The oil sands in the Obama era

2008-11-06

in Canada, Economics, Politics, The environment

With the election of Barack Obama, Canadian politicians seem to be taking the initiative in raising the issue of future climate change policy in North America. The situation is a complicated one, particularly given tensions between climate change mitigation objectives and aspirations for energy security. A further complication arises because of overlapping jurisdictions. US states, Canadian provinces, and regional initiatives are all working on climate change mitigation. To some extent, this federal government-to-government bid seems designed to supplant that. Foreign Affairs Minister Lawrence Cannon has expressed the hope that a Canada-US deal could “provide uniformity and supplant the patchwork of plans that are being implemented in various states and provinces.” While uniformly good policies would certainly be a step forward, there is the distinct danger that more innovative and committed jurisdictions will be forced down towards mediocrity, and that time will be wasted as reorganization occurs.

In the end, the oil sands are both a huge financial temptation and a hugely sensitive regional issue. How they end up being treated will have a lot to do with the extent to which national governments are willing to consider overall societal welfare, as opposed to the more volatile interests of specific groups, as well as the degree to which either government is willing to bear political risks in order to achieve their existing mitigation targets. I don’t think it can be realistically argued that current oil sands policy is anything other than selfish and reckless. That is on account of both the near-term ecological damage arising from oil sands extraction and refining, as well as the long-term climatic threats associated with using such dirty fuels.

One element of the Globe and Mail reporting is rather misleading. It says that “the oil sands are comparable to conventional sources of oil, if the companies implement so-called carbon-capture-and-storage technology.” It is a bit laughable to say that two things are comparable, provided an entirely untested technology is instantly deployed in a widespread fashion. Particularly given the falling price of oil, the possibility that oil sands extraction with carbon capture and storage has the potential to be a low-carbon and economically attractive source of energy seems very dubious.

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{ 27 comments… read them below or add one }

Milan November 6, 2008 at 11:47 am
. November 6, 2008 at 11:58 am

How green will the new Congress be?
Enviro-backed congressional candidates win a number of seats, but not as many as hoped
Posted by Kate Sheppard

. November 6, 2008 at 12:02 pm

Oil sands players to lobby Obama
Wasting No Time; Expected to be more hostile to development
Claudia Cattaneo, Calgary Bureau Chief, Financial Post Published: Thursday, November 06, 2008

Obama adds to oil sands pressure
SHAWN MCCARTHY
GLOBAL ENERGY REPORTER
OTTAWA — Canada’s oil sands producers are facing new pressures to slash their greenhouse gas emissions, with the latest salvo coming from the campaign of Barack Obama, the presumptive Democratic U.S. presidential nominee.

Obama lobbied by Canada on oil sands
The Associated Press
Published: November 6, 2008

OBAMA AIDE CASTS DOUBT ON OIL SANDS
Candidate pledges to break U. S. reliance on ‘dirty’ fuel; Industry Anger
Sheldon Alberts, Canwest News Service Published: Wednesday, June 25, 2008

Obama’s clean-oil vow could threaten oilsands industry
Sheldon Alberts, Canwest News
Washington Correspondent, Calgary Herald
Published: Tuesday, June 24, 2008

. November 6, 2008 at 12:11 pm

Now that the writing is on the wall — Obama is in and has made energy and climate his top priorities — the Conservatives figure the best strategy now is to appear proactive and cooperative with the U.S. in hopes of being able to negotiate a cap-and-trade regime that’s maybe not so tough on Canada, which through its oil-sands developments is acting these days like a petrostate. Canada will be swept up anyway by U.S. changes, so coming out now with talk of deal-making allows the Conservatives to take credit later for something it has resisted but which Canadian provinces like Ontario and British Columbia have promoted.

