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Industry Should Cover Social Cost of Oilsands, Experts Say

Posted: 11/25/2013 1:17 pm

It was less than six months ago that a handful of energy companies resorted to selling off portions of their stake in the oil patch after failing to garner the kind of investor support they needed to fund major projects.

The costs of development in the oilsands is increasing due to material and labour shortages in Alberta and limited real estate. According to reports by the Petroleum Human Resources Council of Canada, the industry is effectively innovating itself out of the labour market, expanding beyond what the available pool of skilled labour can support.

Development costs are also escalating as the environmental toll of extracting and upgrading tar-like bitumen from the region has put both policy makers and the public on edge.

Jean-Michel Gires, the former CEO of the Canadian unit of France's Total SA, says crude from the oilsands is "among the most expensive oil" in the world to produce. Yet, development continues, leading some experts to claim that the oilsands costly production still doesn't accurately reflect the true costs associated with the resource.

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  • Syncrude Upgrader and Oil Sands

    The refining or upgrading of the tarry bitumen which lies under the oil sands consumes far more oil and energy than conventional oil and produces almost twice as much carbon. Each barrel of oil requires 3-5 barrels of fresh water from the neighboring Athabasca River. About 90% of this is returned as toxic tailings into the vast unlined tailings ponds that dot the landscape. Syncrude alone dumps 500,000 tons of toxic tailings into just one of their tailings ponds everyday.

  • Boreal Forest and Coast Mountains / Atlin Lake, British Columbia | 2001

    This area, located in the extreme northwest of British Columbia, marks the western boundary of the Boreal region. On the border of the Yukon and Southeast Alaska, the western flank of these mountains descends into Alaska's Tongass Rainforest and British Columbia's Great Bear Rainforest. Far from the oil sands, the greatest remaining coastal temperate and marine ecosystem is imminently threatened by the proposal to build a 750-mile pipeline to pump 550,000 barrels per day of oil sands crude to the coast. Once there, it would be shipped through some of the most treacherous waters, virtually assuring an ecological disaster at some point in the future.

  • Tailings Pond in Winter, Abstract #2 / Alberta Tar Sands | 2010

    Even in the extreme cold of the winter, the toxic tailings ponds do not freeze. On one particularly cold morning, the partially frozen tailings, sand, liquid tailings and oil residue, combined to produce abstractions that reminded me of a Jackson Pollock canvas.

  • Aspen and Spruce | Northern Alberta | 2001

    Photographed in late autumn in softly falling snow, a solitary spruce is set against a sea of aspen. The Boreal Forest of northern Canada is perhaps the best and largest example of a largely intact forest ecosystem. Canada's Boreal Forest alone stores an amount of carbon equal to ten times the total annual global emissions from all fossil fuel consumption.

  • Tar Sands at Night #1 | Alberta Oil Sands | 2010

    Twenty four hours a day the oil sands eats into the most carbon rich forest ecosystem on the planet. Storing almost twice as much carbon per hectare as tropical rainforests, the boreal forest is the planet's greatest terrestrial carbon storehouse. To the industry, these diverse and ecologically significant forests and wetlands are referred to as overburden, the forest to be stripped and the wetlands dredged and replaced by mines and tailings ponds so vast they can be seen from outer space.

  • Dry Tailings #2 | Alberta Tar Sands | 2010

    In an effort to deal with the problem of tailings ponds, Suncor is experimenting with dry tailings technology. This has the potential to limit, or eliminate, the need for vast tailings ponds in the future and lessen this aspect of the oil sands' impact.

  • Tailings Pond Abstract #2 | Alberta Tar Sands / 2010

    So large are the Alberta Tar Sands tailings ponds that they can be seen from space. It has been estimated by Natural Resources Canada that the industry to date has produced enough toxic waste to fill a canal 32 feet deep by 65 feet wide from Fort McMurray to Edmonton, and on to Ottawa, a distance of over 2,000 miles. In this image, the sky is reflected in the toxic and oily waste of a tailings pond.

