The oil industry, Alberta’s provincial government, and the Canadian federal government are all breathing huge sighs of relief with the release of the Royal Society of Canada’s report [pdf] on the Alberta oil sands.
The cause for relief comes from the fact that a comprehensive study about the Alberta oil sands conducted by independent scientists has stated the enormous oil project is not the most environmentally devastating project on Earth, as it has been labeled. The Calgary Herald took the report’s findings as far as to suggest the Alberta oil sands are a sustainable project.
Sustainability, in the environmental and economic sense of the term, has been the biggest grievance regarding oil production from Alberta’s oil sands. Producing crude oil from oil sands is an energy intensive process that requires large amounts of water and natural gas. The complex extraction and conversion process means oil sands crude is more expensive to produce than conventional oil production.
In in its 2008 World Energy Outlook report, the International Energy Agency stated production of heavy oil from oil sands costs between $32 and $68 per barrel. Oil produced in the Middle East, on the other hand, costs between $6 and $28 per barrel.
Despite its higher production costs, the development of Alberta’s oil sands has increased steadily over the past decade, and the industry aims to double production by 2020.
Proponents of the oil sands point to the economic bounty it represents. In 2010, production of crude oil from Alberta’s oil sands rose 11% to 854,369 barrels per day and now represents more than half of Canada’s total oil production. Alberta’s provincial government says the sands brought in $10 billion of investment in 2009; and that for every dollar invested, $9 of economic activity is generated.
What is not often spoken of is the amount of subsidization the oil sands receive. According to research conducted by the Global Subsidies Initiative, in 2008 the Alberta oil sands received $2.074 billion in funding from the provincial and federal governments; this is 74% of the total government subsidies given to the oil industry that year. These subsidies have a high impact on financial development in Alberta and the oil industry, but little effect on Canada’s overall economy.
The GSI report [pdf] says removing the $2.82 billion oil subsidies, something the Canadian government has promised to the G20 it will do, would reduce the annual GDP in Alberta’s oil sector by 6%, while having zero effect on Canada’s national GDP. In fact, removing the subsidies would have a positive impact on the government’s budget.
Besides finances, the oil sands pose serious environmental issues. Although the Royal Society’s report states “the oil sands industry is no higher than third in industrial categories for air emissions of major criteria air pollutants,” they still produce 5% of Canada’s greenhouse gas emissions.
With production continuing to grow, the Royal Society says greenhouse gas emissions will continue to rise as well — all this at a time where countries are trying to reduce emissions: “Increasing GHG emissions from growing bitumen production creates a major challenge for Canada to meet our international commitments for overall GHG emission reduction that current technology options do not resolve.”
Beyond GHG emissions, the oil sands are also a major emitter of other air pollutants on local, regional, and national scales. The Royal Society says air quality monitoring systems are severely lacking, and this is an important issue for oil sands development. Given the recent findings by the Health Effects Institute that all major cities in Asia have poor quality air, these findings a part of a growing global concern.
Finally, as much as carbon capture and storage technology has been touted as a method to make production more sustainable, the Royal Society states it does not appear to be feasible for the oil sands: “Substantial questions remain to be answered about the feasibility and reliability of CCS in all applications.”
The oil sands are such a hot international debate because they represent the crux of the current energy discourse: the old versus the new.
The Alberta oil sands are a vast tract of usable oil. Oil is the world’s most important commodity; it is also a major environmental liability, especially when produced from oil sands. Meanwhile, there are several other energy resources which offer similar economic potential and less environmental impact.
All the energy players are jockeying for position in the evolving sector. Admist this positioning, one thing is certain, the new energy economy will center around sustainability and independence; where the oil industry and its oil sands fit into this picture is still to be determined.