As I was catching up on a two-week backlog of news after my vacation, I ran across a New York Times editorial with the promising title of "Tar Sands and the Carbon Numbers." Thinking that perhaps the Times might have woken up to the necessity of comparing the lifecycle emissions from oil sands to those from other crude oils, I was disappointed to find its editors perpetuating the common misunderstanding concerning these emissions when viewed only from an oil-production perspective. That's a shame, because it results in the scape-goating of Canadian producers and pipeline companies while conveniently avoiding the soul-searching that ought to accompany a clear understanding that, whether we're talking about oil sands or conventional oil imported from any other source, the vast majority of the lifecycle emissions will occur here, when the products into which these oils will be refined are consumed. It is also condescending toward the sovereign responsibility of our NAFTA neighbor for managing their national emissions under the Kyoto Protocol, which they ratified but we didn't.
The pending State Department review of the proposed Keystone XL pipeline project linking Alberta's oil and oil-sands projects to Gulf Coast refineries has become a hot-button issue for US environmental groups. Producing oil from oil sands, which were more commonly called tar sands until that became a term of disparagement, certainly involves more environmental consequences than most--though not all--conventional crude oils. Since US groups haven't been very successful targeting the oil sands projects in Alberta, where they contribute significantly to Canada's oil output and overall economy, the export pipeline has become a target of convenience. From my perspective, the angst about pipeline safety and acidic bitumen is mainly a red herring; the oil industry routinely handles other crude oils of similar sulfur levels and acidity, usually by adjusting the metallurgy of the pipes and vessels involved. The real issue here is greenhouse gas emissions, which the Times and most other critics of oil sands narrowly compare to those from producing conventional oils.
The Environment Canada report cited by the Times indicates that oil sands production and upgrading result in emissions about 70% higher per barrel than for the production of Canada's average conventional oil. That's in the range of other estimates I've seen. However, what the Times fails to mention is that such "upstream" emissions only account for a fraction of the total lifecycle emissions attributable to any oil. By far the biggest portion--even for oil sands--comes from the combustion of petroleum products by end-users.
So if at least 70% of the emissions from oil sands crude occur in the US, rather than Canada, and if the lifecycle (well-to-wheels) emissions from oil sands only average around 15% higher than for the average US refinery's crude slate, while emitting little or no more than some commonly imported crude oils from other countries, are the XL pipeline's opponents exaggerating its impact? I believe they are, unless they're also willing to take on imports of consumer goods and other products from higher-emitting countries like China. That would be difficult to justify to the World Trade Organization, considering that the US doesn't have a statutory limit on its own greenhouse gas emissions. It might also put us in an awkward position with regard to our exports to countries that have adopted strict emissions reduction targets.
Meanwhile we shouldn't forget that under UN agreements it is Canada that bears responsibility for the extra emissions that oil sands generate in Alberta. The Environment Canada report indicates that oil sands are likely to contribute 11.7% of Canada's GHG emissions by 2020, up from 6.7% in 2005, when Canada's share of global GHG emissions stood at less than 2%. The expected increase in oil sands output would account for essentially all of the projected 7% rise in Canada's emissions over that interval, an amount equivalent to 0.1% of current global emissions. The means by which Canada could address those incremental emissions include improved technology, offsetting cuts in other sectors, emissions trading and offsets purchased from other countries, or the Canadian government could simply choose to restrict oil sands output. Whatever path they choose, we have plenty of our own emissions to consider without going into a tizzy over a Canadian sector that currently emits roughly as much as US livestock waste management.
Trying to control the emissions from oil sands by blocking this pipeline is a perfect illustration of the difficulty of attempting to tackle a complex global environmental problem by focusing on isolated measures that only bear indirectly on the outcomes that matter. The weakness of the Times' argument is reflected in the following sentence, referring to Canada's policies: "The United States can't do much about that, but it can stop the Keystone XL pipeline." The implication seems to be that we would be better off if Canada exported its oil sands to developing Asia, their next best market, relieving us of any associated guilt, even if it made no actual difference in global emissions. I hope that when the State Department decides this matter, it gives appropriate weight to the fact that, other than fuel economy improvements in the US car fleet, our energy ties with Canada represent the single most effective energy security measure undertaken by this country since the oil crises of the 1970s.
