01/21/2014 05:08 EST | Updated 03/23/2014 05:59 EDT

"Greening" the Oilsands: More than a Pipe(line) Dream

Recent events, like the tragic explosion in Lac-Megantic and the near-disasters recently in Casselton, North Dakota and Plaster Rock, New Brunswick, have put the transportation of oil by rail into question.

Safety concerns, especially with the more volatile and lighter shale oil that comes from the Bakken oil fields of Saskatchewan and North Dakota, are becoming real deterrents to moving oil by rail.

Meanwhile, the industry and pipeliners argue that their method is far safer, and therefore that more pipelines are desperately needed to move the new supplies of bitumen, synthetic crude oil and shale oil that are coming online.

The only problem is that bitumen from Alberta's oilsands, the product that arguably needs the most efficient and safe solution, is an incredibly thick, heavy oil.

To transport Alberta bitumen through any pipeline - be it Northern Gateway or Keystone XL - producers need to add a diluent. Diluent helps the thick oilsands bitumen flow more easily through a pipeline by adding both lubrication and a bit of heat. It is typically made of natural gas condensate (NGC), refined naptha (similar to gasoline) or synthetic crude oil (SCO) and may make up 25 to 50% of the volume of oil transported, depending on the bitumen quality.

Mostly for economic purposes, the diluent is returned to the oilsands after transporting the bitumen to any given refinery, which normally means diluent actually travels the length of the pipeline twice.

Given the predicted explosive growth of the oilsands to some 8 million barrels/day by 2030, there will be even more demand for diluent, ironically much of which could end up being imported from the U.S. Thus we will actually be importing a high-value petroleum product in order just to export it again.

But what if there was a way to "dilute" Alberta bitumen with a locally-produced diluent, and -- at the same time - "green" it? Sound like a pipe dream? Not really. The chemistry known as hydrothermal upgrading has been around for some 70 years, but with recent higher oil prices, it has finally become economically viable.

It uses a relatively simple thermo-chemical process employing pressure and medium-to-high temperatures to convert common biomass into renewable fuel-oil, or even bio-diluent.

Recent advancements in this technology have demonstrated various forms of biomass - straw, sawdust, wood chips, even algae - can now be cost effectively converted, at large scale, to a synthetic bio-diluent, and produced near the oilsands producers who will so desperately need it.

This second-generation renewable energy technology also does not use food crops, like first-

generation corn-based ethanol, and therefore they can be easily and sustainably sourced, especially in Alberta where strong forestry and agricultural industries already exist. By refining this bio-diluent further, it becomes a renewable transportation fuel (diesel or jet) that can be "dropped-in" or blended into existing fuel infrastructures without any of the problems associated with ethanol or bio-diesel.

If this seems like a no-brainer, it is. Think of the public relations benefits alone - Keystone XL or Northern Gateway could use a bio-boost like this right now. But the petroleum financing world is conservative - financing is often limited to tried and true technologies, no matter what the arguments to the contrary nor the sustainable and economically viable opportunities.

This often also extends to government grants and subsidies as well. The old maxim of the more you have, the more you get is alive and well, as it's often the large oil and gas producers who receive the bulk of new renewable energy grants.

Start-up renewable producers have a hard time getting the financing needed, especially when it comes to exiting the laboratory and commercializing their technologies.

Wasn't cost effective production of oilsands once someone's pipe dream?

What is needed is a rethink of the role renewable technologies can play in our 21st energy landscape. Technologies like hydrothermal upgrading are not a competitor to conventional oil and gas producers.

Instead, they are actually an ally, helping to provide a low-carbon environmental component to the processing and transportation of existing fossil-based fuels.

The International Energy Agency is forecasting that by 2050, biofuels could constitute 27% of global transportation fuels, thereby avoiding 2.1 gigatonnes of carbon dioxide emissions annually. Canada needs to look at new technologies such as hydrothermal upgrading as a bridge to the future, and not necessarily as a barrier to current prosperity.