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Canadian tar sands set to be top U.S. oil import

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"Canadian tar sands set to be top U.S. oil import"

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Let’s not forget that other risky, dirty oil business BP is part of

Canada’s large reserves of tar sands (or oil sands) are poised to become the number one source of U.S. crude oil imports in 2010, according to a new report from research firm IHS Cambridge Energy Research Associates.

Oil sands imports could ultimately increase to account for 20 percent to 36 percent of U.S. oil and refined product imports by 2030 from the 2009 level of 8 percent, according to the report, “The Role of Canadian Oil Sands in U.S. Oil Supply.”

featured imageI’m so glad the Houston Chronicle still uses the term tar sands, unlike the semi-greenwashing term CERA is using (see Memo to all: They ain’t “oil sands.”)

The CERA report also seriously underplays the devastating environmental and human health consequences of the “biggest global warming crime ever seen.” See also Canadian bishop challenges the “moral legitimacy” of tar sands production.  Indeed, a major new study by Ceres, discussed below, comes to a very different view.

And these reports couldn’t be more timely, given which company is betting big time on the tar sands (see BP stand for “back to petroleum” “” oil giant shuts clean energy HQ, slashes renewables budget up to $900 million this year, dives into tar sands).

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CERA claims the environmental concerns are not big enough to undermine the rationale for continued expansion of the tar Sands:

Energy security does not need to be at odds with the environment. Innovation in oil sands has been a constant theme. Since its inception, the industry has made and continues to make major technological strides in optimizing resources, innovating new processes, reducing costs, increasing efficiency, reducing greenhouse gas (GHG) emissions, and reducing its environmental impact. However, new techniques and technologies are needed to continue to grow production sustainably. Cooperation between governments, both in the United States and Canada, and the private sector is crucial to continued advancement of new technologies.

As the Houston Chronicle reports,

The findings are at odds with those released this week by sustainable investment advocacy group Ceres, which released a report saying Canada’s oil sands are potentially riskier investments than the Gulf of Mexico. Stricter climate regulation and a possible federal low-carbon fuels mandate undermine such investments, the study says.

And CP just happens to have an analysis of the Ceres report by CAP’s Colorado-based Tom Kenworthy.

As hard as it is to take our eyes off the volcano of oil erupting into the Gulf of Mexico, a new report on the Canadian tar sands industry is worth a look northward.

“Canada’s Oil Sands/Shrinking Window of Opportunity,” just published by Ceres, a coalition of investors, environmental and public interest organizations that studies challenges to sustainability, says that in financial and environmental terms our northern neighbor’s tar sands industry may be even riskier  than sucking oil from beneath the Gulf.

“Most of these risks are related to the energy- and water-intensive nature of oil sands production, risks that will only increase as the industry seeks to double or even triple production in a world that is increasingly becoming water- and carbon-constrained,” writes Ceres president Mindy S. Lubber in her introduction to the report.

The mining, processing and upgrading of the viscous bitumen that lies beneath a great swath of northern Alberta, produces about 1.3 million barrels of oil per day. Most of it is exported to the U.S. where many states are considering imposing low-carbon fuel standards for transportation fuels that threaten the Canadian industry’s growth. Canadian and Albertan officials, along with industry leaders, have embarked on a high-intensity lobbying campaign to change the dirty image of tar sands oil, which is about three times as carbon intensive as conventional oil.

Because new production of oil from tar sands is so expensive, requiring a world price of at least $65 a barrel and “potentially as high as $95 per barrel to make economic sense,” the industry’s plans to greatly expand are vulnerable to price pressures, including those from low carbon fuel standards. Though the carbon content of tar sands could be reduced by mixing the oil with biofuels produced from cellulosic ethanol, that additive is not yet available on a commercial scale. Ceres estimates that if a quarter of the U.S. vehicle market were subject to a low carbon fuel standard, requiring a 10% reduction in the carbon intensity of gasoline by 2020 and another 10% reduction by 2030, that could cut tar sands production by 13.5% compared to a baseline estimate.

Other risks facing the industry cited by the Ceres report include:

  • Tar sands production that relies on strip mining of deposits close to the surface uses large quantities of water – as much as four barrels of water for every barrel of oil produced. Though the industry is increasingly shifting to less water-intensive methods including in-situ release of bitumen by underground steam injection, water constraints, including the impact of climate change, could hamper growth.
  • The industry faces growing costs from land reclamation under pressure from new government reclamation directives, and this could mean higher operating costs for some producers.
  • Opposition from aboriginal communities could stymie growth and slow efforts to build pipelines to Canada’s west coast for export to Asia.
  • Carbon capture and sequestration technology could help the tar sands industry lower its carbon intensity, but it would require lengthy pipelines and raise the price of production by $11.40 per barrel.

“Added together,” Lubber concluded, “these wider-ranging challenges will make oil sands production increasingly risky in the years ahead”¦.  (G)lobal oil prices will need to remain high – possibly approaching $100 a barrel – to justify the planed $120 billion expansion in the oil sands region in the next decade. Oil sands producers must also be mindful that if global oil prices get too high, above $120-$150 a barrel, it will likely reduce global oil demand and shift markets in favor of alternative fuels. Bottom line: oil sand producers are operating in a narrowing window of profitability.”

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14 Responses to Canadian tar sands set to be top U.S. oil import

  1. prokaryote says:

    I’m looking forward to see those CEO’s in prison, for their crimes on our environment, manipulation and lack of safty. Likewise it will turn out that the earth will experience catastrophic climate changes BECAUSE of what dirty oil and gas buisnesses done to confuse the public and decision makers. They continue with their manipulation of opinion and destruction of the environment and it seems only law enforcement will be able to stop these criminal attitudes.