Oil Sands Anxiety Is Overblown
Authored by:
Geoffrey Styles
Geoffrey Styles is Managing Director of GSW Strategy Group, LLC, an energy and environmental strategy consulting firm. Since 2002 he has served as a consultant and advisor, helping organizations and executives address systems-level challenges. His industry experience includes 22 years at Texaco Inc., culminating in a senior position on Texaco's leadership team for strategy development, ...
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Paul O says:
For the U.S. to decline oil from Canadian Tar Sands, or increase the expense to itself of oil from Canada by impeding the pipeline effort, is just plain foolhardy in my opinion.
We would end up simultaneously reinforcing our dependence on the Middle East for oil, and handing over to China (who are showing significant interest and are investing in the Tar Sands), yet another means by which they could further compete with us, or even displace us in international trade, and competition for resources.
That in the end will be all we accomplish.
A guest says:
Geoffrey, while it's indisputable that demand reduction is important, oil sands and pipeline to enable expanded production from them are still important targets. Total GHG emissions are the issue. If we are to contain climate change to within limits that our civilisation can withstand wthout collapse, then total GHG emissions must be curtailed. Coal is the biggest target, and we will have to forego mining some of the recoverable reserves. Tar sands are an equally legitimate target, because exploitation of a significant fraction of the huge potentially recoverable reserves will accelerate the build-up of atmospheric CO2 compared to restricting ourselves to conventional reserves.
To say that we're collectively going to burn all available fossil fuels anyway so why not burn the dirty stuff next door, strikes me as defeatism. In that case we're inviting climate disaster, so odds on we're all doomed and there is really no point to discussing any of this.
To say that we should manage demand before worrying about the environmental impact of supply is certainly arguable. However, leaving the oil sands in the ground would limit global supply and hence increase price, which is exactly the way to stimulate demand reduction. Doesn't look like the USA in particular is going to volunteer reductions without some forcing.
If the argument is that the Canadians are going to extract the stuff come what may so USA may as well buy it from them is spurious. Everyone should be putting pressure on them not to exploit it, for the obvious reasons above.
Geoffrey Styles says:
Peter,
I understand your argument and see its merits. However, I can also put myself in the shoes of our neighbors to the north. The market value of the oil sands, if produced, is on the order of $15 trillion. And that's just the proved reserves, not the total recoverable resources, which are much larger. Expecting them to leave that in the ground and forgo that kind of economic uplift just doesn't seem realistic. So on that basis I believe it's entirely valid and appropriate to see a benefit in its coming to us, rather than going elsewhere to be consumed.
Tim Havel says:
Unfortunately, this article is also missing something important: the Energy Returned on Energy Invested (EROEI) of the tar sands is lousy: about 1.5. The only reason it is economical at all is because natural gas is much cheaper than oil per unit energy. If you think that's going to last (I don't) then it would be physically more efficient to run the US vehicle fleet off natural gas directly than it would be to use that gas to melt bitumen. But what really makes the tar sands a veritable carbon bomb is the way they are going to start melting it once natural gas gets too expensive: http://www.theoildrum.com/node/6183
Geoffrey Styles says:
EROEI is an important consideration, and it's one reason why crop-based ethanol faces serious limits to further expansion. I've seen a range of EROEI figures for oil sands, but they are all generally lower than for conventional oil as you'd expect. While I'm sympathetic to the argument that the gas used to extract and process them might better be used directly in vehicles--I've made this argument myself concerning the large quantities of gas used in the corn ethanol lifecycle--the fact is we are no longer gas-constrained as we were a couple of years ago. It would take tens of millions of natural gas vehicles on the road before they started competing in a serious way with the gas consumed by oil sands and other heavy oil processes. (The first 10 million NGVs would use about 0.5 TCF/yr.)
Until we reach that point, I suggest viewing both oil sands and corn ethanol as forms of resource-leveraged gas-to-liquids, enabling natural gas to have a much greater effect on the supply and demand balance for transportation fuels than if we had to wait for an NGV buildout.