It must hurt Harper and executives in the oil patch to see stories like the one on Dow Jones yesterday with the headline: “Under Obama, Dark Days Seen Ahead for Fossil Fuels.” According to the story, under Obama “energy and environment policy marks a tectonic shift for the nation. He would move the U.S. away from petroleum as its primary energy source and towards renewable energy, advanced biofuels, efficiency and low greenhouse-gas-emitting technologies.” In fact, Obama wants to create a windfall tax on oil that trades over $80 a barrel, and the funds from that would be used to create a government venture capital fund and incentive program aimed at renewable energy and clean technologies. He’s also focused on reducing U.S. transportation fuel consumption by doubling CAFE efficiency standards. And, with respect to his plan to create a national cap-and-trade regime, the aim is to return the United States to 1990 levels by 2020.

R.K. November 6, 2008 at 1:36 pm

Having a common price for carbon across North America makes both environmental and economic sense. It expands the pool of possible mitigation projects, thereby reducing the costs associated with achieving any set level of reductions.

At least, that is true in abstract economic terms. Political implementation is a whole other issue.

. November 6, 2008 at 5:20 pm

Alberta wants in on climate negotiations with U.S.

The Canadian Press

November 6, 2008 at 4:18 PM EST

EDMONTON — Premier Ed Stelmach says Alberta wants a seat at the table during any talks aimed at reaching a climate change deal between the federal government and the United States.

. November 8, 2008 at 6:13 pm

Obama will let us off the Kyoto hook

Peter Gorrie

Prime Minister Stephen Harper must be pinching himself over his great luck.

One day, he’s isolated with the reviled George W. Bush as a pariah of climate change. The next, he’s shoulder to shoulder on the issue with the most popular politician on the planet.

All without having to lift a finger. American voters did him the favour by making Barack Obama their president-elect. Obama pledges to act on climate change, and after eight years of American obstructionism, “re-engage” with the international negotiations to reduce greenhouse gas emissions.

His administration will “work constructively” within the United Nations process aimed at putting the Kyoto Protocol into practice. He proposes a firm target for reducing emissions. He promises an ambitious list of measures to achieve that goal, including a cap-and-trade system far tougher than any attempted elsewhere.

But a crucial outcome of all this – for Harper and the world – is that the Protocol is dead.

. November 9, 2008 at 4:34 pm

Op-Ed Contributor
The Climate for Change

By AL GORE
Published: November 9, 2008

THE inspiring and transformative choice by the American people to elect Barack Obama as our 44th president lays the foundation for another fateful choice that he — and we — must make this January to begin an emergency rescue of human civilization from the imminent and rapidly growing threat posed by the climate crisis.

. November 9, 2008 at 4:38 pm

“Some have come up with even dirtier and more expensive new ways to extract the same old fuels, like coal liquids, oil shale, tar sands and “clean coal” technology.

But in every case, the resources in question are much too expensive or polluting, or, in the case of “clean coal,” too imaginary to make a difference in protecting either our national security or the global climate. Indeed, those who spend hundreds of millions promoting “clean coal” technology consistently omit the fact that there is little investment and not a single large-scale demonstration project in the United States for capturing and safely burying all of this pollution. If the coal industry can make good on this promise, then I’m all for it. But until that day comes, we simply cannot any longer base the strategy for human survival on a cynical and self-interested illusion.”

. November 12, 2008 at 1:41 pm

Canada’s Oil Sands: $1.4 Trillion Worth of Trouble
By Richard Littlemore on News

The Canadian tar sand deposit – the largest oil deposit in North America and the second-largest in the world – is worth $1.5 trillion or $34,591 for every man, woman and child in the country, according to the (quite credible) Canadian think tank, the Centre for the Study of Living Standards.

That’s one and a half trillion tons of trouble for environmental policymakers in Canada and the United States.

. November 13, 2008 at 12:00 pm

There’s little new for Obama in Harper’s energy ‘offer’

JEFFREY SIMPSON

From Wednesday’s Globe and Mail

“Ottawa has also read that Mr. Obama has pledged to reduce U.S. greenhouse gas emissions by 20 per cent by 2020, in part through a cap-and-trade system. By offering a pact, the Harper government is acknowledging what has been obvious to any serious observer of Canadian affairs for a very long time — that because Canada cannot get its own act together on climate change, we must ask the Americans to save us from our incoherence.

