Tar Sands

INTRODUCTION

I've been resisting the temptation to do an article on Tar Sands as it is so widely covered by environmental media and NGO outlets. But when you're constantly bombarded with images and footage of the wanton destruction taking place in Northern Alberta in Canada, you can't stop words such as outrage, insanity and sheer stupidity from popping into your head. It also makes you feel inclined to pose the question; would any reasonable normal person stand back and allow this to happen? The video at the foot of the page offers a possible perspective.

HISTORY

In 1967 Commercial exploitation of tar sands became feasible. Current rates of production are estimated at 1.3 million barrels per day, rising to around 3 million by the end of the decade. Eventually output could rise to 5 million, following peak oil and increased demand from developing economies such as China.

GEOLOGY

Millions of years ago a large volume of light crude oil was pushed north-eastward, perhaps by the rise of the Rocky Mountains. In the process it also migrated upward, along sloping layers of sediment, until eventually it reached depths shallow and cool enough for bacteria to thrive. Those bacteria degraded the oil to bitumen. As a result of this bacterial degradation, the bitumen is carbon rich and hydrogen poor.

PROCESSING

There are two main methods of extraction:

• Strip mining. Huge hydraulic and electrically powered shovels dig up the tar sands and load them into enormous trucks that can carry up to 320 tons of tar sands per load.
• In situ. Steam Assisted Gravity Drainage (SAGD) is the predominant process. This involves drilling two wells and pumping heated steam down one well to soften the bitumen down into liquid form. It is then forced up the second well where it is recovered. Deposits too deep for surface extraction are exploited by this method.
• It takes two tons of tar sands to produce a barrel of oil.  The process is very energy intensive and uses large quantities of water. It is also capital intensive.

Extraction

In order to extract the bitumen hot water is added. The addition of solvents assist extraction.

Because the bitumen is of such poor quality it has to be upgraded. A process called hydrocracking is used, which breaks it down into simpler molecules. Hydrogen is introduced forming more complex hydrocarbons. This forms a substrate called synthetic crude, which is then ready for refining. It is then transported to an oil refinery by pipeline.

ENVIRONMENTAL IMPACTS

The key issues relating to tar sands production are:

• Fresh water. It is estimated that 370 million m³ needs to be withdrawn from the Athabasca River rising to 529 million m³. The river will not be able to sustain this level of use.
• Groundwater depletion. Groundwater needs to be pumped out during mining operations otherwise flooding will occur. Reducing ground water levels will have consequences on the wider ecosystem. It will affect wetlands and peatlands.
• The water used eventually becomes contaminated with toxic chemicals, which is disposed of in huge tailings ponds. This can affect wildlife and could contaminate groundwater supplies. 
• CO2 emissions are up to 3 times greater during tar sands production compared to conventional oil. In situ is about 5 times greater. Using lifecycle analysis of tar sands oil from well to wheel, emissions are about as high as coal.
• Land disturbance. It's been estimated that an area of land the size of Florida could be decimated. The policy is to reclaim this land when mining is completed, but considerable uncertainties exist.
• Socio-economic. The impacts on First Nations people have been significant.

There is a misguided belief within the oil industry that tar sands will fill the gap following peak oil. This won't happen due to limitations such as water supply, shortage of labour and the sheer complexity of the operations.

One area of considerable contention is the use of natural gas during extraction and production of tar sands. 'To produce two million barrels per day will require approximately two billion cubic feet of natural gas per day... This daily requirement is roughly equivalent to the amount of natural gas needed to heat  [every] home in Canada for a day' (Source: Pembina Institute).

An alternative energy option is to build a nuclear power station in Alberta! 'Canada could well become the first country in the world to use nuclear power to accelerate the exploitation of fossil fuels' (Greenpeace: Dirty oil).

Carbon capture and storage (CCS) is touted by big oil as the great greenhouse gas reduction (GHG) panacea. But as more sober observers point out; 'In CCS, we would need to build at least 20 demonstration plants by 2020, at a cost of US$1.5bn each.

'It is not acceptable to use a promise of CCS as a licence to significantly expand the exploitation of unconventional fossil fuels when its availability on a sufficient scale is decades from being achieved' (Co-op/WWF: Unconventional Oil).

Water

Water levels vary on the Athabasca River system. The Alberta Government has introduced a regulatory framework to control water abstraction from the river - especially during the winter when flows are low.

But global warming could directly affect water levels. The ice fields in the Rocky Mountains that feed Canada's river systems are melting. Estimates vary, but the glaciers could melt away by mid century - effectively drying up the Athabasca River. WWF Canada sums up the prospects; 'climate warming is predicted to reduce flows in the Athabasca River - exacerbating the problem of water insecurity not only for ecosystems but for industry itself. With annual and winter low flows decreasing in recent years, a trend expected to persist into the future, the potential exists for oil sands water withdrawals to threaten environmental flows in the Athabasca River to a much greater degree than has occurred to date. If they decline as predicted, flows in the Athabasca River will be insufficient to satisfy both the needs of rapidly expanding oil sands production and sustain the natural environment'.

