Saturday, 4 June 2011

Keystone XL, the oil sands and the Stanley Cup finals

This blog comes to you from Vancouver, on the night that the Vancouver Canucks' Alex Burrows, le Vampire du Quebec, stunned the Boston Bruins with his second goal a mere 11 seconds into overtime. The City of Vancouver, with its ubiquitous car flags and Canucks jerseys, reminds me of Green Bay the weekend of a Packers game; only this isn't a city of 100,000 people, it's a metropolis of two million.

The Stanley Cup finals isn't the only thing that is getting Canadians and Americans worked up about their relationship. Controversy continues to roil the fate of the Keystone XL pipeline, the planned $13 billion pipeline that would transport crude from Canada's oil sands ("tar sands," to some inclined to criticize it), to refineries in the Gulf Coast. Tensions are particularly high after the US Department of Transportation ordered Canadian pipeline builder and operator TransCanada to shut its smaller Keystone 1 pipeline after leaks were detected [NYT story].

The pipeline is the flashpoint for a much bigger controversy: Canadian development of its oil sands in Northern Alberta. This blogger recently toured Suncor oil sands facility in Fort McMurray, a guest of Suncor and Carbon Management Canada, which provides some research funding for this blogger. What I learned on this trip was nothing eye-opening or surprising. In fact, it should surprise no one that Suncor, in conducting some 150 tours a year of its oil sands refinery, is fully prepared for people that are extremely critical of the whole business.

Oversimplifying a bit, the Canadian oil sands industry literally draws bitumen from the oil sands, or the sandy soils of Northern Alberta, which are especially rich in bitumen content. Northern Alberta's oil sands are estimated to contain as much crude oil potential as the world's total reserves of conventional oil. The process requires that huge chunks of earth be dug up, and run through a "upgrading" process in which steam and hot water are used to separate the bitumen from the sand, which is thereafter refined into petroleum and petroleum products. There are a lot of "primers" out there, and what is interesting is that people can disagree vehemently about whether we should be doing this, but they seem to agree on descriptions of the process. This primer by Environment Northeast, and environmental NGO, seems helpful.

Here are a few facts worth knowing about oil sands, some courtesy of the Director of Sustainability for Suncor, who helped lead the tour:
  • Although most oil sands facilities recycle water repeatedly, the upgrading process is extremely water-intensive. Suncor's water recycling rate is about 95% -- 95% of the water going into the upgrading process goes back into water that will be used again. And yet, about 2.5 to 3 barrels of water is required to produce one barrel of oil. If water were not recycled, it would require something more like 50 or 60 barrels of water to produce one barrel of oil.
  • Suncor, with an old, fully depreciated facility (about 40 years old now at Fort McMurray), can produce a barrel of crude for $30 to $35 per barrel. This is compared to the $5 to $8 that it costs producers in Saudi Arabia to produce a barrel. With oil prices at around $100 per barrel, though, this is a highly profitable business.
  • Suncor's direct greenhouse gas emissions are about 0.099 tons of CO2 per barrel. But over a lifecycle analysis, according to Environment Northeast, total emissions are more like 4 tons. This is about 5 to 10 percent more over the lifecycle emissions of conventional crude oil production.
So what do these facts tell us? Is this worth doing or not? And what does this have to do with the Stanley Cup??

It is easy to look at the impacts of oil sands and conclude that this is not worth doing. We are talking about ripping up entire forests and sucking the oil out of it, then trying to put it back. It sounds preposterous. And the footprint is huge: over the 40-year life of the Suncor Millenium facility, about 17,800 hectares have been disturbed. 1200 have been reclaimed. And the water consumption is hard to get around. The current oil sands production output is about 1 million barrels a day, which means it is consuming about 2 to 3 million barrels of water per day.

But that's a little too blithe. As behemoth an enterprise as the oil sands is, it is still a price taker on world oil markets, as everybody is. Shutting down the oil sands will accomplish nothing. And for Canada, it would be extremely disruptive economically.

But what seems more important to observe about the oil sands is that Canadian supply of oil to the US is, on the whole, a much less disruptive relationship than that presented by alternative suppliers, even the second-largest US supplier, Mexico. There is something important about doing something right, and as environmentally disruptive as the oil sands are, my adoptive country is doing it about as well as it can, and undertaking much greater care than any oil producer in the world. If you start thinking about the oppression, corruption, and political upheaval that oil has produced in the Middle East and in places like Nigeria, ripping up huge swaths of northern boreal forest starts to look less and less evil.

And finally, as an American transplant living in Canada, I can say that Canadians are just a little too insecure about what they bring to the table in a bilateral relationship with the US. Some might say that the obsession with oil sands is a manifestation of that insecurity. Alberta Premier Ed Stelmach recently said, "A good neighbour lends you a cup of sugar. A great neighbour supplies you with 1.4 million barrels of oil per day." That's a little clumsy and more than a little self-serving, but there is something valuable about this co-dependency: a reason for the two countries, which share the largest undefended border in the world, to value each other is important for a whole host of reasons beyond environmental and economic ones. It makes possible the positive excitement over a transboundary Stanley Cup, which hasn't happened very often recently. Could you imagine what International Cricket would be like if Pakistan and India actually got along?

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