BOTTOM OF THE BARREL: CANADA'S TAR SANDS

by Chris Arsenault

(IPS) FT. MCMURRY -- The sun rises in a bright, red line over flat land, small lakes, boreal forest and peat bogs as our small double engine plane bumps through early morning turbulence between Edmonton and Ft. McMurray, Canada.

With more than 173 billion barrels of oil recoverable with current technology and more than $100 billion in committed capital investment, the Alberta tar sands around Ft. McMurray are considered the largest industrial project on earth. Unlike conventional crude, oil here isn't pumped, it's mined.

Current developments could yield 21 billion barrels of oil, according to the Canadian Association of Petroleum Producers. In 2007, the tar sands produced 1.2 million barrels of oil every day. By conservative estimates, this number will rise to 3.5 million barrels per day by 2020.

Locals here call it Ft. McMoney, as the median annual income for a two person family in this sprawling boom town is $120,100, the highest level in Canada and about twice the national average.

But this wealth comes with hidden costs, according to environmentalists. "Ft. McMurray is like an old-time gold rush and this leads to socio-economic conflicts and environmental problems," Thomas Clayton-Muller from the Indigenous Environmental Network told IPS.

In 1967, when Suncor energy opened the first tar sands operation, Ft. McMurray had some 1,000 residents. Today, 60,000 people live here with another 20,000 cloistered in temporary work camps, according to Janet Annesley, a public relations representative with Shell Canada.

Annesley hosted a group of journalists and senior Shell executives on a tour of Albian Sands Muskeg River Mines, a development that began producing 155,000 barrels of oil per day in 2002. Albian Sands is partially owned by Shell and the company is trying to counter negative press.

In Britain, the Advertising Standards Authority (ASA) recently reprimanded Shell for a series of advertisements which called the oil mine a "sustainable energy source."

"Because we had not seen data that showed how Shell was effectively managing carbon emissions from its oil sands projects in order to limit climate change, we concluded that the ad was misleading," said ASA in its ruling.

Don Thompson, president of the Oil Sands Developers Group, an industry association, wouldn't comment on the Advertising Standards Authority ruling. But in a meeting at Shell Canada's headquarters in downtown Calgary, he told IPS that "recent media and NGO reports have criticized the environmental performance of the oil sands industry. Much of this criticism is unjustified."

Environmentalists say that mining tar sands oil produces three to five times more greenhouse gas emissions (GHG) than conventional crude. Large amounts of water and natural gas are required to heat and separate oily tar -- or bitumen -- from the sand.

Extracting one barrel of oil from the tar sands requires 650 cubic feet of natural gas, according to Shell Canada figures.

"They [pipeline companies] are developing a multi-billion-dollar [gas] pipeline from the Mackenzie Delta," said Dr. David Suzuki, Canada's leading environmentalist. "All of that gas is going to be brought down, but not to heat our homes. It's going to be burned in the tar sands to melt the tar sands," Suzuki told IPS.

The tar sands currently account for around 5 percent of Canada's greenhouse gas emissions (GHG) and that number is expected to rise as production levels increase. By 2030, the tar sands could be producing 5 million barrels of oil per day, according to Alberta government figures. "That would account for more than half of all the greenhouses gases we produce in Canada," said David Suzuki. "It's just crazy."

"We didn't put the oil there," Shell's Janet Annesley told IPS in response to questions about increased GHG emissions from increasing levels of oil production.

When considering emissions from the beginning of production to the end burning of gasoline in cars, or what oil lobbyists call the "well to wheel life cycle," Annesley says oil sands crude is only around 15 percent worse than conventional oil in terms of GHG emissions.

Oil from countries like Saudi Arabia must be shipped to North America on tankers, which increases GHG emissions, while tar sands oil is moved to the U.S. via pipelines.

Environmentalists don't think those numbers are accurate and question the well to wheel methodology. Simon Dyer of the Pembina Institute, an environmental think-tank based in Alberta, told IPS that well to wheel is "an attempt by industry to duck the issues and deflect attention," adding that tar sands oil is still between 16-40 percent more GHG intensive than regular crude when using the industry's lifecycle methodology.