    Someone need to pull the plug from their opinion HQ’s and websites.
    They are a threat to the survival of the species.

  2. mike roddy says:

    Like the Deepwater Horizon, Canadian tar sands operations are monuments to man’s greed and stupidity. The financial risk appears to be much greater than, say, designing electric cars and supporting infrastructure. If oil has to be over $95 a barrel, battery operated cars would appear to be instantly competitive, based on strides made just in the last year.

    BP is the current leader in environmental nightmares, but the business plans of Exxon, Chevron, and Conoco Phillips are just as deadly. They prefer to joint venture with corrupt governments in places like Peru, Nigeria, and Saudi Arabia.

    It’s the technology itself that is destructive, in all of its manifestations.

  3. PeterW says:

    Don’t forget that BP also has its eyes on the Arctic Ocean.

    http://www.reuters.com/article/idUSN1326556220100513?type=marketsNews

    Lucky for them the Arctic ice doesn’t seem to be as thick as in the past.

  4. Rockfish says:

    “Lucky for them the Arctic ice doesn’t seem to be as thick as in the past”

    If they had their way, the Arctic would have the same climate as the Gulf of Mexico!

    Sadly, I see the tar sands project as only the first of many examples of how desperate humanity will become to keep the oil flowing. No matter how much demand destruction we can accomplish, oil will surely get over $100/bbl and stay there in the near future. That starts to make a lot of atrocities “pencil out” in a financial sense.

    I fear the only thing that will save us is another Great Depression. Luckily, Europe once again seems to be taking the lead in saving the planet!

  5. Bill Woods says:

    A technology to keep an eye on:
    http://www.petrobank.com/heavy-oil/the-thai-process/

  6. Edward says:

    Reference “Storms of My Grandchildren” by Jim Hansen, chapter 9: WE MUST leave all the rest of the coal and all of the tar sands and all of the oil shale IN THE GROUND AS THEY ARE to avoid a climate disaster far worse than the holocaust. The ramp down of coal use must start NOW. We must NEVER touch tar sand or oil shale.

  7. glen says:

    When you compare the enviromental and economic costs of securing oil from the Middle East and Africa, the oilsands in Alberta start to look pretty environmentally friendly and economical. No wars to be fought and a secure supply with reserves second only to Saudi Arabia. New technologies are reducing the water usage required and the land reclamation will make other enviromental impacts minimal. The aboriginals are voicing their objections to further their negotiation ability for compensation but are very unlikely to stop continued development. The recent heavy investment in the oilsands by Chinese government owned oil companies indicates that competition for resource rights from China will nullify any impact of carbon regulations imposed by North American governments. Cera is an advocacy group and their recomendations should be regarded as such.

  8. Mark says:

    Under Kerry-Lieberman will states still be allowed to impose low-carbon fuel standards for transportation fuels?

  9. Michael Tucker says:

    BP is not the only oil company that is chasing this hard to recover and hard to process oil. Shell would also like to drill in the Arctic while Chevron has been drilling deep water wells in the Gulf of Mexico for several years now. And it isn’t just tar sand as the CAP article says. Oil shale, in both the US and Canada, has been a tempting oil resource for several decades. Shell has been trying to develop methods to get oil from the oil shale for the past few years. As oil gets scarce, as the price increases, these sources become much more attractive to your friendly neighborhood oil company.

    Since the only biofuel that is currently in production is corn-to-ethanol, I would suggest that higher oil costs will cause higher food costs in the short term. BTW, the new energy bill does not seem to address the current food to fuel nightmare and adds another: subsidized farm land for fuel. To be successful, biofuel must come from non-food stocks on non-farm land. If more can be made by planting switch grass, food shortages can result as farmers chase profits.

  10. glen says:

    With advancing recovery technologies, previously capped conventional oil wells are being brought back into production and will prove the fallacy of peak oil occurring any time soon.

  11. Rob Mac says:

    New technologies are reducing the water usage required and the land reclamation will make other enviromental impacts minimal.

    This is the same song and dance we’ve heard from the mountain-top-removal coal mining companies. I’m sure it’s equally as likely to be true.

  12. Edward says:

    “If we don’t do it they will” is an excuse we have heard before. NO THEY WON’T because they are going to run out of food! NO FOOD NO WORK!

    In any case, WE HAVE GOT TO STOP COAL, TAR SAND AND OIL SHALE NOW. It has to be a worldwide law and it has to be now. The alternative is a catastrophe that gets worse for every day that we delay action.

  13. les says:

    For info. A news article about Norway’s Statoil
    http://theforeigner.no/pages/news/statoil-vote-stirs-the-carbon-pot/

    “CEO Helge Lund said Statoil hasn’t even begun recovering oil sand, but the company is developing a pilot project. They plan to produce 10,000 barrels of oil per day, about 0.5 percent of the company’s production.”

  14. Monique says:

    Hi Joe,
    Can you look into and start highlighting what another foreign conglomerate AngloAmerican and its partners are attempting to do in Alaska? They want to dig a 2,000 foot deep hole 2 miles wide to mine gold and copper that would completely destroy the headwaters where salmon spawn in the Bristol Bay area and poison the surrounding tundra, lakes, rivers and streams.
    The companies have already invested millions to locate the deposits and they are quite substantial, or so they say.
    There is no doubt how completely destructive mining is as evidenced by case after case. It also has practices that impoverish communities instead of helping them. The loss of life and the loss of quality of life is tremendous. And finally, the rape of the earth is so devastating not just because it exposes living things to toxic substances but the industry is never held accountable for the complete cleanup and leaves the lifetime maintenance of its own waste to the public and nature.
    Thank you