Another major problem is massive tailings ponds, which are visible from space. These are huge lakes of toxic sludge. They are a threat to wildlife and their proximity to the Athabasca River - separated by a few metres of dyke - could potentially create an environmental catastrophe should a breach occur. Indeed according to Environmental Defence, the tailings ponds are already leaking 11 million litres a day.

Air Pollution

As tar sands extraction expands, air pollution will likely pose serious problems. Nitrogen oxides, sulphur dioxide, volatile organic compounds and particulate matter are the main pollutants identified. Respiratory health problems and acid rain are potential hazards.

Wholesale environmental destruction

An area of land the size of Wales has already been obliterated. As only 20% of tar sands deposits can be extracted by strip mining, the oil industry is claiming that the remainder, which will be recovered in situ, will cause less damage to the Boreal forest ecosystem. But this is debunked in a Greenpeace special report. In situ still causes fragmentation as access routes to in situ wells have to be built. This damages local habitats.

The destruction of the Boreal forest is a major concern, as Greenpeace points out in Dirty oil: 'The full development of Canada’s tar sands will eventually fragment and erode peatlands and forest over an area the size of England. Scientists estimate that even small changes to the health of peatlands in the region will convert these northern organic soils to a net carbon source to the atmosphere. Global Forest Watch estimates that the capacity of Alberta’s forests and wetlands to absorb industrial GHG emissions was exceeded in 2003. In other words, the region now exports vast amount of CO2 to other parts of Canada and the rest of the planet'.

Land reclamation is problematic. After nearly half a century of activity, only about 104 hectares have been certified as reclaimed to date. As for the tailings ponds - the challenge there is enormous.

TRANSPORTATION

A network of pipelines connects Northern Alberta with refining centres around North America, transporting sythetic crude (sometimes bitumen solution is transported for upgrading outwith Alberta).

Further routes have been proposed, generating a great deal of controversy, because they pass through ecologicaly sensitive areas, causing concern of environmental contamination through leaks. And with good cause. There have been several cases recently. On 29th April - as reported by Greenpeace - the Planes American pipeline leaked nearly 30,000 barrels of oil in the Peace region of Alberta, generating serious health problems within the local community of Little Buffalo. This report from the Globe and Mail highlights the incident. Also on May 7th the TransCanada Keystone I pipeline leaked 500 barrels in North Dakota - the 12th occurance within a year according to Friends of the Earth (FoE(US))!  But perhaps most controversial of all is TransCanada's proposal to build the Keystone XL pipeline, running from Hardisty, Alberta to the Gulf of Mexico (view map). FoE sums up the concerns.

Currently there's a campaign underway in the US opposing the project - as reported in the Huffington Post.

FoE reported (15 June) that a bill was pushed through in Washington, which could confirm the construction of the Keystone XL pipeline. This has raised eyebrows because there appears to be a link between the US state department and TransCanada, as uncovered by FoE. It involves Paul Elliott, who 'formerly worked as the national deputy director for Secretary Clinton’s presidential campaign. Elliott was then hired by TransCanada Pipelines, Ltd.
'Elliott registered as a lobbyist only after news organizations reported on his lobbying activities on behalf of TransCanada in December 2010. TransCanada needs a permit from Secretary Clinton to build the Keystone XL pipeline'. The plot thickens...

INVESTMENTS

Suffice to say generous financial incentives have come from the provincial and Federal Governments to encourage expansion projects, with the Alberta Government reducing royalties payable by the oil industry to 1% from a potential 25%, when capital costs from exploration and development are covered. The Pembina Institute reports that an oil company 'only pays federal income tax on the income from the project once it has written off all eligible capital costs. These tax rules make oil sands projects much more attractive and profitable than they would be otherwise' (Oil Sands Fever). 

Corporate involvement
As well as Government sweeteners, the oil industry needs to tap into investment and resources from financial institutions and other companies.
Ethical Magazine has identified the top 10 companies with an interest in oil sands:

1 Superdrug
2 Hitachi
3 Barclays
4 Nouvelle paper products
5 ‘3’ mobile phone network
6 Royal Bank of Scotland
7 Caterpillar
8 Liebherr fridges
9 HSBC
10 Lycra

Superdrug and the mobile phone brand ‘3’ are owned by Hong Kong company Hutchison Whampoa, which also owns Husky Energy Ltd. In 2006 Husky had a total of 510,890 acres of oil sands leases and in 2007 signed an agreement with BP for a 50/50 partnership to develop the Sunrise oil sands project.