Put another way, with provinces running off in all directions and the Harper government unwilling to even try to craft a national policy, only by joining a U.S. system and imposing that system on ourselves can Canada achieve domestic coherence. It’s a sad way for a sovereign country to behave, but such is the nature of Canadian federalism these days, the yawning gaps among the provinces and the disinclination of the national government to be a national government.”

. November 14, 2008 at 2:17 pm

Friday, November 14, 2008
The Energy Return of Tar Sands

By sugarcane accounting the EROEI of tar sands is about 5.8 million BTUs (the value of a barrel of oil)/0.8 million BTUs (the approximate energy content of 0.8 MCF that was externally purchased), or 7.25. By true EROEI accounting – which includes the internally consumed energy as an input – the EROEI would be 5.8/1.5 = 3.9.

Of course then the oil has to be refined. For a light, sweet oil such as the output of a syncrude unit, that step is going to be 12/1 or better. Putting the two steps together, I calculate that I need to spend 1.5 million BTUs to produce the oil, and another 5.8/12 = 0.5 million BTUs to refine it to gasoline and diesel. Total process is then 5.8 million BTUs/2 = 2.9/1 for the production and refining processes. Conventional light, sweet oil is around 6/1 for the entire process of oil in the ground to gasoline in the tank.

R.K. November 27, 2008 at 11:34 am

Looking up big dams in Canada, I found this:

“The Syncrude Tailings Dam is a barrage dam that is, by volume of material, the largest dam in the world at 540,000,000 cubic meters. It is located near Fort McMurray, Alberta, Canada. The dam and the tailings pond within it are maintained as part of ongoing operations by Syncrude Canada Ltd. in extracting oil from the Athabasca Oil Sands.”

. January 2, 2009 at 9:24 am

Stelmach confident Obama will see the sense in Alberta oil

KATHERINE O’NEILL

From Friday’s Globe and Mail

January 1, 2009 at 10:21 PM EST

EDMONTON — Alberta Premier Ed Stelmach wants U.S. president-elect Barack Obama to know that Canada is the United States’ best friend when it comes to supplying reliable and secure oil.

Alberta has been hit hard by collapsing oil and natural gas prices and the global financial meltdown, and there is concern across the province that the Obama administration’s environmental policies could hammer the energy sector even more.

However, Mr. Stelmach is convinced the United States needs “affordable energy” now more than ever to pull itself out of its growing financial quagmire and create new wealth and jobs.

. January 8, 2009 at 11:01 am

The Costly Compromises of Oil From Sand

By IAN AUSTEN
Published: January 6, 2009

OTTAWA — The oil that is extracted from Canadian dirt is being portrayed as saving America from energy dependence on the unstable Middle East, or an environmental catastrophe in the making — depending on the perspective.

As Barack Obama prepares to take office in two weeks, the debate is no longer academic. The president-elect has promised to move forward with an ambitious program aimed at fighting climate change.

Operators of oil sands projects and Canadian governments are eager to point to its potential to reduce America’s dependence on oil from politically unstable regions. Canadian oil sands produce about 1.2 million barrels a day, or about 9 percent of the imported oil consumed in the United States.

Production was headed toward 3.5 million barrels a day by 2015 before the economic slowdown; with the vast reserves available, Canadian oil sands have the potential to produce the equivalent of 1.7 trillion barrels of oil.

. January 16, 2009 at 12:04 am

Canada’s energy ally in Obama’s ‘green team’

SHAWN MCCARTHY

From Friday’s Globe and Mail

January 15, 2009 at 8:55 PM EST

OTTAWA — After eight years of Republican rule, environmentalists now believe they have a keen ally moving into the White House next week, and Canada’s oil sands are high on their list of targets.

But they’ll have to deal with General James Jones.

As a monumental battle over energy policy shapes up within the new administration of president-elect Barack Obama, Gen. Jones, a former NATO supreme commander who retired from the U.S. Marine Corps, may turn out to be Canada’s best ally.

