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