  • Confluence of Carcajou River and Mackenzie River | Mackenzie Valley, NWT | 2005

    The Caracajou River winds back and forth creating this oxbow of wetlands as it joins the Mackenzie flowing north to the Beaufort Sea. This region, almost entirely pristine, and the third largest watershed basin in the world, will be directly impacted by the proposed Mackenzie Valley National Gas Pipeline to fuel the energy needs of the Alberta Oil Sands mega-project.

  • Black Cliff | Alberta Oil Sands | 2005

    Oil sands pit mining is done in benches or steps. These benches are each approximately 12-15 meters high. Giant shovels dig the oil sand and place it into heavy hauler trucks that range in size from 240 tons to the largest trucks, which have a 400-ton capacity.

  • Oil Sands Upgrader in Winter| Alberta Oil Sands | 2010

    The Alberta oil sands are Canada's single largest source of carbon. They produce about as much annually as the nation of Denmark. The refining of the tar-like bitumen requires more water and uses almost twice as much energy as the production of conventional oil. Particularly visible in winter, vast plumes of toxic pollution fill the skies. The oil sands are so large they create their own weather systems.

  • Boreal Forest and Wetland | Athabasca Delta Northern Alberta | 2010

    Located just 70 miles downstream from the Alberta oil sands, the Athabasca Delta is the world's largest freshwater delta. It lies at the convergence of North America's four major flyways and is a critical stopover for migrating waterfowl and considered one of the most globally significant wetlands. It is threatened both by the massive water consumption of the tar sands and its toxic tailings ponds.

  • Tar Pit #3

    This network of roads reminded me of a claw or tentacles. It represents for me the way in which the tentacles of the tar sands reach out and wreak havoc and destruction. Proposed pipelines to American Midwest, Mackenzie Valley, and through the Great Bear Rainforest will bring new threats to these regions while the pipelines fuel new markets and ensure the proposed five fold expansion of the oil sands.

  • <strong>NEXT -----> Craziest Pictures of the oilsands</strong>

  • Syncrude's Mildred Lake Upgrader, part of The Syncrude Project complex for oil sands processing, is pictured Monday, March 8, 2006 in Fort McMurray, Alberta, Canada.

  • The Syncrude oil sands extraction facility is reflected in a lake reclaimed from an old mine near the town of Fort McMurray in Alberta, Canada on October 22, 2009.

  • A disused mining machine on display in front of the Syncrude oil sands extraction facility near the town of Fort McMurray in Alberta on October 22, 2009.

  • Tailings pond in winter.

  • Syncrude upgrader.

  • Dry tailings.

  • The Suncor oilsands operation uses trucks that are 3 stories tall, weigh one million pounds, and cost 7 million dollars each.

  • Oilsands at night.

  • A tailings pond.

  • Black Cliff in the Alberta oilsands.

  • Oilsands upgrader in winter.

  • Oilsands extraction.

  • Oil sits on the surface at a Suncor Energy Inc. oilsands mining operation near Fort McMurray, Alberta, Canada, on Tuesday, Aug. 13, 2013. Photographer:

  • A large oil refinery along the Athabasca River in Alberta's Oilsands. Fort McMurray, Alberta.

  • Oils mixes with water at a tailings pond at a Suncor Energy Inc. oilsands mining operation near Fort McMurray, Alberta, Canada, on Tuesday, Aug. 13, 2013.

  • Fort McMurray is in the heart of the world's biggest single oil deposit - the Athabasca Oil Sands, and the oil is extracted by surface mining and refined in the region. The oil production is at the heart of the economy.

  • In this Aug. 5, 2005 file photo, the Syncrude upgrader spreads out towards the horizon at the company's oil sands project in Ft. McMurray, Alberta, Canada.

  • This Tuesday, July 10, 2012 aerial photo shows a Nexen oil sands facility near Fort McMurray, Alberta, Canada.

  • This Sept. 19, 2011 aerial photo shows an oilsands facility near Fort McMurray, in Alberta, Canada.

  • This Sept. 19, 2011 aerial photo shows an oilsands tailings pond at a mine facility near Fort McMurray, in Alberta, Canada.

  • This Sept. 19, 2011 aerial photo shows an oilsands tailings pond at a mine facility near Fort McMurray, in Alberta, Canada.

  • The Syncrude extraction facility in the northern Alberta oil sand fields is reflected in the pool of water being recycled for re-use.

