Conflict Oil or Canadian Oil?

A second dispatch from Alberta's oil sands.


Fort McMurray, Alberta—This is the second dispatch from my oil sands tour. The first dispatch yesterday focused on the oil sands mining. After our Suncor oil sands mine tour, our band of flacks and hacks were bussed back to our motel for cocktails and dinner with various Canadian oil sheiks, including Alberta's Minister of Energy Ronald Liepert, TransCanada Pipeline vice president Robert Jones, and ConocoPhillips Canada senior vice president Nick Olds, among others. In the fashion of such tours, we sat around a conference table listening to the concerns of our hosts, which in this case, mostly involved activist opposition to the construction of the Keystone XL pipeline in the United States. When completed the pipeline could transport 1.3 million barrels of oil per day to refineries in the Midwest and on the Gulf Coast.

However, environmentalist groups like the Natural Resources Defense Council (NRDC) not only oppose the oil sands production because of the greenhouse gas emissions, but also assert "the oil industry is transforming one of the world's last remaining intact ecosystems into America's gas tank." Another concern is that the Keystone XL supposedly threatens "to contaminate freshwater supplies in America's agricultural heartland."

Dinner with Canadian Oil Sheiks

But before getting to the pipeline controversy, Liepert and others discussed the issue of oil sands greenhouse gas emissions compared to those of conventionally produced oil. Liepert cited a 2010 well-to-wheels study [PDF] by the consultancy IHS Cambridge Energy Research Associates that calculated that with regard to greenhouse gas emissions, the "average oil sands import is about 6 percent higher than that of the average crude oil consumed in the United States." A 2010 report from the Royal Society of Canada notes that other studies have found that producing oil from oil sands results in greenhouse gas emissions that average 10 to 20 percent higher than conventional oil. Oil sands emissions currently account for 6.5 percent of Canada's emissions and 0.15 percent of global emissions. However, recent reports suggest that these emissions will triple by 2020. This is something to take into account as one considers trade-offs between energy security and climate change.

However, TransCanada's Robert Jones, who is in charge of getting the Keystone XL pipeline approved and completed, pointed out the energy security benefits to the United States of importing oil from Canada. He asked, why would the U.S. want to depend on "conflict oil" imported from countries run by unsavory regimes like those of Venezuela, Nigeria and Saudi Arabia? And whose oil is dirtier? After all, producing oil sands crude in Canada already includes the costs of reclaiming the land and a whole panoply of other environmental regulations.

The assembled Canadian oil moguls cited studies [PDF] that project the creation of as many as 600,000 jobs and a $775 billion boost to the U.S. gross national product by 2035 as a result of importing Canadian oil. And, of course, the Canadians played the China card. If the Americans are too good to take Canadian oil, the Chinese will be happy to get it. They noted that Chinese enterprises have invested $15 billion in Alberta in the last 18 months. The Chinese are agitating for the construction the Northern Gateway pipeline to the port of Kitimat on British Columbia's Pacific coast so that that country could import oil sands crude. 

TransCanada's Jones noted that the Keystone XL project has already been delayed for three years. The U.S. State Department now says that a final decision will be reached on the pipeline by the end of the year. Jones declared that the pipeline is "shovel ready" and construction would involve hiring as many as 10,000 Americans immediately with up 34,000 by 2014. Energy Minister Liepert dryly commented that in June Alberta, population 3.7 million, created 22,000 new jobs compared to just 18,000 for the entire U.S.

The Natural Resource Defence Council (NRDC) and other environmental lobbyists are right that mining oil sands does mean ripping up some boreal forest. Let's put that in context. Canada's boreal forest covers 2.2 million square miles, an area that is about 60 percent of the size of the entire United States. So far oil sands production has disturbed about 410 square miles of boreal forest. For comparison, the Chicago metropolitan area covers about 10,000 square miles.

