Who Could Stop the Tar Sands?
Tailings ponds at Suncor's facility adjacent to the Athabasca river. Credit: Global Forest Watch Canada
The tar sands projects in Canada draw significant criticism from many groups around the world. Critics point to the dramatic ‘moonscapes’ caused by surface mining and tailings ponds, the mistreatment of First Nations’ people and their land, and the economics showing that synthetic crude made from tar sands bitumen is expensive and taxing on the environment. Opposition reached a high point recently during the protests against Keystone XL, a new pipeline that will roughly double the capacity to send oil from Alberta, Canada all the way down to Texas and the gulf to be refined into fuel. Environmentalists, First Nations and their supporters, and even organized Norwegian grandparents oppose tar sands development and the Keystone XL pipeline. While most critics focus on the tar sands and the environmental cost of producing synthetic crude from bitumen, few attempt to understand the root of the problem. Why is so much dirty, inefficient, and expensive crude oil produced from the tar sands in the first place?
Before I get to that question, let me introduce the tar sands and bitumen mining. The Athabasca tar sands of northeastern Alberta represent one of the world’s largest sources of petroleum. The tar sands contain approximately 1.7 trillion barrels of bitumen, of which about 170 billion barrels are economically feasible to extract. This places Canada’s petroleum reserves second in the world behind Saudi Arabia.
There are two main ways of extracting bitumen from the frozen ground – surface mining and in-situ extraction. Surface mining, which began in the 1970s, is responsible for the ‘moonscapes’ that are created when forests are cleared, bitumen is dug up from the ground and processed into synthetic crude oil, and polluted water used in processing is pumped into large tailings ponds. This method of extraction takes a heavy toll on the local environment, and represents about 55% of tar sands extraction currently. In-situ mining can be done using several different technologies, but the one gaining the most use is SAGD. SAGD (steam assisted gravity drainage) involves drilling a well into a bitumen source and injecting steam. The steam slowly melts the frozen soil, and after several months, bitumen becomes liquid enough to pump out of the well. This method causes less destruction to the local environment, but consumes very high amounts of water and energy for the production of steam and leads to much higher greenhouse gas emissions.
In the November 25 issue of Nature, University of Calgary professor Dr. David Schindler summarized the environmental outlook of tar sands development:
“Emissions of carbon dioxide from the Canadian oil sands are expected to reach 108 megatonnes by 2020 — a fifth of Canada’s current national emissions. The extraction also requires a huge amount of water — 2–5 barrels of water per barrel of oil. Much of the used water ends up in toxic tailings ponds, which can kill birds that land in them and are suspected of seeping chemicals into groundwater.”
Production costs are also high; based on estimates from the National Energy Board of Canada, the price of oil must be at least $35 for an oil sands project to be worthwhile. During the 2008 financial crisis, Albertans witnessed a sharp cutback in oil sands investment, with billions of dollars of projects being cancelled as the world price of oil fell. Prices have quickly recovered, however, and oil sand investment is growing rapidly again.
Estimated future production. SCO: Synthetic crude oil made from bitumen.
Why are oil sands projects booming in size and number, if they are so destructive to the local and global environment? Ultimately, the government of Alberta is responsible. The province’s Progressive Conservatives have held control over the government and the tar sands, nearly uncontested, for the past 40 years. Due to the government’s oil sands development policies and royalty regimes, oil companies are highly incentivized to get in on the action.
The Progressive Conservative government led a platform that the voters have found very hard to resist – the “Alberta Advantage”. The advantage is summarized well by the government’s finance department as: “low personal income taxes, low corporate income taxes, the lowest fuel taxes among provinces, no capital tax, no payroll tax, and no sales tax”. In spite of having the lowest tax rates in Canada, Alberta also boasts the highest rate of public spending: in fiscal year 2008-09, Alberta’s spending was 40 percent higher per-capita than Ontario, 30 percent higher than British Columbia, and 15 per cent higher than the average in the other nine provinces. Can you guess where the money to finance the ‘advantage’ comes from? In the government’s own words, budget gaps are “filled by money the provincial government receives from the sale of our non-renewable energy assets”. These gaps have added up to an average of 30% of the budget each year over the past 30 years.
