Though they may be a favorable alternative to a massive oil spill devastating the Gulf Coast, the effects of oil sands processing can’t quite be called clean or safe. (image: Edward Burtynsky for the Globe and Mail via treehugger.com)

The environmental and economic disaster in the Gulf of Mexico oil spill has made clear the risks of deepwater drilling in search of crude oil. Images of oil-covered seabirds and contaminated beaches on computer monitors and television screens across the country will no doubt bring increased wariness and stricter regulation of deepwater drilling and offshore drilling in general.

Proponents of Canada’s oil sands are taking advantage of this unprecedented situation by singing its praises in contrast to the terrible cost of deepwater drilling gone wrong. But while their praises may seem legitimate in the shadow of the largest oil spill in US history, the environmental devastation and high cost of extracting and processing oil sands have not changed.

Reporting on a speech he made to a business group, the Calgary Herald summed up the message from CEO Bruce March of oil sands developer Imperial Oil: “Canada’s oil reserves offer the only safe and most environmentally friendly source of energy to meet world demands over the next three decades.”  Whether those exact words were spoken by March himself is not clear, but the statement is at best open to debate and at worst deeply misleading. Squeezing synthetic crude oil from oil sands in Alberta requires the excavation of millions of tons of earth in a forested wilderness, contamination of millions of gallons of fresh water that form toxic ponds, and emits millions of pounds of greenhouse gases into the atmosphere.

Responding to a US trip by Alberta Premier Ed Stelmach that included promoting oil sands to US lawmakers, economist Jeffrey Rubin summed up his criticism:

The tar sands aren’t a greener alternative to deep-water oil. They’re just a more expensive alternative. And the more that synthetic oil from tar sands replaces deep-water production, the more you’ll pay to burn it.

Calling oil sands excavation and processing “effectively a massive strip-mining project with a huge carbon emissions trail,” Rubin expressed disappointment that the tragedy in the Gulf had led some to see the process in more environmentally favorable light. Taking a page from his book that paints a gloomy picture of our petroleum-based global society, Why Your World is About to Get a Whole Lot Smaller, Rubin also noted the great economic expense of making useful crude oil out of oil sands and predicted that it would help drive gasoline, heating oil, and other petroleum product prices to staggering highs in the next decade. Those spiking prices, he posits, will bring about profound societal changes; “The very oil prices that are needed in order for tar sands to replace deep-water production are the same ones that will take millions of North American drivers right off the road,” he wrote.

The environmental effects and high cost are not lost on oil sands-men like March, who said his company and others are working to bring down costs and mitigate negative environmental effects:

“Our goal on land use is simple,” he said. “After development is completed, we want no evidence that we were ever there.”

Until that goal is achieved, however, oil sands will continue to be a costly and environmentally taxing source of crude oil, regardless of disasters that result from other methods of oil extraction. True, oil sands operations will never spout millions of gallons of crude into the ocean, but unchecked water pollution, excavation of forests, and greenhouse gas emissions associated with oil sands processing hardly make it a “clean” alternative.

Oil sands, shown here as a slurry in the early stage of the process that produces synthetic crude oil, are an increasingly large source of America’s oil. (image: nytimes.com)

As spilled oil spreads throughout the Gulf of Mexico and threatens a widening swath of US coastline, public attention has turned to other methods of producing crude oil that involve fewer risks of environmental and economic disaster. Once such method is the synthesizing of crude oil from oil sands (a.k.a. tar sands) in Alberta, Canada. Although the extraction and processing of oil sands carries heavy environmental costs, the risk of a catastrophic explosion or spill are much lower than on offshore drilling rigs.

An in-depth article in Wednesday’s New York Times lays out the benefits and costs of crude oil from the oil sands of Alberta, sure to become a more attractive but also more scrutinized source of oil for the US in the coming months and years. The benefits: huge supplies (second only to those of Saudi Arabia), a lower risk of spill and explosion, geographical proximity, and the friendliness and stability of the Canadian government. The costs: environmental devastation caused by the extraction process (excavation of millions of tons of sand and toxic wastewater ponds), energy- and water-intensive processing of sand to produce synthetic crude, and high carbon emissions produced by processing.

“Canadian oil sands are expected to become America’s top source of imported oil this year, surpassing conventional Canadian oil imports.” Source: IHS Cambridge Energy Research Associates (image: nytimes.com)

For their part, oil companies (Shell is the largest oil sands producer in Alberta) are developing new technology to help bring down the emissions of oil sands processing, according to a separate New York Times report published on its Green blog on Tuesday. The blog reported on one oil company’s ambitious goal of reducing emissions from oil sands production by 40 percent over the next 15 years. Oil companies involved in oil sands production are aware of the environmentally damaging effects of their activities and are working to fix them.