What about the claim that Keystone XL pipeline threatens America's freshwater supplies? The main assertion is that a pipeline spill of thousands of gallons of crude could contaminate the Ogallala aquifer in Nebraska, which supplies water for drinking and agriculture. TransCanada counters that Nebraska is already criss-crossed with 21,000 miles of oil and natural gas pipelines which have not resulted in significant groundwater contamination. That 21,000 mile figure is somewhat misleading since most of the pipelines carry natural gas. However, the 20-inch diameter Platte oil pipeline has been carrying about 150,000 barrels of crude per day from the Rocky Mountains across the length of Nebraska since 1953. In 1981, the pipe broke in Wyoming spilling 8,500 barrels of oil into the North Platte River. Jones points out that TransCanada would use the most modern techniques to build and to monitor the Keystone XL pipeline. 

I asked Jones if the already operating portions of the pipeline have experienced any leaks. He grudgingly acknowledged that there have been 12 spills, but quickly adds that 10 of them involved five to ten gallons and were essentially cleaned with a shovel and bucket. No doubt exercising discretion, Jones didn't mention the May 7 spill of 500 barrels of oil that occurred when a valve at a pumping station in North Dakota broke or the 40-barrel spill at another pumping station in Kansas on May 29. Both spills were largely contained at the pump station sites and at the larger North Dakota spill valves shut the flow of oil down within nine minutes.

Since the Keystone XL pipeline will cross numerous rivers, including the Yellowstone, the Missouri, and the Platte, the July pipeline break under the Yellowstone River that released a 1,000 barrels of crude oil comes to mind. Jones points out that bottom scouring by an unprecedented flood probably broke open the pipeline which was laid just 8 feet beneath the river's bottom. To mitigate the chance of a similar incident, TransCanada would use horizontal directional drilling to put the Keystone XL pipeline 25 to 50 feet below river bottoms. Of course, the only way to guarantee no leaks is to ship no oil.

Day Two: Surmont Steam Assisted Gravity Drainage

Loaded onto the bus at 6:45 a.m., our group went in search of oil obtained by means of steam assisted gravity drainage, or SAGD. This time we drove south from Fort McMurray about 40 miles to the Surmont SAGD operations, a joint venture of ConocoPhillips and Total. Our tour guides were a trio of ConocoPhillips executives, Nick Olds, senior vice president for oil sands, Pat Lamont, operations manager, and Perry Berkenpas, vice president for oil sands operations. Again our merry band donned the standard issue personal protective gear, although this time my hard hat came with ear muffs.

Only 20 percent of Alberta's oil sands are shallow enough to mine, which means that other 80 percent must be recovered by other technologies. Berkenpas explained that the Surmont facility uses SAGD in which horizontal drilling creates two parallel wells, one on top of the other exactly three meters (approximately 10 feet) apart. The well pairs can extend to about a kilometer (approximately 0.6 miles). Once completed, operators inject high-pressure 500 degree Fahrenheit steam produced by four enormous natural gas-fired steam generators into the top wells. This melts the bitumen causing a mixture of bitumen and water to drain into the bottom pipe from which it is then pumped to the plant. The SAGD process recovers about 60 percent of the resource in the ground.

The ratio of the bitumen/water mixture pumped out of the wells is about 2.7 to 1. The bitumen and water are separated and the thick bitumen is diluted with synthetic oil at a 1-to-1 ratio so that it can flow through transportation pipelines to refineries. In the trade Surmont's product is known as heavy synbit. When I noted to Berkenpas that he had failed to mention the per barrel cost of Surmont synbit, he cagily replied, "That was deliberate." Some outside experts believe that the SAGD breakeven is around $55 per barrel.

Oil and Water

As we toured Surmont, it became apparent that the vast majority of the facilities and the piping are used for handling water. The hot water is recovered and cleaned so that its heat can be recycled. "This plant is primarily a freshwater handling facility," declared Berkenpas. Deploying what must be a well worn industry adage, he further quipped, "To be a good oil company, you've got to be a great water company."