Robert Cormia says:
While I am not fond of the open pit mining of virgin land in Canada, I do find the thoughtful analysis of the author compelling, and especially the argument (or assertion) that we should be looking elsewhere, and internal to the US, for more significant changes to 'move the needle' on GHGs. Let's stop and and consider one argument (not made by the author) that the GHG investment by the US military to protect Arab oil is in fact not added in the wells to wheels GHG analysis of that petroleum. I bet if we ran the numbers on it it would not be insignificant. Or rather, what about US (congress) intransigence to raising fuel efficiency (thankfully changing) but if we were at 35 mpg fleet instead of 21, and if new car CAFE was 40 mpg instead of the current 27 mpg, what impact would that have? We use 25% of the world's petroleum, so that would be HUGE. My third argument (slightly off topic) is that if we had 50 million gallons a day of biofuels (not agrifuels) and we could push that to 100 million gallons a day by 2022, and if CAFE were 40 to 50 mpg then, we could cut petroleum use by at least half. So let's get going with that, and not beat up our neighbor to the north over supply concerns, when we have a demand problem here at home. So do those numbers, and then beat up on Congress, and not the Canadians.
A guest says:
Excellent article, with some well thought out replies. I have concern that the over exaggeration of the real risks posed by keystone, and the oil sands in general is overshadowing the real difference that could be made by a reduction in coal fired power generation in the USA, an area which is led by France and Canada. The environmental activists seem to have blinders on about this, and severe tunnel vision.A guest says:
Kelly - great point about coal! We DO have our blinders on! If we focused on building out wind, and also working to quickly increase both CAFE (mpg) and biofuels (not agrifuels) we could significantly reduce our GHGs. Strategically it is obvious that a partnership with Canada for oils sands petro-feedstock in teh western states is the way forward, as Canada is a more trusty partner (or less problematic) than the middle east. Wind energy would also be a real job creator in the US, bringing manufacturing back to regions including Detroit.
Rick Engebretson says:
A highly diverse chemical and energy industry might emerge from this rhetorical fog. As well, a logistic security might emerge given the convergence of tar, agriculture and transportation around the former rust belt.
The complimentarity of biomass chemistry and tar enable a large spectrum of product capabilities, while cutting the carbon footprint of organic fuels.
The high electric costs (currently shipped coal) for iron production might also enter this scenario.
There are critical environmental issues given the profound sensitivity of the Great Lakes. We wouldn't put a nuclear plant in the Grand Canyon. And Canada impressed me as lacking with the devastation around Sudbury nickel mines.
Somewhere between biomass alcohols (etc.) and tar, development and destruction, there is opportunity to be crafted. My guess is industry insiders already have plans on the table since cash is flowing faster than oil.
Robert Cormia says:
Rick,
Excellent point about mixing bio-fuels with oil sands. When Exxon Mobil first presented this idea yars ago I RAILED against it, We'd blend our way through the evil of tar sands. On more considered reflection, the way to a stable gasoline (liquid fuels) price is exactly this approach. If oil sails to $150 or even $200 a barrel, a company (like Exxon) could blend a stable process like oil sands with a predictable bio-fuels product. For instance, mixing oil sands at $5 a gallon with bio-fuels at $3 a gallon (50:50) gets you $4 gas, or a worse case, oil sands product at $6 a gallon and bio-fuels at $4 a gallon (50:50) for $5 gas. Oil sands at 125% GHG plus bio-fuels at 25% GHG still gets you 75% GHGs, somewhat of a reduction. Worse case of oils sands 125% and cellulosic ethanol at 75% pencils out at 100%. My prediction (perhaps you hinted at this) is that we will create an industry with Canadian feedstock (bituman) and US bio-fuels. It is a bit of a deal with the devil, but if we push CAFE (mpg) to an 'honest 50 mpg' we can reduce GHGs by 50% and reduce dependence on petroleum feedstock by 75%. Then Canada supplies most of what we need in the US (assuming we can only push 5M barrels a day).