Even when the environmental costs of oil sands production are taken into the consideration, the economic payoff of synthetic crude from oil sands is keeping projects humming. Despite the high costs of oil sands production, the price of crude has remained high enough for most of the past few years to make the undertaking worthwhile. But a recent report publicized by a third New York Times piece, published on the Green blog on Wednesday, questions the long-term economic benefits of oil sands. The report, produced by RiskMetrics and investment adviser Ceres, calculates the monetary cost of environmental cleanup from oil sands operations as well as pending legislation that could make oil from tar sands even more expensive or ban it outright. The report’s final recommendation is one of caution:

We conclude that oil sands producers banking on rapid growth are taking a big gamble. Over the long-time horizon of these capital-intensive investments, market and energy policies could turn against their projects for reasons largely beyond their control.

There is no question that demand for oil in the US and around the world will remain strong for decades to come. As long as that demand is there, oil sands will be a viable source of oil and source of revenue for companies that process them. And as conventional oil (crude oil acquired through onshore or offshore drilling) becomes more expensive and hazardous to reach, the appeal of synthetic crude from oil sands will only grow. The question raised by the Ceres report is this: can oil sands producers clean up their act faster than state governments and Washington can enact laws that render the product of oil sands unprofitable? It could go either way, but there is a very real danger that the oil companies will lose the race.

Therein lies the dual identity of Canadian oil sands: a plentiful and promising energy source that may or may not be worth steep environmental and economic costs.

Jeff Rubin and the cover of his recent book, Why Your World is About to Get a Whole Lot Smaller. (image: treehugger.com)

Jeff Rubin is not an oil alarmist—he doesn’t think that the world’s supply of crude will run out and cause resource wars and food shortages of apocalyptic proportions. In fact, he doesn’t even think the world’s supply of crude is running out at all. Rubin made this clear as he addressed the Business of Climate Change Conference in Toronto last September, opening his keynote address with the statement, “The world’s not running out of oil.” However, after milking the pause for a second or two, Rubin went on: “But it has already run out of oil it can afford to burn.”

Rubin, former head economist at CIBC World Markets, is often referred to as Canada’s top economist, largely because of his bold and accurate economic predictions: in 2000, he forecast that the price of crude would hit $50 per barrel within five years (it broke the $50 mark in 2004) and foresaw the huge price spike of 2008. He recently predicted that the price of crude would hit $100 again by the fourth quarter of this year.

His view of the future of oil and its role in civilization is just as startling as many prevailing theories within the peak oil community, but interestingly different from most that have come before.

As he explained at the Business of Climate Change Conference, Rubin envisions a world that has run out of cheap oil “not in the next 10 to 12 years, but in the next 10 to 12 months.” In his model, the beginning of the oil crisis is not marked by a sudden and extreme depletion of oil reserves, but oil prices that rise at an accelerating rate, driven by rapidly growing demand from the global economy (primarily from developing countries like China and India) and expanding development of expensive and energy-intensive non-conventional sources. According to Rubin, “since 2005 conventional oil supply has not grown, and may never grow again.” As the supply from conventional oil fields drops off, it will have to be replaced by supplies from dirtier, harder-to-process unconventional sources like the tar sands of Alberta, Canada. Because the processing of unconventional sources is so expensive, Rubin argues, the crude oil it produces will be more expensive. Combine higher baseline production costs with growing global demand and you get a huge increase in crude oil prices over a short period of time.As anecdotal evidence of the rapid depletion of conventional oil resources, Rubin pointed to frequent news stories on discoveries of major oil reservoirs in the Gulf of Mexico and elsewhere, in contrast with the lack of reporting on massive, decades-old oil fields drying up. According to Rubin, the world loses 4 million barrels per day of crude oil production every year, but we don’t hear much about it.

On the demand side, Rubin sees the global economy as the overarching driver of the world’s skyrocketing thirst for crude. Globalization has created a system of commerce that requires raw materials to be shipped from their places of origin to far-away industrial centers that produce consumer goods (everything from chicken wings to HD televisions), which are then shipped around the world again to consumers. Petroleum-based fuels power all of this transport, be it by sea vessel, airplane, or truck, Rubin reminded his audience. The problem with the global economy, he says, is that “it assumes that the cost of moving goods around the world is minimal or marginal.” And it was that assumption that allowed the sudden spike in crude oil prices in July of 2008 to trigger a global recession, Rubin said, emphasizing his belief that “the world’s biggest energy shock” and not the sub-prime mortgage crisis in the US caused the most severe economic downturn since the Great Depression.

In short, Rubin emphatically believes that two intensifying and antagonistic trends will cause a blast-off of crude oil prices in the next 15 months: exponentially-increasing demand for oil tied to the global economy and the ever-accelerating depletion of conventional (cheap) oil reserves.

