Little of the disaster covered center-column here would be probable were it not
for unsustainable overpopulation.
Aug 7, 2010 Economist Magazine
Ottawa -Canada's energy industry
Tarred with the same brush
The Gulf spill has focused American minds on pollution from Canadian oil
producers. But cleaning up the tar sands will not be easy
“A GOOD neighbour lends you a cup of sugar,” read an ad in the Washington Post
last month. “A great neighbour supplies you with 1.4 million barrels of oil a
day.” Ed Stelmach, the premier of the energy-rich province of Alberta,
certainly knows how to make the case for Canadian petroleum. Buying from Canada
neither props up an authoritarian regime nor exposes the United States to
political manipulation of its energy supply. Little wonder, then, that Canada
is the biggest exporter of oil to America, with 22% of the total. The
runners-up, Mexico, Saudi Arabia and Venezuela, have just 11-12% each. And the
country’s potential seems limitless: Canada’s 179 billion barrels of oil and
gas reserves rank second in the world.
There is, however, a catch: Canadian crude is dirty. Just
over half the country’s oil comes from tar sands, a mixture of water, sand,
clay and bitumen—an extremely dense and thick form of petroleum, which usually
must be melted before it can be extracted and refined. It takes up to four
barrels of water to generate one barrel of tar-sands crude, and 20% of Canada’s
natural gas (a clean fuel) is used to produce oil (a dirty one). Mining the
sands also strips forest and creates vast ponds of toxic byproducts. According
to America’s Environmental Protection Agency (EPA), producing Canadian
tar-sands oil generates 82% more greenhouse-gas emissions than does the average
barrel refined in the United States.
In the wake of the Deepwater Horizon spill, and of a pipeline
rupture that shed 19,500 barrels of Canadian oil into Michigan’s Kalamazoo
river last month, concern in America is growing over the environmental
consequences of oil exploration. Federal government agencies were banned from
buying tar-sands oil in 2007. Henry Waxman, chairman of the House Committee on
Energy and Commerce, calls it “the dirtiest source of transportation fuel
currently available”. This year he was one of 50 lawmakers who complained to
Hillary Clinton, the secretary of state, that her department had not analysed
the environmental impact of a proposed pipeline extension that would more than
double imports from the sands. The epa then recommended that the department,
which must approve international pipelines, consider alternatives to Canadian
crude. On July 26th the department extended its review of the project by 90
The best hope to reduce pollution from the sands is probably
finding alternative energy sources or cutting consumption. Transforming tar
sands into crude is costly as well as dirty: the process only becomes
profitable with oil prices in the $60-85 range or higher. Indeed, the recession
put 70% of proposed investment there on hold, although half of that has since
restarted, according to Jackie Forrest of IHS CERA, an energy-forecasting firm.
With just a modest fall in oil prices, the sands’ production would start to go.
Changing the status quo, however, will be hard. The oil
industry’s economic importance to Canada has consistently trumped green
concerns. Energy, including natural gas, conventional oil and coal, makes up
a quarter of Alberta’s $211 billion economy. The rest of the country
benefits from service and supply contracts with energy companies, and from
the government’s redistribution of Alberta’s wealth to poorer provinces. At
the peak of the commodity boom in 2008, energy was Canada’s largest export.
As a result, the sands have only been lightly regulated. Instead of being 6%
below 1990 levels of greenhouse-gas emissions by 2012, its commitment under
the Kyoto protocol, Canada will be 30% above.
Stephen Harper, the prime minister, built his political
career in Alberta and shares its energy-friendly attitudes. He has refused
to implement a new emissions policy until America does. Given the Democrats’
recent decision to drop a cap-and-trade bill in the Senate, that seems a
long way off. It also means the environmental costs of the sands’ oil are
not about to be reflected in their price. In fact, the political fallout
from the Gulf spill might actually increase America’s dependence on Canadian
supplies, if demands for new limits on offshore drilling are met.
Moreover, efforts to press Canada into cleaning up the
business would face stiff resistance from America’s energy lobby, since many
operators in the sands are based in the United States. One of the draft
energy bills floating around the Senate this year even proposed removing the
ban on government purchases of tar-sands oil. And even if America does try
to reduce its imports, China will be more than happy to take them. Chinese
firms have already begun investing heavily in the sands.