  • A night view of the Syncrude oil sands extraction facility near the town of Fort McMurray in Alberta Province, Canada on October 22, 2009.

  • Aerial view of a lake and forests in the vicinity of oil sands extraction facilities near the town of Fort McMurray in Alberta, Canada on October 23, 2009.

  • Workers use heavy machinery in the tailings pond at the Syncrude oil sands extraction facility near the town of Fort McMurray in Alberta , Canada on October 25, 2009.

  • Fort McMurray is in the heart of the world's biggest single oil deposit - the Athabasca Oil Sands, and the oil is extracted by surface mining and refined in the region. The oil production is at the heart of the economy.

  • A large oil refinery in Alberta's Oilsands project. Fort McMurray, Alberta.

  • Next: Alberta Oil Spills

  • CFB Cold Lake, CNRL

    A bitumen leak was reported at a Canadian Natural Resources oilsands operation in the weapons range part of the RCAF base in June 2013.

  • CFB Cold Lake, CNRL

    Company officials said the leak - at what it calls its Primrose operation - was caused by faulty machinery at one of the wells, affected an area of approximately 13.5 hectares and released as much as 3,200 litres of bitumen each day.

  • CFB Cold Lake, CNRL

    Preliminary tallies put the death toll from the leak at 16 birds, seven small mammals and 38 amphibians. Dozen were rescued and taken to an Edmonton centre for rehabilitation.

  • CFB Cold Lake

    As of early August 2013, more than 1.1 million litres of bitumen had been pulled from marshlands, bushes and waterways.

  • CFB Cold Lake, CNRL

    Although CNRL could not say when the leak may finally be stopped, it estimates it will likely cost more than $40 million to clean up.

  • <em>Click through for other recent spill in Alberta</em>

  • Plains Midstream

    Little Buffalo band member Melina Laboucan-Massimo scoops up July 13, 2012 what appears to oil from the pond shoreline near the site of a 4.5 million-litre Plains Midstream pipeline leak detected April 29, 2011. Photos taken at the site and released by Greenpeace of Alberta's second-worst pipeline spill suggest at least part of the site remains heavily contaminated despite company suggestions that the cleanup is complete.

  • Plains Midstream Canada

    A boat passes by a boom stretching out to contain a pipeline leak on the Gleniffer reservoir near Innisfail, Alta., Tuesday, June 12, 2012. Plains Midstream Canada says one of their non-functioning pipelines leaked between 1,000-3,000 barrels of sour crude near Sundre, Alberta, on June 7 and flowed downstream in the Red Deer river to the reservoir.

  • Plains Midstream Canada

    Debris pushes up against a boom as it stretches out to contain a pipeline leak on the Gleniffer reservoir near Innisfail, Alta., Tuesday, June 12, 2012.

  • Plains Midstream Canada

    A boom stretches out to contain a pipeline leak on the Gleniffer reservoir near Innisfail, Alta., Tuesday, June 12, 2012. Plains Midstream Canada says one of their non-functioning pipelines leaked between 1,000-3,000 barrels of sour crude near Sundre, Alberta, on June 7 and flowed downstream in the Red Deer river to the reservoir.

Rising Costs
Royal Dutch Shell's Athabasca Oil Sands Project costs jumped from an estimated $3.5 billion in 2005 to $14.3 billion in 2010 due to unforseen expenses.

Even without environmental regulations concerning waste, companies are already spending billions on tailings reduction technology simply because they're running out of space. Tailings ponds currently cover more than 176 square kilometres of the region.

The Kearl Mine, an Exxon-owned Imperial Oil project, cost $12.9 billion in its first phase - more than 40 percent over the expected price tag.

The mega-project is intended to produce 600,000 barrels of crude oil per day by 2020. Downgraded from three development phases to two, the Kearl project is expected to produce 110,000 barrels per day by the end of this year.

The mine is already connected to Enbridge's Cheecham Terminal by the Woodland Pipeline and will begin to test capacity before long.

Enbridge quietly received regulatory approval in August of last year to build a $1.3 billion extension of the Woodland Pipeline to accommodate the expected increase in production at Kearl. The project is set to be complete in 2015, the same year Imperial plans to move an additional 110,000 barrels of bitumen per day out of Kearl.