In Rubin's view, the worldwide shipping of raw materials and consumer goods will soon be a relic of a global economy rendered obsolete by astronomical oil prices. (image: noaa.gov)

Instead of calling for government action to avert the crisis-causing apex of these two trends, Rubin thinks the crisis will be addressed by local and individual action driven by market forces. “The prices needed to get unconventional oil out of the ground are the same prices that will get you off the road,” he explained. He elaborated by predicting that stratospheric oil prices would force consumers and producers alike to change behaviors that would eventually lead to a breakdown of the global economy and a return to local economies. After people stop driving, he suggested, they will begin to seek out cheaper goods, which will by then be made and distributed by nearby manufacturers and distributors, who are able to offer affordable prices thanks to lower fuel utilization and a resulting decrease in transport costs. “In a world of triple-digit oil prices, we will not be getting our food from China…we’re going to have to grow our own,” Rubin proclaimed.

So what if Rubin is right? What if his streak of correct predictions extends to this global bombshell? Under Rubin’s model, people should brace themselves for steep increases in gasoline, diesel, and heating oil prices over the next two years (after oil hits $100 this year, Rubin has said, it will reach $225 by 2012). Specifically, those preparations should amount to major cutbacks in consumption of and reliance on petroleum-based fuels—switching to ethanol or biofuels wherever possible, and reducing overall consumption of fuels by switching to more efficient vehicles and appliances are the most obvious first steps.

As is the case with all predictions, only time can prove Rubin’s right or wrong. In five years, Jeff Rubin will be definitively proven to be a genius or a paranoid dud. In the winter of 2015, if you find yourself sitting down in your biofuel-heated home to a dinner of locally produced food carried home on a bicycle while you marvel at the collapse of the global economy and shake your head at $15-a-gallon gasoline, remember, you heard it here first!

(Watch Rubin’s full speech at the Business of Climate Change Conference below)

[There is a video that cannot be displayed in this feed. Visit the blog entry to see the video.]

Peter Davies, former head economist at BP, says fears about peak oil production are “overstated and exaggerated.” (image: telegraph.co.uk)

An article in Emirates Business 24/7 this week announced new studies and figures aimed at proving that claims about peak oil are “exaggerated.” This latest round in the high-stakes game between oil producers and climate-change whistleblowers, however, isn’t exactly from the most neutral of sources. The primary claim reported was made by Peter Davies, a former chief economist for BP, while delivering a speech during a recent seminar held by the Saudi Association for Energy Economics (SAFE)–the article notably omits that Davies is no longer in BP’s employ. While paying lip service to the fact that global oil resources are, in fact, finite, Davies countered “theories” about peak oil by saying generally that technology and economics will find a way to stretch our oil resources much farther into the future than predicted:

Those who believe in peak oil tend to believe that technology and economics don’t matter, and I think this is false. The application of technology, the innovation of new technology and economic forces especially mean that recoverable oil resources can increase. If there is a peak in oil, it will come from the demand side. There are always fears, but these remain overstated and exaggerated.

BP’s estimates of word oil reserves (broken down by region) at the end of 2008. (image: bp.com)

This of course, would be a balm to the anxieties of any oil-producing nation, and the article goes on to cite statistics from the Organization of Arab Petroleum Exporting Countries (OAPEC),which appear to back up Davies’ statement. According to OAPEC, there are some 1,809 billion barrels of oil in the Gulf region beyond proved reserves, which cannot be extracted using current technology but which could be potentially tapped in the future. The article claims: “These quantities, if they can be extracted, will meet the world needs for 60 years.” But that is a rather large “if.” The figure falls as low as “enough oil for seven years” if only 10% of the deposits are usable and obtainable.

As we’ve reported previously, Colin Campbell, a former BP geologist and founder of Association for the Study of Peak Oil and Gas, has stated that peak oil occurred in 2008, and that numbers like OAPEC’s are based on poor reporting practices for oil reserves. It is apparently common in the industry for oil companies to report the minimum of reserves upon the discovery of a field, and then revise the public estimates upward during the course of its life, so that the true reserve numbers are based on research done at the outset and don’t reflect newly discovered oil. In addition, he believes that “conventional” reserves peaked in 2005, and that since that time, the shortfall between demand and what the world’s oil fields could put out has been met by oil from more expensive and difficult to extract locations such as the Canadian tar sands. By Campbell’s logic, we are already tapping the sort of resources that the Gulf is counting on for its future productivity, and that shift was largely responsible for the oil price spikes we saw in the winter of last year. Another peak-oil believer, Swedish physicist Kjell Aleklett, claims that overestimation of Gulf reserves by the International Energy Agency may be partially responsible for the current financial crisis in Dubai. The Emirates city-state is surprisingly poor in oil resources, and dependent on petro-fueled tourism from its wealthier neighbors and other parts of the world. So, if Akelett and Campbell are correct, Dubai’s problems may be a harbinger of things to come – a canary in the oil field, if you will – if petroleum energy use doesn’t shift in a more sustainable direction.