After the plant tour, we hop back on the bus to visit one of the well pads where 18 well pairs are located. Thanks to horizontal drilling, the wells occupy about 13 acres and drain bitumen from the surrounding 250 acres. The wells will operate for between and 8 and 15 years. The Surmont facility currently produces 23,000 barrels of bitumen per day, but ConocoPhillips plans to up that production to 136,000 barrels by 2015. The company estimates that it could produce as much as 500,000 barrels per day by 2040.

One of my compatriot journalists who had previously toured many other oil production sites expressed amazement at how clean and orderly the facility was—not even stray bits of paper or oil smudges anywhere. A clearly proud Berkenpas responded that seeing oil would mean that something is wrong; it's supposed to stay in the tanks and the pipelines.

Interestingly, anti-oil sands activists who eagerly highlight photos of the vast oils sands mining pits, don't tend to show photos of SAGD facilities. Likely this is because such pictures would not do much to scare target audiences—the footprint of SAGD operations typically occupies only 5 percent of the land from which oil is being recovered, leaving most of the forests undisturbed. 

As our tour group heads back to our motel, the questions posed by TransCanada's Robert Jones reverberate: Why would the U.S. want to depend on "conflict oil" imported from countries run by unsavory regimes like those of Venezuela, Nigeria, and Saudi Arabia? And whose oil is really dirtier?

Ronald Bailey is Reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.

Disclosure: My travel expenses to visit Alberta's oil sands were covered by the American Petroleum Institute. The API did not ask for nor does it have any editorial control over my reporting of this trip

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  1. Energy Minister Liepert dryly commented that in June Alberta, population 3.7 million, created 22,000 new jobs compared to just 18,000 for the entire U.S.

    We tuk yer jerbs!


    1. Were in yer continent stealinz yer jobz!

      1. gravity drainage facility

        they tuk er gravity!

    2. Damn puckheads and snowbacks, takin ur jerbs…wait, how can you take our jobs in Canada?

      1. It’s that enormous sucking sound you hear.

        1. I thought that was the Canucks.

          OH SNAP

          1. It was. But Vancouver doesn’t want to talk about it right now.

            1. Speaking of Vancouver, this is the best picture you’ll ever see of a guy fighting a mob.

              1. Vin Diesel’s Canuck Cousin?

  2. Another interesting read, clearly this will create jobs in Canada. Sadly there will be the usual group who will want to reject anything developed by ConocoPhillips, probably university students you get to have free ride generated by capital from the very same industry they want to eliminate.

  3. That actually does make a lot of sense when you think about it.

  4. We must end our dependence on foreign oil!
    Canadians hate us and our freedoms!
    No Canuck Law!

  5. We need to take as much Canadian oil as we can. We shall grow strong off their labors so we may crush them when they finally unveil their treachery.

  6. where’s Sacre Bleu?

    1. Between Colisse and Tabarnac

  7. The tradeoff between energy security and climate change?

    New flash: insofar as burning oil is heating up the globe, developing nations with many times the US population will be burning more oil no matter what we do. Our use of Canadian oil will have no meaningful impact on global CO2 output, but it will have a large impact on energy security.

    So we’re talking a tradeoff close to infinity in favor of energy security.

    Why was this “tradeoff” even worth mentioning? Just paying tribute to the enviro-religion? There’s nothing rational about the idea.

  8. The dudes who work the oil sands make a shitton of money. It seems like every 22 year old kid in Alberta owns his own home, a sharp contrast with the lazy hippies in Vancouver are still working part time at a coffee shop and living with 5 roommates at age 35.

    1. A chemical engineer I know is moving to Edmonton to work in the oil fields. Doesn’t sound like a bad idea.

      1. I hope he enjoys bitter cold winters.

      2. He will make lots of money, but when they send him even further north than Edmonton it will be fucking cold and the only women he will see for months will be strippers. And not the best ones either, because strippers, like other humans, don’t want to be in northern Alberta if they can help it.