Inflating Investments
According to investment analysts, the solution to the problem, both in terms of money and morale, is to greenlight the various pipeline projects currently under consideration, including proposal to modify existing pipelines such as Enbridge's Line 9 to eastern Canada. But those pipelines themselves are projected to cost billions of dollars to build.

Moving ahead with such projects has been made easier with a flood of outside investment used to artificially prop up the industry.

One such surge of investment recently came from Warren Buffet. This summer marked the first time one of the world's largest investors plunged billions into Canadian resource development. Buffet, head of Berkshire Hathaway Inc, has thrown his weight behind Suncor, Canada's largest oil and gas company.

Ironically, this kind of large-scale investment serves to drive costs up even higher by contributing to inflation.

Counting the Real Costs
It's unlikely the rising costs of development, no matter how severe, will investment in the oilsands to an end. Yet when it comes to realistic cost accounting for large-scale carbon projects, there are people working on pragmatic solutions.

In spite of the environmental movement's push for a shift in values, some experts say it's more likely carbon policy will make the difference.

Dr. Andrew Leach, professor at the Alberta School of Business at the University of Alberta says the rising social cost of tar sands development, as well as meaningful environmental policy changes are contributing to the higher price tags on new projects, but it's ultimately consumer choices that will determine whether projects in the tar sands remain viable.

To illustrate, Leach uses the example of the car-driven suburb model of living.

"In order to meet at 450 ppm target, we can't have people living out in the suburbs and driving big cars, but people are still living in the suburbs and buying big cars." The analogy applies to dirty oil development. It's not that developers don't know what's going on; it's that they won't stop until someone makes them.

"That's sort of at the heart of carbon pricing to say let's let the market decide what activities make sense given a particular carbon budget."

From a policy perspective Leach, who spent a year working on policy initiatives with Environment Canada, believes the best thing we can do it is force the industry to internalize the social costs of extracting oil from the ground.

"The social cost of a carbon future, reclamation expenses, water and air pollution - those need to be internal to company decisions, and that can be done in any number of ways," he said, adding that this is a standard view among economist, despite how popular media portrays the issue.

Matt Horne, Director of Climate Change at the Pembina Institute, says industry regulation and policy changes are already making renewables more competitive. Combined with success stories from various fields within the green energy, the gap between oil and renewable energy is getting smaller. It's just the policy piece that's missing.

He says the combination of solid economics and strong environmental policies will make renewables the norm rather than "a few leading examples." The goal is ultimately to make it cheaper to produce clean energy than it is to extract oil from the ground.

"I think policy can change quickly and change the economic playing field quite quickly."

Mark Jaccard, professor in the School of Resource Management at Simon Fraser University and author of Sustainability Suspicions, believes that with more attention on those leading examples--particularly the ones closest to home like California and British Columbia--we can make that change sooner rather than later.

"I am amazed that environmentalists all over North America are not talking about California's policies every day and focusing strategic efforts to effect voting support on vulnerable politicians where they do not push for similar policies," he said in an interview.

He cited the Low Carbon Fuel Standard, the Renewable Electricity Portfolio Standard and the Vehicle Emissions Standards among others as examples of economic and environmental success.

Jaccard also believes the movement needs to shift its focus from individual projects to the broader issue of the climate. When it comes to particular projects, such as the Enbridge Northern Gateway Pipeline, he says the benefits for the people in power will always outweigh the environmental costs. To create the critical mass necessary for change, we should be focusing on climate change as a global issue, something no one can ignore.

"When did we get good policies implemented? Never when talking about oil sands and oil spills. But yes when we got enough people (probably less than 10 percent of the population) very concerned about climate change. Politicians, ever watchful of swing voters, had to pay attention." Environmentalists should also be fighting for trade penalties on imports from jurisdictions that are still using the atmosphere as a dumping ground, he adds.

"Only in this way can environmentalists put together a coherent argument for action. Only in this way can we effectively counter the fossil fuel arguments like, one, we need the Chinese to act, two, our emissions are only a small percentage, three, we won't stop needing oil tomorrow, etc."

- Erin Flegg, DeSmog Canada

 

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