Caterpillar and Hitachi both make trucks used in the tar sands. The vehicles have almost certainly been developed for this purpose, as the requirements of the vehicles are immense and project specific. If you visit the Caterpillar website, you’ll see a trail of trucks the sizes of houses shifting 400 tonnes of tar sands each from the mines.

Along with fridges, Liebherr-International AG also manufactures trucks for use in the tar sands. 

Koch Industries Inc. is deeply entrenched in the tar sands industry, primarily through its subsidiary Flint Hills Resources. Another subsidiary company has constructed, and yet another one operates, a pipeline which carries oil from Alberta to Minnesota, USA. Koch has a very sketchy track record as far as environmental responsibility goes. In 2000 alone, “Koch was fined $35 million dollars for more than 310 spills into lakes, streams and waterways from its pipelines and oil facilities in six states in the USA”. Koch Industries is a huge company, the largest privately-held company in the United States. Its subsidiaries produce a number of household products, brands and materials, including Nouvelle recycled toilet paper, Lotus disposable paper products, and LYCRA fibres (Ethical magazine: Stop the Oil Sands).

These are the top key banking groups providing finance over $100million (Source: Rainforest Action Network):

Rank	Bank	Loans (million $US)
1	Royal Bank of Canada	16 903
2	JP Morgan Chase	13 895
3	TD Bank Financial	12 775
4	Citigroup	12 043
5	CIBC	10 467
6	Bank of America	10 101
7	RBS	7 544
8	Scotiabank	4 685
9	BMO Financia1	4 467
10	Wells Fargo	2 176
11	Barclays	1 450
12	Societe Generale	936
13	HSBC	667
14	BNP Paribas	261
15	Intesa Sanpaolo	250
16	Sumitomo	186
17	Calyon	119
18	ING	119
19	KBC	119
20	Mizuho	111

One of the key warnings prevalent in the Co-op report is whether such investments represent security in a world that is more likely to head towards a future of carbon constraint; 'At a time when investors want to know the carbon liabilities hidden in companies’ books, it is legitimate for even the most conservative investor to question why companies are pursuing a path that, while profitable in the short term, could soon become unviable because of punitive carbon regulation and consumer concern. By this time, massive capital expenditure will have been injected into it, in a sector where costs elsewhere have been rising alarmingly'.

The Royal Bank of Scotland (RBS) was the biggest beneficiary of the recent public bail-out, with UK tax payers now owning an 83% share in the bank. But this didn't deter RBS from financing loans to fossil fuel companies worth nearly £10bn - over a quarter the amount the bank received from the tax payers, as reported in the Guardian. As such it has been the target of campaigns by civil society groups.

Economic liabilities
A report recently released by the Pembina Institute (full disclosure) gives a revealing insight into tar sands investments. The report reveals that 'the economics of oil sands extraction, even at today’s relatively high prices, are fairly marginal, and a lack of disclosure by companies may be making the financial picture look better than it actually is. Major costs, including the multi-billion dollar costs for reclaiming the land disturbed by oil sands mining, are largely carried off the balance sheet.

'Despite being required to submit accurate reclamation costs to the Alberta government, the oil sands industry actually discloses a far smaller magnitude of liability. ...liability management regulations ...have not historically been an accurate proxy for the actual liabilities being accrued. Given the marginal economics for the oil sands industry, this discrepancy should be of significant concern for investors.
'It is clear that the liabilities associated with oil sands reclamation are significant, material, underestimated and largely undisclosed'. And to add to this, the Alberta Government has inadequate resources to cover reclamation costs should operations default.

ENVIRONMENTAL RESPONSES

Almost every civil society group on the planet has been critical of tar Sands exploitation. A series of three films documenting the effects of oil sands exploitation - Dirty Oil, H2Oil and Petropolis were produced showing the impacts of tar sands production.

The legal Challenge & the plight of First Nations

In February 2009, the Co-operative bank offered financial support to the Beaver Lake Cree in their legal battle to protect their territory. The crux of the argument is the First Nations Constitutional land rights. The relevant legislation here is the Constitution Act (1867) and the subsequent amended Act of 1982. And Treaty 8, which is part of a series of 11 Treaties each covering a specific area of land in Canada (view map).

The Beaver lake Cree has commenced a law suit against the Albertan Government - supported financially by the Co-op - under the jurisdiction of Treaty 6. Jack Woodward of Woodward & Company LLP has been the leading lawyer in the case. The RAVEN Trust, a charitable trust, was set up to support the Beaver Lake Cree Nation in order to raise funds from donations to finance the legal battle. A related lawsuit is being pursued, which aims to protect the woodland caribou, a threatened species, which could face extinction due to tar sands exploitation.

First Nations rights are recognised by the United Nations (UN) as incorporated in the UN Declaration on the Rights of Indigenous Peoples, which Canada eventually ratified. But there has been no consultation between the oil industry and the first nations.

