Petrodollars, Tar and the Athabasca-Mackenzie Watershed

In a Nutshell: Extracting and refining oil from the tar sands has the potential for significant damages: environmental, social, economic and national. But the reserves in the tar sands can’t solve the global petroleum shortage that is developing. The tar sands reserve could ease a transition to the future mixed energy lifeblood that must be developed. The key is to avoid the potentially crippling damages being caused by the current unregulated, short-term, opportunistic development that is underway.

In 2008, Andrew Nikiforuk, a native Albertan, seasoned researcher and experienced writer, published Tar Sands – Dirty Oil and the Future of a Continent. Much of the facts that follow are taken from that book but any issues with what is presented here fall to me.

Canada now exports more oil to the U.S. than does Saudi Arabia; nearly 20% of all U.S. oil imports and rising. Yet half of Canadians depend on the mid-east for their oil. But what other costs are attached to our new primacy in petroleum?

It all started in 1967 when a U.S. speculator built the first tar mine and tar-to-oil upgrader on the banks of the Athabasca River at Fort McMurray. In the early 70’s, the U.S. government was calling this germ of the tar sands development “Project Independence” and it was not just a name, it was a point of view that still exists and grows. Money soon came from not only the U.S., but also Japan, Korea and European nations. The attitude was as if the tar sands were declared international territory for the national benefit of almost any nation except Canada. Now Norway, France, China and mid-east nations have staked claims. But Canada absorbs the impacts – environmental and other.

The tar from the tar sands (bitumen) has a nasty environmental impact. It is a dirty kind of petroleum. Not just sticky and tarry but higher in carbon and lower in hydrogen than ordinary light crude oil. It has 5% sulphur, 0.5% nitrogen and 1000 ppm of heavy metals. As it comes out of the tar sands, it is full of abrasives, too sticky to pump –semi-solid—and requires a lot of energy and resources to move it to a refinery. From surface mining it to getting it to flow in a pipe, all costs total about $100,000 per flowing barrel. Much of the tar is too deep for surface mining and requires steam-assisted gravity draining (SAGD) to melt it and get it to the surface. To get a barrel out by SAGD uses as much energy (natural gas) to make the steam as there is in a third of a barrel of the recovered bitumen. In total, it costs a barrel of oil to recover from five to as little as two barrels of oil by this method, depending on the estimate. In addition, to be pumped through a pipeline to a refinery, light crude must be added to the bitumen. The tar sands uses about 50,000 barrels of light crude per year for this. Once the bitumen gets to a refinery, it needs a lot more refining than normal light crude, so more energy and resources are used.

Tar sands now provide about half of Canada’s oil production; about 1.3 billion barrels per day. That consumes a lot of Canadian resources and leaves us with a lot of wastes. In 2007, Imperial Oil proposed their Kearl tar sands project which would produce more greenhouse gases than 800,000 passenger vehicles. The Energy Resources Conservation Board, an Alberta regulatory agency, said it was “not likely to cause significant adverse environmental effects”.

A major effect of the tar sands projects is on our fresh water. Not only does it severely affect the source water areas for the Athabasca River and the Mackenzie by mechanical effects and by pollution, but it also uses huge amounts of water in getting the bitumen out and flowing. The Department of Fisheries and Oceans admits that we don’t have data to estimate the cumulative effects of water withdrawal in the Athabasca River watershed. Imperial’s Kearl project is projected to take 3.7 billion cubic feet from the Athabasca River. This project will also suck up over 300 million cubic feet of groundwater. All this in addition to this one project’s destruction of water-conserving forest, trashed wetlands, bogs and fens. Syncrude takes 2.5 trillion gallons of water from the Athabasca in one year. Headwater rivers and streams in the Athabasca watershed are being destroyed and flow of groundwater into the rivers is being severely reduced. David Schindler (University of Alberta recipient of the Stockholm Water Prize) and colleagues have supported a moratorium on additional tar sands projects because of their overuse of fresh water. Schindler points out that climate change has reduced river flows in the Athabasca drainage by 30% since 1971 and will continue to reduce those flows. The escalating demands by tar sands projects are taking water that the Athabasca and Mackenzie watersheds can not afford to lose. Surface water flow is related to groundwater levels and flows. The SAGD method of recovering bitumen uses huge amounts of groundwater. The Alberta government predicted 110 million cubic feet per year but the use has already increased at more than 3 times the predicted rate.

