Oil Economy Driving Growth of Controversial Tar Sands

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Inter Press Service

Oil Economy Driving Growth of Controversial Tar Sands

by
Chris Arsenault

Water used in the extraction process is dumped into pools in the northern Alberta oil sand fields. Imperial Oil, the Canadian subsidiary of US oil giant ExxonMobil, said Monday it is going ahead with a 7.1-billion-US-dollar first phase of its Alberta oil sands mining project.(AFP/File/David Boily)

VANCOUVER, Canada - A report from one of the world's top energy consultancies says oil production in Canada's tar sands could see a five-fold increase by 2035.
"The oil sands have moved from the fringe to the center of energy supply," notes the report "Growth in the Canadian Oil Sands: Finding a New Balance" released by IHS Cambridge Energy Research Associates (CERA) on May 18.

Environmentalists and some aboriginal groups want the oil sands to stay on the fringes because extracting heavy oil produces more greenhouse gas emissions than convention crude.

Meanwhile, the Council on Foreign Relations (CFR) issued a report titled "The Canadian Oil Sands: Energy Security vs Climate Change" on May 22 arguing that both the negative environmental impacts and benefits to U.S. energy security from Canada's tar sands are overstated.

"Smart regulation can place a fair and reasonable price on the oil sands' greenhouse gas emissions, providing the right incentive to reduce them," said Michael Levi, an author of the CFR report.

Levi told IPS that lifecycle green house gas emmissions from the tar sands are 17 percent worse than conventional U.S. oil imports. Environmentalists dispute this claim, stating oil production from the tar sands is at least three times worse than conventional oil.

"The development of Canadian oil sands encapsulates the complexities that the world faces on energy, environment and security," said IHS CERA chairman Daniel Yergin in a statement.

Yergin won a Pulitzer award for his book "The Prize", a history of the oil industry. CERA did not respond to interview requests from IPS.

Oil today accounts for 35 percent of global energy supply - the largest share of any form of energy. In 2008, world oil demand was 85.2 million barrels per day. CERA estimates global oil demand in 2035 could range from 97 million barrels per day (mbd) to 113 mbd.

If the global economy stays in recession or a slow growth scenario, production from Canada's tar sands will reach about 2.3 million barrels per day by 2035, an increase of about 1 million barrels a day from present levels, according to CERA.

In 2008, Canada supplied the U.S. with 19 percent of its oil imports. That number could rise to 37 percent by 2035, according to CERA.

The dependency on oil exports to the U.S. worries Gordon Laxer, a professor of sociology at the University of Alberta. "We need 21st century public interest ownership [of oil reserves]," said Laxer.

Laxer told IPS that relying on exports to the U.S. rather than the domestic market puts Canada in a weak position if there is a supply crisis. Unlike the U.S., Canada does not maintain a strategic petroleum reserve.

In contrast to Canada's private ownership structure, the vast majority of world oil reserves are controlled by government-owned companies which can, in theory, use oil wealth to finance national development, according to Laxer.

While arguing for a price on carbon emissions, the CFR report is not concerned with other environmental problems, including water contamination.

"Local impacts are not the concern of U.S. policy makers," Levi told IPS.

Environmentalists say that exponential increases in water extraction from the Athabasca River could destabilise the North American water cycle.

Most water used in tar sands extraction is not returned to the natural water system. Instead, wastewater containing toxins is dumped into what the industry calls tailings ponds.

Staten Island, New York could fit inside the tailings pond operated by Syncrude, the largest tar sands consortium, according to CERA's report.

"It takes a huge amount of energy just to melt the tar sands and then you have to use a huge quantity of water: that's a cost which has to be internalised [by industry]," said environmentalist Dr. David Suzuki.

"Right now the oil industry is getting away scot-free," Suzuki told IPS.

The CFR report supports adding a cost or externality to carbon emissions. The report guesses that a carbon price of 20 dollars per tonne of CO2 equivalent - roughly what prices have averaged in the European Union's Emission Trading Scheme - would add only 2.21 dollars per barrel of additional production costs to the oil sands.

"The U.S. will have a large market for emissions, Canada will benefit from that stability," the CFR's Michael Levi told IPS, extolling the benefits of a carbon pricing system which is being debated by legislators on both sides of the Canada-U.S. border. Environmentalists say these cost estimates for carbon are too low to stop runaway climate change, a scenario many scientists argue could destroy life on Earth as we know it.

CERA maintains a list of the world's top 15 countries that have the potential to increase oil production over the next decade. Canada ranks fourth on this list. Brazil is the only other country in the Western Hemisphere to make CERA's list.

Critics of CERA's methodology say this accounting neglects Venezuela's massive and virtually untapped heavy oil reserves in the Orinoco belt.

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