Of great concern is reported health problems within First Nations communities. 

Dr John O'Connor, a physician based in Fort Chipewyan raised the alarm after discovering higher rates of cancer than usual. A study by the local health authority had found high levels of arsenic, cadmium, polycyclic aromatic hydrocarbons (PAHs) and resin acids in the [river] sediment, as well as high levels of mercury in tested fish. These are highly toxic chemicals and their affects can be amplified in combination and could have carcinogenic effects.

Although Dr O'Connor's evidence was initially rejected and criticised by the authorities an investigation by the Canadian Medical Association vindicated him, showing that there was indeed higher rates of cancer than normal and that these were causing premature deaths.

THE EUROPEAN DIMENSION
In the report Tar Sands in Your Tank Greenpeace points out that tar sands derived oil products are already reaching EU markets, albeit in relatively small quantities. But the concern is that these could increase markedly in the wake of the completion of the Keystone XL pipeline - should the project go ahead. If the EU gives the green light to importing these products, it would effectively undermine climate change regulation, currently under review, namely the Fuel Quality Directive (FQD). Not surprisingly vested interests are trying to weaken the legislation, including VW, which as you will now no doubt be aware is the subject of a major Greenpeace campaign.

The FQD is the centre piece of current EU GHG reduction legislation. It sets a 10% target for GHG emissions cuts from transport fuel. However a sticking point is the EU's proposal to 'assign a single default value for GHG emissions for all transport fuels extracted from oil'. This will fail to account for the higher GHG intensities of tar sands produced oil. Unless this anomaly is accounted for it will completely undermine the EU’s claim to be the most “climate-friendly” region in the world. It would also give carte blanch to oil producers to essentially 'suit themselves'. Transparency would therefore be sacrificed.

Recently the EU Commission investigated the life cycle emissions of tar sands produced oil. Here's a summary:

This is the clearest indication yet of the GHG intensity of tar sands and bears out the argument that you have to analyse each component within the well to wheel life cycle.

Greenpeace recently highlighted that the Federal Government was rather keen to hide the fact that GHG emissions from tar sands had risen by 21% last year. This was intentionally omitted from a report submitted to the UN.  This coincides with figures released by the IEA, which shows that GHG emissions for 2010 were the highest ever. Greenpeace has subsequently noted that Canada's representation at the UN climate talks was less than spectacular. Indeed if you also follow the links to the newspaper reports from the Greenpeace post, you are left with the distinct impression that Canadian politics is a total sham. 

Trade

Another major cover-up has come to light. Highlighted by the UK Tar Sands Network, it involves setting up a trade agreement called the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). It would work along similar lines to the North American Free Trade Agreement (NAFTA). It’s because of the CETA talks - going on behind closed doors - that the FQD has stalled.

Effectively what this means is that big oil could sue Governments if their profits were affected in any way by environmental regulation. It could also affect First Nation legal challenges. But there are wider implications beyond big oil, as reported here in the Globe and Mail. The article finishes with this comment; 'CETA is the wrong model for Canada and Europe. Unlimited growth and economic globalization are killing the planet. CETA serves only the profit interests of the big business community. We can do better'. In a nutshell! Avaaz has recently launched No tar sands in Europe.

CONCLUSION AND REFLECTIONS
When I first started this article I didn't know half the story about tar sands. Like most people I had a general knowledge of what was going on. The deeper I got into it the more the introduction seemed like an understatement.

I'm left with the only conclusion that I can think of. Tar sands has to stop. And will it stop?

My crystal ball is telling me that at some point in the future Canada will end up with a massive white elephant in the middle of a dust bowl. A perfect storm is brewing. Increasing oil prices, more demand, a general move towards renewables, declining reserves, investment risk and the greatest irony of all - the effects of Global warming could shut down the entire operation.

But the climate denial brigade will march on, handing out blinkers to those gullible enough to take them.

Of course it won't end at Canada's borders. Already the Pied Pipers of big oil are planning to troop around the Globe - exploiting unconventional oil wherever they find it.

But they say every cloud has a silver lining. China has recently agreed on the implementation of a new 5 year plan aimed at generating a more sustainable economy. There are many flaws in the system. Corruption is not uncommon. But if China pulls it off, it could leave North America looking like a lumbering dinosaur.

And just to consolidate the issue, on June 14 the IPCC released the full Special Report on Renewable Energy Sources and Climate Change Mitigation (SRREN), following the release of the summary for policy makers on May 9. The message? Yes the World can function on renewables. Could this herald the final nail in the coffin for fossil fuels? We wait and we wonder.

Footnote

This is an abridged version of an article on tar sands that I recently published on my blog. It took me over 2 months to research and produce. The aim of the article was to produce an overview of the various facets of tar sands production from 'well to wheel'.

Now that you've read this - read this brilliant article by Bill McKibben in the Huffington Post.