        1. See, that’s the even weirder thing. He’s moving there because he married a Canadian broad. He thought ahead.

          1. Dragging your own woman up there is a wise move. They should bring DVDs too, because Canadian Netflix blows and you can’t get Hulu and I am guessing there are precisely two things to do up there in winter: have sex and watch TV.

            1. That’s why they pay so much

            2. You forgot drink heavily.

              1. Where can I sign up?

            3. how about sledding or making snow men and shit?

              And you can REALLY have a ball if you get a samoyed dog, they’re like big teddy bear/polar bear fluffballs of playful adorableness

            4. that’s why they have sex doggy style watching Grapes do Hockey Nite in Canada

          2. yeah that’s the other side of that coin. If you already have a woman the cold will make it fun to get nice and cuddly and cozy on the couch

      3. Does his company need any more?

        1. Right now in Alberta, if you have skills and are breathing*, you can get a job.

          *This requirment may be eliminated if zombies can get their case heard by the Human Rights Commission.

      4. When Venezuela’s Chavez fired all his oil engineers years ago in a fit of pique, they began migrating to Alberta to help build Canada’s oil industry. They have their own communities up there now and make many times the salary they got under Chavez.

      5. Warty: If you want to see life on Canadian rigs, get your hands on a Canadian tv show that was broadcast for a few seasons not that long ago called “The Rig”. It follows one rig and the crew over I think it must have been a couple of seasons of drilling. The show covers rig work conditions, tearing down and reassembling rigs, family affected by the job, etc. It’s fun to watch and very realistic. We’re Canadians, we don’t fuck around.

    2. Holy shit really?
      that sounds awesome

    3. Absolutely not true. Most of them are still living with their Moms.

  9. Why would the U.S. want to depend on “conflict oil” imported from countries run by unsavory regimes like those of Venezuela, Nigeria, and Saudi Arabia?

    I’m not sure how much we depend on this to begin with. If you take Venezuela out of the group above, we really only get around 18% of our oil from truly “unstable/unfriendly” regimes. And Venezuela, whilst most certainly not an ally of the US, is far from the level of danger that a Nigeria or Saudi Arabia could be viewed.

    But what is somewhat ridiculous is to think that if the US suddenly stopped buying oil from Saudi Arabia or Nigeria that they would somehow have trouble finding new customers. Sure, you would have the satisfaction of saying “we don’t support murderous regimes by buying their oil” but if that was truly a worry then why do buy so much stuff from China?

    1. Venezuela is the only “hostile” country named in the group, and they pretty much have to sell their oil to us, as it’s so heavy it takes special facilities to refine it–facilities that were built in the U.S. long ago for the express purpose of refining Venezuela crude. The alternative is for Venezuela to ship it halfway around the world to refine it, then ship that somewhere else. They need us as a market. Also, the U.S. is about the only country that buys Venezuelan oil and actually pays for it. Their other “customers” either barter for it or pay on extended terms that practically constitute non-payment. We pay in dollars, which they badly need.

      1. Interesting, thanks Dennis.

        The usual argument about “dirty oil” refers to folks like the Saudi’s who actively fund anti-american jihad movements with oil money, but we get like maybe 12% from them. We don’t get any oil from Iran or Lybia or any of the other truly anti-american ME nations. The only part of Venezuela that’s really “dirty” is Baby Hugo, and he looks like his days are numbered. Whether that means Venezuela gets friendlier remains to be seen, but I don’t consider Venezuela to be a major threat to the US.

  10. Disclosure: I own a car that runs on gasoline, and I’ve had to fill it up before.

  11. When push come to shove, why not just invade the neighbors to the north? Conflict-free oil.

    1. We’re just waiting for them to make the first move. Don’t think War Plan Red hasn’t been updated.

    2. @Max the “why not just invade the neighbours to the North? Conflict free.” guy.
      Sorry pal, but you’re an idiot and here’s why.
      1. We know more about your country than you do. Period.
      2.We look like you.
      3.We can easily adopt your accents, attitudes and mannerisms and slip on down into the Excited States of America and YOU WOULDN’T EVEN KNOW WE WERE THERE! 4.Trust me, you do not want a guerrilla counter-invasion by Canadians. Look at our battle record starting beginning WW1.
      5. We are a peaceful state but we only fight when there is no other recourse available, and we’re very good at it.
      It is commonly known that two of our regiments don’t take prisoners. We’re not sure about the rest.