. January 22, 2009 at 8:54 am

Ignatieff touts Alberta tar sands

Oil industry key to Canada’s geopolitical power, Liberal leader tells Quebecers in unity pitch

Jan 22, 2009 04:30 AM

Andrew Chung
Quebec Bureau Chief

MONTREAL–Liberal Leader Michael Ignatieff brought a pragmatic message to this environmentally conscious province yesterday, defending Alberta in the name of national unity.

. January 30, 2009 at 11:32 am

Feb 2009
Source: Oilsands Review

The case against dirty oil

Is the export market to the United States really that secure?
Peter McKenzie-Brown

For its part, California has passed regulations requiring fuel suppliers to reduce the emissions from the fuel they sell-and to account for those emissions right back to the original source of production.

Energy calculus of this kind is unprecedented, and if followed to its logical conclusion could be devastating for Canada. The world´s largest per capita consumers of energy, Canadians are also the world´s largest per capita producers of CO2. Regulations that limit the carbon quotient in other imported goods could shut a variety of Canadian products out of American markets. Whether or not such rules will ever apply to other commodities, for oilsands producers these developments are immediate matters of deep concern.

Will President Obama, who often used green rhetoric on the campaign trail, continue down that road?

“No,” says Murray Smith-a one-time provincial energy minister who until recently served as Alberta´s representative in Washington, D.C.

. February 11, 2009 at 10:35 am

Ottawa counters ‘dirty oil’ campaign

CAMPBELL CLARK

From Wednesday’s Globe and Mail

February 11, 2009 at 4:03 AM EST

OTTAWA — Environment Minister Jim Prentice hit back yesterday at an environmental campaign pressing Barack Obama to treat Alberta’s oil sands as the “world’s dirtiest oil,” arguing that Canada is only seeking the same treatment that the United States will have to apply to its own coal.

Stephen Harper’s Conservative government has called for a joint Canada-U.S. pact on greenhouse-gas emissions and energy security, in part to ensure that the oil sands are not hit by punishing U.S. regulations under Mr. Obama’s environment-conscious administration.

. April 16, 2009 at 1:48 pm

Big-league players step up for oil sands U.S. lobbying

By Claudia Cattaneo, Financial PostMarch 11, 2009

As Alberta’s oil sands industry struggles with depressed oil prices and opposition from the environmental movement, a new front is emerging to support it — in Washington.

From the recently formed Center for North American Energy Security (CNAES), headed by former Republican Congressman Tom Corcoran, to the American Petroleum Institute (API), some of the world’s major oil companies and some big guns in Washington’s lobby community, including former U. S. ambassadors to Canada such as Gordon Giffin, are taking up the oil sands cause.

. April 30, 2009 at 12:12 pm

The Struggle for North America’s Energy Future: Canada and Alberta

Chris Fellingham, 27th April 09

California, the US’s most populous and wealthy state and Alberta, a far less populous but nonetheless vital part of Canada’s economy sparred this week, as California seeks to push forward ever bolder Climate Change initiatives. The battle pits two states that could hardly be more dissimilar when it comes to Climate Change. California has trail blazed its way through Climate change, running against the Bush administration and much of his own party, Schwarzenegger reached out to states in the US and Canada in his attempt to direct California’s entrepreneurial dynamism to capitalise on green economics.

Alberta, has been rather different, opting for “reduction in intensity” over actual reductions in its Climate Change reduction, it has been got on well with the Harper administration’s under-whelming Climate Change efforts. The reason lies in Alberta’s not so secret oil sands which have endured a barrage of infamy from protests in Poznan, to a National Geographic report. Tar sands already in development could become an exceptionally lucrative export if as predicted oil prices continue to rise, and the US continues to look for energy supplies to be brought closer to home. While the latter is already underway in some US states and a Climate Change bill currently in discussion, the oil sands future took a different turn as rather than a continually rosier future it met it’s first major clash when one of its largest potential markets passed a bill on Thursday that will eventually ban fuels, that are deemed to emit too much carbon in their production phase.

