Canada’s large reserves of tar sands (or oil sands) are poised to become the number one source of U.S. crude oil imports in 2010, according to a new report from research firm IHS Cambridge Energy Research Associates.
Oil sands imports could ultimately increase to account for 20 percent to 36 percent of U.S. oil and refined product imports by 2030 from the 2009 level of 8 percent, according to the report, “The Role of Canadian Oil Sands in U.S. Oil Supply.”
I’m so glad the Houston Chronicle still uses the term tar sands, unlike the semi-greenwashing term CERA is using (see Memo to all: They ain’t “oil sands.”)
The CERA report also seriously underplays the devastating environmental and human health consequences of the “biggest global warming crime ever seen.” See also Canadian bishop challenges the “moral legitimacy” of tar sands production. Indeed, a major new study by Ceres, discussed below, comes to a very different view.
And these reports couldn’t be more timely, given which company is betting big time on the tar sands (see BP stand for “back to petroleum” — oil giant shuts clean energy HQ, slashes renewables budget up to $900 million this year, dives into tar sands).
CERA claims the environmental concerns are not big enough to undermine the rationale for continued expansion of the tar Sands:
Energy security does not need to be at odds with the environment. Innovation in oil sands has been a constant theme. Since its inception, the industry has made and continues to make major technological strides in optimizing resources, innovating new processes, reducing costs, increasing efficiency, reducing greenhouse gas (GHG) emissions, and reducing its environmental impact. However, new techniques and technologies are needed to continue to grow production sustainably. Cooperation between governments, both in the United States and Canada, and the private sector is crucial to continued advancement of new technologies.
As the Houston Chronicle reports,
The findings are at odds with those released this week by sustainable investment advocacy group Ceres, which released a report saying Canada’s oil sands are potentially riskier investments than the Gulf of Mexico. Stricter climate regulation and a possible federal low-carbon fuels mandate undermine such investments, the study says.
And CP just happens to have an analysis of the Ceres report by CAP’s Colorado-based Tom Kenworthy.
As hard as it is to take our eyes off the volcano of oil erupting into the Gulf of Mexico, a new report on the Canadian tar sands industry is worth a look northward.
“Canada’s Oil Sands/Shrinking Window of Opportunity,” just published by Ceres, a coalition of investors, environmental and public interest organizations that studies challenges to sustainability, says that in financial and environmental terms our northern neighbor’s tar sands industry may be even riskier than sucking oil from beneath the Gulf.
“Most of these risks are related to the energy- and water-intensive nature of oil sands production, risks that will only increase as the industry seeks to double or even triple production in a world that is increasingly becoming water- and carbon-constrained,” writes Ceres president Mindy S. Lubber in her introduction to the report.
The mining, processing and upgrading of the viscous bitumen that lies beneath a great swath of northern Alberta, produces about 1.3 million barrels of oil per day. Most of it is exported to the U.S. where many states are considering imposing low-carbon fuel standards for transportation fuels that threaten the Canadian industry’s growth. Canadian and Albertan officials, along with industry leaders, have embarked on a high-intensity lobbying campaign to change the dirty image of tar sands oil, which is about three times as carbon intensive as conventional oil.
Because new production of oil from tar sands is so expensive, requiring a world price of at least $65 a barrel and “potentially as high as $95 per barrel to make economic sense,” the industry’s plans to greatly expand are vulnerable to price pressures, including those from low carbon fuel standards. Though the carbon content of tar sands could be reduced by mixing the oil with biofuels produced from cellulosic ethanol, that additive is not yet available on a commercial scale. Ceres estimates that if a quarter of the U.S. vehicle market were subject to a low carbon fuel standard, requiring a 10% reduction in the carbon intensity of gasoline by 2020 and another 10% reduction by 2030, that could cut tar sands production by 13.5% compared to a baseline estimate.
Other risks facing the industry cited by the Ceres report include:
- Tar sands production that relies on strip mining of deposits close to the surface uses large quantities of water – as much as four barrels of water for every barrel of oil produced. Though the industry is increasingly shifting to less water-intensive methods including in-situ release of bitumen by underground steam injection, water constraints, including the impact of climate change, could hamper growth.
- The industry faces growing costs from land reclamation under pressure from new government reclamation directives, and this could mean higher operating costs for some producers.
- Opposition from aboriginal communities could stymie growth and slow efforts to build pipelines to Canada’s west coast for export to Asia.
- Carbon capture and sequestration technology could help the tar sands industry lower its carbon intensity, but it would require lengthy pipelines and raise the price of production by $11.40 per barrel.
“Added together,” Lubber concluded, “these wider-ranging challenges will make oil sands production increasingly risky in the years ahead…. (G)lobal oil prices will need to remain high – possibly approaching $100 a barrel – to justify the planed $120 billion expansion in the oil sands region in the next decade. Oil sands producers must also be mindful that if global oil prices get too high, above $120-$150 a barrel, it will likely reduce global oil demand and shift markets in favor of alternative fuels. Bottom line: oil sand producers are operating in a narrowing window of profitability.”