-rdc
Geoffrey Styles says:
Blending down GHGs has a lot of potential, as you describe. However, I wouldn't count on "cheaper" biofuels (which don't yet exist) to affect final fuel prices in the way you propose. The price of gasoline (petro + bio) will still be set by the price of oil, while a large volume of biofuels (along with improved efficiency) would depress oil prices by reducing aggregate demand for oil.
Rick Engebretson says:
Very interesting, rdcormia.
As something of a biophysicist, I saw plenty of reaction chemistry that involved multiple reactants. And if I don't volunteer "my" ideas, it's because I learned there are a lot of smart people with good ideas. It seems to me biomass might be used to assist production of liquid fuels directly. Sawdust works well to soak up an oil spill in the garage. Why separately produce an expensive fuel from tar and an expensive fuel from cellulose and try mix them when they don't want to mix?
Secondly, with the forest industry losing paper and building materials markets, we must find a way to manage a few million acres of biomass or it will burn anyway. Again, there are serious experts out there, but that fresh northwest wind might turn into a lot of carbon monoxide and smoke.
Thirdly, with carbon sequestration markets emerging, a company like Exxon might sustain healthy ecosystem biomass sources and, figuratively, have their cake and eat it too.
There are a lot of possibilities to continue using organic fuels. We had a good 100 years, learned a lot, the human race seems to be prospering. It seems like windmills, hydrogen and batteries are still a risky gamble.
Rick Engebretson says:
As your writings convey, we are in a fast changing energy and infrastructure economy. You understand this stuff better than I do. And you endure the swipes of the unimaginative far better than I will try.
Andrew Holland says:
Geoff -
This is a good and well-researched post. I agree with you that the environmental community is tiliting after the wrong windmill here - they probably should be protesting coal power, not oil imports from a friendly neighbor.
However, after a lot of research, I have come down on the opposite side from you on this.
The thing is, we have a sweet deal from Canada right now - we are the sole importer of their oil, and our refineries are able to buy oil for below market rates. According to a report from TransCanada, who is building the pipeline, the American refineries currently at the receiving end of the existing Keystone pipeline pay less for the oil than world market rates. They know that Canadian exporters have no other option. That is why gas in the Midwest (refined from cheaper tar sands oil) has been cheaper in recent years than gas on the coasts (refined from US or imported oil).
The proposed Keystone XL pipeline could actually increase costs to American refiners by bringing the oil to the Gulf Coast, where it would compete with imports from around the world. This would refute arguments that more oil from Canada could reduce gas prices.
In fact, if the pipeline is built, it will allow Canadian oil to be exported via the U.S. Gulf Coast. The Keystone XL pipeline will finally connect Canadian oil production to global markets, making it a fungible commodity. Diversifying the Canadian economy away from dependence on the U.S. is a strategic goal for Canada, as cited by this Globe and Mail story. Once Canadian oil can reach the Gulf Coast, then it can be exported to wherever the demand is highest: and right now, that’s China.
Geoffrey Styles says:
Andrew,
Most of the current discount for Canadian crude is an artifact of the WTI bottleneck at Cushing, OK. This is a temporary situation that won't require the Keystone XL line to rectify. You're right that Canadian oil would ultimately compete with imported oil in the Gulf, though it's not obvious that large quantities would actually be loaded onto tankers at Gulf Coat ports, while foreign cargoes were brought in to replace them. Assessing that requires a detailed analysis of China's refinery configurations and product markets, US refining yields and markets, competing crude qualities, and freight rates. The net of all that is a dynamic, rather than static result.
Amelia Timbers says:
Geoff, welcome back! Also, Canada did ratify the Kyoto Protocol, but it seems like they are doing a bad job of meeting targets. From today: http://theenergycollective.com/simondonner/63717/reality-canadas-new-reg...
Geoffrey Styles says:
Amelia,
Thanks. Canada is hardly the only country that is having a hard time reconciling emissions reduction with economic growth. However, given our close ties it makes an odd choice to urge our government to play hardball with them over this.
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Geoffrey Styles is Managing Director of GSW Strategy Group, LLC and an award-winning blogger. More »
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