. May 18, 2009 at 8:37 pm

Oil sands output could rise to 6.3-million barrels a day: U.S. report

BY PETER KOVEN, FINANCIAL POSTMAY 18, 2009 6:01 PM

TORONTO — Output from Canada’s oil sands could rise to as much as 6.3-million barrels a day by 2035, a nearly five-fold increase above current levels, according to a landmark U.S. report released Monday.

It was one of the findings by energy consultancy IHS Cambridge Energy Research Associates (CERA) in a study called Growth in the Canadian Oil Sands: Finding a New Balance. The study, which took eight months to research and was produced in consultation with many different stakeholders, looks at how the oil sands have morphed “from the fringe to the centre” of global energy supply and the resulting economic and environmental implications.

“The length and depth of the current economic recession, the pace of technological innovation as well as government regulation, particularly in addressing concerns about climate change, will all shape the growth of oil sands,” Daniel Yergin, chairman of Cambridge, Mass.-based IHS CERA, said in a statement.

To reach the theoretical level of 6.3 million barrels a day, the study assumes strong economic growth and robust oil prices over the long-term. If the global economy stagnates and oil prices remain weak, it is projecting daily production of 2.3 million barrels a day by 2035. That is still about one million barrels a day above current levels.

. May 25, 2009 at 10:06 am

Tar sands’ climate threat, security promise both exaggerated — report

By NATHANIAL GRONEWOLD
Published: May 22, 2009

NEW YORK — Further development of Alberta’s famous oil sands will be neither the climate disaster that activists fear nor the energy security panacea that proponents suggest it is, the Council on Foreign Relations concludes in a new report.

The reality of the oil sands in the international energy and climate picture suggests both the United States and Canada would be wise to develop climate policy in tandem, or at least link whatever independent cap-and-trade programs for greenhouse gases each government may develop, a researcher at the New York-based think tank says.

“There is a compelling case, even absent the oil sands, for harmonizing U.S. and Canadian carbon pricing schemes,” writes Michael Levi, senior fellow for energy and environment at CFR. “The oil sands factor, in both its energy security and climate change dimensions, only makes that case stronger.”

The simplest way to do this would be to allow cross-trading of emission allowances between two systems, leading to carbon prices that are roughly the same on both sides of the border, Levi says. A combined cap-and-trade system would be even better.

It is unlikely that Canadian oil sands can free the United States of its dependence on Middle Eastern oil, the report concludes. But as the only non-OPEC source with the potential for large production growth over the next several years, the tar sands have very strong energy security implications — meaning U.S. policymakers should not impose any restrictions on their development through such means as low-carbon fuel standards or special import tariffs, Levi concludes.

The council’s analysis suggests the oil sands are unique in that they hold the potential to reduce OPEC’s revenues, thus weakening the cartel and those members that often undertake policies hostile to U.S. interests. If the oil sands could replace 2 million barrels per day of OPEC production, that would lead to a $70 billion per year cut in revenue to OPEC states, even with prices at $100 a barrel.

. June 21, 2009 at 11:15 pm

Living on Canada’s Oil
Must we really choose between energy security and a climate disaster?
By Michael A. Levi
Posted Friday, June 19, 2009, at 10:55 AM ET

Deep in northern Alberta, under the cover of 50,000 square miles of boreal forest, lie spectacular reserves of what the Canadians call “oil sands”—a mixture of sand, clay, and a viscous tarlike form of petroleum that can be transformed into synthetic oil. With oil-sands production at more than 1.2 million barrels per day, Canada, which also produces conventional oil, has quietly passed Saudi Arabia to become the top supplier to the United States. U.S. government analysts expect that production could triple again by 2030, lessening our reliance on Middle Eastern sources. One very bullish scenario sees the oil sands eventually delivering as much as 37 percent of our imported crude.

No matter how useful the oil sands might be to our energy supplies, tapping into them remains the most controversial petroleum project on Earth. The local environmental fallout—in terms of deforestation, water demand, and toxic waste—varies among the dozens of ongoing extraction projects but is often immense. And taken as a whole, the oil-sands industry emits so much greenhouse gas that Greenpeace has called it “the biggest global warming crime ever seen.”