  12. I prefer not to depend on Canadian oil because then we would have to go to war with them. It would be inevitable, and I really love Vancouver and hope someday to visit Calgary, Toronto, and Montreal. Plus, our own Netflix and Hulu would blow chunks, without all of the “American” TV and movies that actually get produced in the Great White North, due to the inevitable wartime embargo of propaganda from Canukistan.

    1. Since oil is a commodity, we could let them sell it on the world market. That would make oil places from places we have conqurered cheaper.

  13. Furthermore, the natural general principle that will subsume this case does not readily tolerate an abstract underlying order. This suggests that a subset of English sentences interesting on quite independent grounds suffices to account for a stipulation to place the constructions into these various categories. We have already seen that an important property of these three types of EC is, apparently, determined by a descriptive fact. Clearly, the descriptive power of the base component raises serious doubts about the ultimate standard that determines the accuracy of any proposed grammar. Summarizing, then, we assume that this analysis of a formative as a pair of sets of features is necessary to impose an interpretation on a corpus of utterance tokens upon which conformity has been defined by the paired utterance test.

  14. here’s something I don’t get – enviros always complain about spills affecting groudwater and the water table we get our water from (often times). But then on the other hand I’m frequently told that it takes 1000s of years for the water to get that far down, and that’s why it’s so clean, because it’s been filtered through all that dirt/sand for so long.

    So which is it? If the water takes 1,000’s of years to get to well-drilling depths, wouldn’t that imply that almost nothing we spill on the surface could affect our water wells?

    I suspect there may be some bullshit going on

  15. What! No mention of the Eskimos-Stampeders rivalry?

    Kramer watched the CFL you know.

    Interesting read.

    Alberta is probably one of the wealthiest part of the continent at this point. Doing better than the crap we put up with here in Quebec anyway.

    1. The first CFL game I ever saw in person was between Edmonton and Saskatchewan at Taylor Field.

      Go Roughriders!!!!

  16. What! No mention of the Eskimos-Stampeders rivalry?
    hyperfuse 2011

  17. Just burn enviros and the energy problem is solved plus the ashes will make a great fertilizer. A win-win solution.

  18. I know the internet is a poor sample for figuring the zeitgeist of a people, but why (from reading newspapers like the Globe and Mail) is a part of the national Canadian identity to think all Americans are idiots? BTW, you cannot decouple from the economy of your southern neighbor, if the US goes down…

  19. This only shows how difficult it will be to keep the promises to reduce the emissions of greenhouse gas because they go against the economic interests of particular business organizations. I am afraid that our own perception of Canada as an environmentally conscious country will gradually be damaged as soon as the final numbers confirm our government’s inability to reach its goals in this particular area.

  20. The other advantage is money spent in Canada, for Canadian oil, inevitably flows back into the US. Our economies are so tightly integrated spending in one area helps the other area. Money spent anywhere else, with the exception of Mexico, is money that has left your system.

  21. Yet there are what seem to be genuine reports of serious environmental damage from Canadian tar sands. A serious examination of oil extraction from tar sands needs to explore the reliability of these reports, given that it’s highly unlikely Canadian Oil Sheiks would mention any such concerns.

    The environmental damage seems to be similar to that caused by fracking. The fracking industry insists it’s safe while ignoring the apparently significant reports of environmental damage, water from taps on fire, and large farming problems…

    The whole issue needs to be investigated rather than such apparently one-sided reports which simply do not do justice to Reason’s usual quality. Investigative journalism of the superb quality of Love Canal reported years ago is what’s needed here…

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