ACT may have a new technology to extract more oil from Alberta’s challenging oil sands. (image: decideforyourself.wordpress.com)

On Nov. 12 American Clean Technologies (ACT) reported additional information about the pilot tests conducted by its American Petroleum Solutions (APS) subsidiary, including the fact that the oil extraction rate was more than 99 percent in tests conducted on oil sand samples from Utah and Alberta, Canada.

APS, which ACT acquired on Oct. 5, uses its patented fluidizer—which the company refers to as “a water-based technology”—to separate oil from any solid surface, including soil and sand. This fluidizer allows oil to be rejected by a solid surface, resulting in recoverable oil. While APS has used this technology for environmental remediation projects after oil spills, removing oil from contaminated soil or sand, the recent tests have shown its promise in extracting oil from the difficult-to-mine oil sands of Alberta.

The findings were reported in a company-issued press release, so the information has not been independently verified. However, this technology could significantly reduce the cost of producing oil from oil sands, making oil sands excavation and processing projects more attractive to investors, and laying the groundwork for a major increase in North American oil production.

According to the Alberta Energy website, Alberta ranks second after Saudi Arabia in proven crude oil reserves. The oil sands areas of Alberta contain an estimated 1.7 trillion barrels of crude bitumen trapped in a mixture of clay, sand, and water. About 10 percent (170.4 billion barrels) of this bitumen is recoverable using current technology. Depending on the bitumen content of the oil sands, potentially 90 percent to 100 percent of the bitumen could be recovered using ACT’s developing technology.

Gregg Gethard wrote on HeatingOil.com that Canada’s oil sands are more difficult and expensive to mine. Gethard cited an article on Bloomberg.com, which quoted the International Energy Agency’s World Energy Outlook as saying that “oil sands projects in Canada account for the bulk of the suspended oil [production] capacity” resulting from the global economic crisis.

(image: Caveman 92223 via flickr.com)

In a Guardian opinion piece published on Wednesday, John Elkington and Gary Kendall make the case for a massive transformation of our hydrocarbon-based economy by mid-century, in response to pressures of the geological, geopolitical, and climate change variety. They point to the fact that even Big Oil knows by this point that we are at the beginning of the end, that the Age of Oil is in irreversible decline. And while the “big six” oil companies seem to be doing well on the surface, they are going to have to drastically change their tune to adapt to a shifting market.

Elkington and Kendall focus on the three aforementioned main factors that are pushing the world away from a carbon economy: geology, geopolitics, and climate change. Geopolitically, there are tensions among oil-producing and oil-consuming nations cropping up in the fight for what’s left of the world’s oil. The pair cites Nigeria and China specially, who are at odds over China’s attempts to lock up oil supplies in African countries.

Geologically, Elkington and Kendall argue that the new market won’t support the lengths to which big oil will need to go in order to procure a continued supply of oil. While there is still oil left in the world, we are going to have to turn more and more to “difficult oil,” or oil trapped deeper in the earth or under the sea. In an effort to satisfy investors, oil companies will be forced to go after riskier, dirtier substitutes like the Canadian Tar Sands, gas-to-liquid options in Qatar, or coal-to-liquid options in China and elsewhere. These prospects will add increased amounts of carbon emissions to the air, which brings us to another source of pressure: the climate.

The pair rightly points out that to really, truly avoid catastrophic climate change impacts, we must take action and drastically decrease our carbon emissions by 2050. They posit that to realistically meet this requirement, we will need to transition to a zero-carbon energy system by mid-century. They imagine a world of energy efficient buildings and appliances, one where we aren’t allowed to burn fossil fuel with no plan to capture emissions. They even go so far as to say that by 2050, the actions of big oil to unearth carbon resources for market will be considered “strikingly primitive.”

Now, I would love to think that Elkington and Kendall are right, and that we’re all going to make this thing work and be carbon-free by 2050. And maybe I’m extremely pessimistic, but I just don’t see it happening. Given the enormous uphill battle it is to convince one country, let alone the whole world, to do what needs to be done…I just can’t imagine that 2050 will bring a resolution. As Elkington and Kendall point out themselves, this new vision of the future is pretty hard to swallow for Big Oil, who, let’s face it, have a lot of control. As Al Gore recently told Jon Stewart, there just isn’t enough monetary incentive for big oil to make the kind of changes needed for a zero-carbon economy, and governments move too slowly. I wish so much that I could agree with the very intelligent Elkington and Kendall, but I just can’t. I think we’re in for a bumpy ride.

Image courtesy Sean Scanlon at http://www.redinkphotography.com/galleries/california/