. June 22, 2009 at 10:30 am

Security trumps environment as Obama gives green light to US consumption of Alberta’s oil
Posted by Chris Fellingham on June 21, 2009 at 19:23

President Obama, in close discussions with Energy Secretary Stephen Chu and Alberta Premier Ed Stelmach is to give the green light for US consumption of oil sand oil, or rather the import of fuels considered among the “dirtiest” in the fuel market. In a meeting last week, President Obama decided that the Canada’s oil sands represented an important part of national security supplies for petroleum in America’s near future.

The move is not without immediate precedent, as Francois Cardinal at cybercress.ca notes, both Hillary Clinton had offered support for oil sands at a recent conference on energy security, and Obama’s national Security adviser General Jim Jones was similarly adamant that the US would be foolish to reject the possibility of a stable source from a close partner in Canada.

The move will disappoint many in the green movement, given Obama has previously been less supportive of oil sands, noting that the Us needed to ween itself off dirty and dangerous oil supplies. In particular at a recent summit with Canada, President Obama described US coal as equivalent to Alberta’s oil sands, given environmentalists hope that the US would take a tough line demanding far reaching cleanup efforts if the oil sands were ever to be imported.

. June 22, 2009 at 11:00 am

Oil sands consolidate into “sustainable growth”
Posted by Chris Fellingham on June 08, 2009 at 21:33

As highlighted by Reuters, Canada’s “dirty secret” is making a comeback, amidst predictions of rising oil prices, as the global recession appears to be bottoming out. This is a classic two sides of the coin issue for those in the environmental movement. The global downturn meant a contraction in emissions but also an excuse for political inaction, the upturn could finally see renewable investment get back on track but could also see the rise of oil sands.

The maths is quite simple: oil sands are not cheap or accessible sources of energy. Quite the opposite, defined as “extra-heavy” the oil is difficult to extract requiring large quantities of energy and a pre-processing stage, before the substance can be sent to a refinery to be converted into petrol. Unsurprising, this process makes oil sands very expensive to produce and they require a large amount of upfront investment before they can begin to yield the profits. The effects are slightly paradoxical; many environmentalists are hopeful of a return to rising oil prices in the hope that it will stimulate demand for fuel efficiency, cleaner vehicles and renewable energy as oil is increasingly seen as a volatile fuel that economies depend upon at their own risk. That scenario is still the most likely, as McKinsey’s report outlines, however it’s not simply that oil prices could dramatically begin to rise by the beginning or end of 2010 (depending on the pace of economic recovery) but that their prices will be volatile, an investors nightmare. This is all well and good for environmental causes, however in the interim, the market will be even keener for stable oil suppliers, making Canada’s oil sands an ever more viable solution.

. November 7, 2009 at 11:33 pm

Canada steps up oil sands push in United States

Jeffrey Jones, Reuters Published: Friday, November 06, 2009

CALGARY — Canada has mounted its biggest campaign yet to sell the United States on the energy security benefits of the oil sands as Washington debates new environmental policy, the country’s energy minister said on Friday.

Canadian Natural Resources Minister Lisa Raitt said she and her staff are lobbying interests in the United States at all levels, trying to send the message that the huge heavy-oil resource in Alberta is being developed responsibly and that U.S. input on environmental fixes is welcome.

The push comes as environmental groups have intensified their own campaigns warning of the impact of oil sands development on climate, water, land and local communities on both sides of the border.

“There are certain groups that just want to completely shut down the oil sands. That is completely unacceptable. That will not happen,” Ms. Raitt said in an interview.

“This is too strategic a resource for the country, and that’s the other part of the message: we will develop it, we will use technology, we are going to work with the United States on it.”

Canada is already the largest foreign supplier of oil to the United States, topping such OPEC suppliers as Saudi Arabia and Venezuela. Much of that crude is derived from oil sands developments in northern Alberta.

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