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Tar Sands: The Oil Junkie’s Last Fix, Part 1

Chris Nelder and Roel Mayer, The Oil Drum: Canada
For this week’s article, I collaborated with energy journalist Roel Mayer, a freelance writer on earth, energy and economy, based in Canada. Roel is a keen observer on energy, and the Canadian tar sands in particular, so he was a natural research partner for this short study on the state of oil production from tar sands.

He was also the one who coined “The Law of Receding Horizons.” For those who missed my previous articles on receding horizons, it is a simple concept: as the cost of energy rises, the cost of everything else made with energy (like building materials) also rises. So an energy project which was expected to be profitable when energy costs were x amount higher than today, turns out to still be uneconomical when you get there.

And the tar sands of Alberta are shaping up to be the oil industry’s poster child of this phenomenon. With oil well over $60 today, the low-grade sludge called kerogen that we recover from tar sand–actually more like a putty, at room temperature, which is why I refuse to use the whitewashing term “oil sands–should be highly profitable.

But paradoxically, the impending decline of global crude oil production, which is now coming clearly into view, has led to a mad rush to produce the tar sands. And this, in turn, has led to skyrocketing costs…such that now, the real “profit” in producing the tar sands seems to be in government tax breaks, not in actual profit on the resource itself.

In fact, the Canadian tar sands operations are facing a whole host of challenges, beyond economic–so much so, that one wonders why we try to harvest them at all.

But trying we are: according to the respected energy analytics firm Wood Mackenzie (WoodMac), about $117 billion is going to be spent on the tar sands by 2015.

Let’s look at some of the challenges.
(25 August 2007)

Factoring Sustainability Into Alberta’s Tar Sands Project

Mindy Lubber, World Changing
…we still have a long way to go to achieve fully sustainable accounting, especially here in North America. Among the biggest challenges is an enormous oil-extraction project underway in Alberta, Canada. Fueled by rising oil prices and declining global oil reserves, US and Canadian oil producers are impacting millions of acres of Alberta’s pristine boreal forest to produce oil from a sticky mud-like substance known as tar sands. Tar sands oil production has doubled over the past 10 years, to 1.1 million barrels a day; future growth is expected to quadruple as oil companies pour well over $100 billion into new production and refining capacity on both sides of the border.

If ever there was a project where sustainable accounting is needed, Alberta tar sands oil extraction is it. Greenhouse gas emissions associated with tar sands development are nearly three times higher than traditional oil extraction and refining. The mining and processing also requires huge amounts of water, much of it pumped from the Athabasca River, which flows 765 miles through Aboriginal land and small communities and supports fish and other wildlife.

There has been some progress in reducing the project’s environmental footprint: Canadian oil company Suncor reduced the amount of water it uses to produce a barrel of oil from tar sands by half between 2002 and 2006. Still, University of Alberta ecologist David Schindler projects that future tar sands growth, combined with climate change, could cut the Athabasca River’s low winter flows 50 percent or more by mid-century. “What they want to withdraw is an unsustainable amount,” Schindler told the Los Angeles Times in July 2007.

Stay tuned. Balancing sustainability and capitalism in the Alberta tar sands will be a long-running issue — and hugely important — as we try to achieve a sustainable society.

Mindy S. Lubber is president of Ceres, a leading coalition of investors, environmental groups and other public interest organizations working with companies to address sustainability challenges.
(25 August 2007)