the world. To produce a barrel of light sweet crude in Saudi Arabia costs around 10 dollars and the infrastructure is already in place. To produce a barrel in the oil sands costs around 35 dollars and only recently has the infrastructure to produce large amounts of oil come online. And then there is the environmental issue. Producing a barrel of oil in the oil sands emits between three to five times as much green house gases as oil produced in the Middle East. Hence, Canada’s oil has been labeled “Dirty Oil.”
One argument that Canada and the oil sand producing companies (all the major oil companies) use to defend their dirty oil production is the idea of national security. Do you want your petrol-dollars to be turned over to a democratic country that shares similar ideas and morals as the United States or to an autocratic government that represses their population and funds terrorism? After hearing this argument I was reminded of the New York Times foreign correspondent David Rhode, who was kidnapped by the Taliban in Afghanistan for seven months last year. Speaking at NYU, one of his concluding remarks stated that he was not concerned by how much oil Saudi Arabia has, but how Saudi Arabia spends their petrol-dollars.
The oil sands create tens of thousands of jobs in the United States. The synthetic crude oil that is produced from bitumen in Canada is sent to Texas and Oklahoma to be refined. The massive trucks are built in Illinois and the tires they drive on are manufactured in South Carolina and sell for $65,000 apiece. From an economic viewpoint, the oil sands is a mutually beneficial relationship between the United States and Canada that has great potential to create even more jobs in the future.
What about renewable energy? In the United States, 95 percent of the energy used for transportation is with fossil fuels. As tough as it is to hear, oil will be around for a long time. I fully support R&D, feed-in-tariffs, and other subsidies to encourage renewable energy development, but it is important to be realistic in the expectations of “green energy”. Green energy sources such as wind, biomass, and electric all use fossil fuels as a necessary component in energy production. Phasing out of fossil fuel in the next few generations is simply unrealistic. A more feasible challenge would be to incrementally increase the amount of renewable energy the world uses, taking market share away from fossil fuels.
Lastly there is the geopolitical issue. Today, it is a luxury to be environmentally conscious. What does this mean? The countries that demand and need energy to keep their economy growing do not have a consensus on human rights or the environment. Sudan is an example. There were many human right activists in the United States that lobbied and fought to kick out US oil companies from the Sudan. Although these activists had good intentions, their results proved to be ineffective and maybe even detrimental. The US companies left the country and China stepped in. Today, China has a monopoly and dependable oil source from the Sudan. In return, the Sudanese government receives large revenues to continue the atrocities that Western activists deplore. In Canada, we heard from both environmentalists and industry leaders of the growing demand and interest from China and other Asian nations in the oil sands. If the United States decides to stop or slow importing “dirty oil” for environmental reasons, China and the rest of Asia will be more than happy to take “dirty oil.” The infrastructure and capacity to export to Asia is not there at the moment, but if Canada continues to feel pressure from the United States, it will begin to look for a new buyer in the East.
I invite readers to leave a comment and share their view on the issue of oil sands. Which way do you lean: Do you support the oil sands for national security and job creation or are the environmental effects a greater issue?
- Pembina Institute: http://www.oilsandswatch.org/
- Canadian Association of Petroleum Producers:http://www.capp.ca/Pages/default.aspx#OHufxhvGa6lI
- The Oil Sands Developers Group: http://www.oilsandsdevelopers.ca/