Volatility and revenue / spending gaps in Alberta's budgets. 2010 Canadian $. Credit: Premier's Council for Economic Strategy, May 2011
By relying so heavily on oil to finance general government spending on education, health, welfare and all of the tax subsidies, the government has become highly dependent on receiving billions of dollars from the oil sector each year. Like other oil-based economies, this has led to great volatility in government budgets, creating fast growth of public spending in boom times, and very large deficit spending during price falls.
While other countries such as Norway, Kuwait, the US State of Alaska, and more have established strong savings regimes to protect the economy from these fluctuations, Alberta has all but abandoned its Heritage Fund. Norway and Alaska both have massive endowment funds, valued at over $100,000 per person and $54,000 per person, respectively, that can be used to smooth the economy and share the wealth with future generations. The Albertan government cut payments to the Heritage Fund in 1984, and then stopped funding in 1987, 11 years after the fund’s creation. The result is that Alberta’s economy and government rely heavily on future oil revenue. The government’s easiest way to ensure this future income, in the absence of savings, is to encourage oil sands development.
Government use of oil revenue between 1976 - 2006. Credit: Canada West Foundation
If the government hadn’t abandoned the Heritage Fund, it wouldn’t need to expand oil sands development to balance its finances like it is doing now. Although the government is aware of the great damage oil sands projects are having on the environment, it has little choice if it wants to maintain high spending and low taxes for the electorate. It could begin saving again like it did from 1976 – 1987, but the government has the same incentives now as it did when it cut the Heritage Fund’s payments. Without a strong savings regime, the government has the ability to spend oil revenue as it wants to.
Alberta’s reliance on oil income from the tar sands will likely continue unless there is a political shock to the system. If another political party challenges the Progressive Conservatives’ hold on provincial government, we could expect either the incumbents or the new party to establish a new, institutionalized savings regime. This would ensure that another government could not spend oil money to prop up public support like the Progressive Conservatives have been doing for the past several decades.
The best hope for slowing tar sands development will likely be an invigoration of Alberta’s increasingly apathetic voters at the next provincial election.
Poor test times and methods to form pre-development baseline data is too common. Currently there is no regulated test times or methods so companies avoid spring thaw water levels, sediment data, proper bore hole depth, proper test times and methods for endangered species etc. It is an advantage if baseline data is poor because when issues arise, it's harder to prove causality. This poor data forms the baseline data used by conservation authorities, ministries etc. It's a great risk for Canada to have such a flawed system. We can't predict what water volumes we actually have due to poor/non existent post development data. Companies doing the Environmental Impact Studies make big profits from remediation and if water systems go bad, they also profit from pipelines etc. It's easy to create destruction for profit schemes. In Canada, companies do their own studies with little to no scrutiny and NGO's are left out of decision making processes. The MNR is both the promoter and regulator of fossil fuels and even when it impacts municipal/agricultural water tables, it's not their mandate to assess the economic consequences since it's beyond their jurisdiction to do so. They don't have the jurisdiction to assess cross jurisdictional impacts, health impacts, economic impacts etc. We need a better more comprehensive system. We can't rely on 30 year old schemes anymore. We have better science and in the age of climate change, we can't afford to ignore sound science.
In Canada, water resources destroyed in quest for fossil fuels at 2-5 barrels of water/ barrel of oil. In Australia, the Great Artesian Basin of ground water contaminated by Coal Seam Gas (CSG) Mining. Happy future everyone- hope we will find a way to make water! !
I am extremely sad to see that our beautiful Canadian forests are being dug up to support a filthy and devastating form of business. We have many smart and educated people in Canada, and we are supporting a completely unsustainable way of life. Did you know that the tar sands have the highest rate of crime, drug use and prostitution? Do you think that is simply an "accident" or a "coincidence." The entire way of life over there is dysfunctional and unhealthy and our Canadian federal government and the government of Alberta are supporting this. We should be creating national parks, protecting our wildlife and the beautiful air we all need to breathe. When we are done extracting and polluting, what will become of us then? The tar sands is a temporary solution and what will happen to all the infrastructure, polluted water and unemployed people when all is said and done? Canada is capable of more than this, and if you read Van Jones, you will understand why the economy demands sustainable technologies NOT quick fixes like the tar sands.
A wonderfully in-depth overview of the situation. It's shocking that the Albertan government seems oblivious to the fact of how dire the situation can become in the future if its carries on relying so heavily on oil...
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