A lot of water is used in recovering bitumen from tar sands. It takes about 12 barrels of water to recover one barrel of tar. That used water, contaminated by a variety of sticky and noxious pollutants, including polycyclic aromatic hydrocarbons (PAH’s) and naphthenic acids, and for each barrel of bitumen recovered, at least 3 barrels ends up accumulating in earthen ponds along the banks of the Athabasca River. There now are over 20 square miles of these ‘tar ponds of the north’. That area used to be boreal habitats. Since the spring of 2008 when about 500 ducks landed on one and disappeared under its surface, never to emerge, that pond is called ‘Dead Duck Lake’. Everyone apologized and offered reassurance that there is no way this sludge will ever get into the Athabasca River. The original projection by engineers was for rapid sedimentation of the nasties from this used water. It did not happen. So more ponds were built to give more time for settling in the early ponds. Settling still is not happening and some projections say it will take about 1000 years. So it is expected that as much as 85 square miles of boreal forest will have to give way to more ponds while we wait.

Engineers are now starting to admit that the early ponds may not be structurally sound and that there is constant leaking ongoing both into the river and into groundwater. If a pond breaches into the Athabasca River, hence into the Mackenzie, David Schindler believes that the result will dwarf the environmental impact of the Exxon Valdez. Neither governments nor industry engineers know the current leakage rates but the engineers are now discussing ‘seepage interception systems’ to be in place for a couple of generations.

The tar sands development, like many other mining projects in Canada has offered many promises to rehabilitate all the damaged natural riches and to create much economic wealth. Canadians made only $150 million in royalties from mining between 1966 and 2002 but we have paid more than $4 billion cleaning up, or just containing damage, at sites left by mining and industrial activities.

In many cases, the repairs to the environments and to the people have been inadequate even if costly. We are paying about a half million dollars per year for a band-aid solution to the arsenic problem in the Giant mine in Yellowknife that has affected health of local people for decades. A thoughtful, although possibly conservative, estimate of the cost to reclaim one acre of wetland lost to the tar sands projects is $10,000. Because of linkage of natural processes among wetlands, full recovery of their ecological services may require rehabilitating up to 10 acres to restore one acre fully. For the almost 240,000 acres of wetlands destroyed so far, the bill could be from $2.4 billion to $24 billion.

The restoration funds held by Alberta to repair damages by the tar sands oil giants might be as much a half billion dollars but possibly much less. The small area that has received any rehabilitation cost $46,000 an acre. If that cost applies to the entire area under development, Canadians can expect the historical pattern of taxpayers inheriting the costs of damages inflicted by large, weakly regulated mining and industrial projects, possibly complete with the human damages. Reasonable regulation could remove this concern. Norway forces oil developers to set aside, in a government fund, 94% of all oil revenues, not just to repair damages, but also to guarantee thoughtful use of the windfall income for needs of its future citizens. A “Heritage Fund” that will work.

Fort McMurray has already suffered some of those human damages simply by unplanned and uncontrolled growth causing a damaging culture of folks who, even with lots of money, can’t obtain reasonable living conditions. A large fraction live below the poverty line even if highly paid. One oil giant contemplated building an alternative city several miles away to avoid the problems. Farther downstream, the human damage seems to have followed the ecosystem damage to Fort Chipweyan on the Peace-Athabasca Delta and when Dr. John O’Connor publicly announced unusual rates of rare cancers there, he was gagged and threatened both by Alberta and by Ottawa.

But we should not be too critical of a wonderful economic opportunity with a few costs. Even the Ontario Teachers Pension Plan, an investment fund guided by the folks who teach our kids, see the tar sands as an economic opportunity. They have proposed to strip-mine 120 square miles of boreal forest to recover coal that can be gasified and used to power the bitumen upgraders. Because of the tar sands, Canada now has a petrodollar. National maturation in some eyes, possibly including a famous Canadian son of an Imperial Oil executive. Unstable economics in recent experience. Lately, the Canadian dollar has fluctuated wildly, in concert with the world price of crude. Global economic traders now see tar sands as the economic basis for the value of our dollar, not the other foundations of our economy. And other nations control Canada’s tar sands.

The tar sands do not hold any long-term promise of an economic foundation for the nation. Certainly, oil has become global lifeblood with a current demand of 85 million barrels each day. Our tar sands only fill 1.5% of that. Even if production does reach the vision of 5 million barrels per day, that will be only 5% of the global market. Oil will not be the global lifeblood in the near future. Currently we use about 30 billion barrels per year but we find only about 4 billion barrels of new oil. Clearly we must plan a transition from the current oil-powered economy to something else. We should be using the tar sands as the key to that planned transition, not as our great tarry hope for all of our futures.

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