In August, Pembina and other environmental groups pulled out of the Cumulative Management Association (CEMA), an organization created by Alberta's provincial government and tasked with including various stakeholders in discussions around tar sands operation and expansion.

"The oil sands approval process wouldn't even wait for CEMA reports before approving new mines," said Dyer in response to why his organization pulled out of the co-management group.

"CEMA made a recommendation a couple of months ago to halt new land leases [for tar sands operators] and the provincial regulators didn't listen. The organization [CEMA] was doing more harm than good," Dyer told IPS.

Don Thompson from the Oil Sands Developers Group says he isn't concerned that Pembina and other groups pulled out of CEMA, even though the "multi-stakeholder" is now missing key participants.

Unlike Pembina, who tried to work with industry, Greenpeace Alberta takes a more provocative approach. "We are calling for a cool out, phase out approach," Mike Hudema, a spokesperson for the group, told IPS.

In July, Greenpeace activists snuck into a facility owned by Syncrude, the largest oil sands consortium, and unfurled a banner reading: "World's Dirtiest Oil: Stop the Tar Sands."

In August, Syncrude launched a $120,000 lawsuit against the activists, claiming among other things that Greenpeace hindered the "quiet enjoyment of the Operation Lands." Anyone who has visited tar sands mines can affirm they are less than quiet places.

While one would assume that roughnecks and truck drivers getting rich from the tar sands would clash with environmentalists, Greenpeace's Hudema says they are particularly supportive when the group canvasses for donations. "They [oil workers] are the nicest at the door and the most ready to give," he said.

"Our campaign isn't against anyone working in the industry. The potential for clean energy is huge in Alberta; it's the sunniest province the country, with some of the most windy areas in its southern corridor," Hudema told IPS. "We have to make a transition to green jobs, so workers can put food on the table while having an environment fit for their children and grandchildren."

The wheels of the Caterpillar 797B, the world's largest truck, are always going round and round at Shell Canada's Albian Sands mine.

The massive dump trucks, with wheels standing twice the size of a person and tires costing some $40,000 apiece, carry tar sand 24 hours a day, seven days a week.

"There isn't a lot of work in Newfoundland [a traditionally poor province on Canada's Atlantic coast], so you can do pretty well out here," Brian Paley, a mechanic who fixes and inspects the three-storey trucks, told IPS.

Paley says he enjoys the work; he earns a six-figure salary and the rugged northern Alberta landscape allows him to snowmobile in the winter and camp during the summer.

However, some natives living downstream from the operation say the tar sands are destroying ecosystems that give people like Brian Paley so much pleasure.

"We've lost 108 people since 1990, the elders say they buried one person per year in the old days," said Michael Mercredi, a member Athabasca Chipewyan/Dene First Nation from Fort Chipewayn, a community of some 1,200 aboriginals located downstream from the tar sands. Many community members died of rare cancers they blame on the tar sands.

Like many young people from Ft. Chipewayn, Mercredi knows the tar sands well; he spent four years making big money driving trucks at one of the mines. "I just walked off the job one night, I thought 'this is wrong, we're destroying our own land,'" said Mercredi.

"Where I come from is ground zero," Mercredi, who now works gathering traditional knowledge from elders in the community, told IPS

Dr. John O'Connor, Ft. Chipewayn's former physician, cataloged a string of cases of cholangiocarcinoma, an uncommon cancer of the bile duct among members of the community. The disease normally strikes 1 in 100,000 and Dr. O'Connor reported six cases in Ft. Chip over a short period, in addition to other strange ailments. He sent results to the local toxicologist's office. That's when the pro-industry Alberta government stepped in.

In 2006, Alberta Health and Wellness filed a complaint with the College of Physicians and Surgeons of Alberta, alleging that Dr. O'Connor had engendered mistrust and raised undue alarm in Ft. Chipewayn. O'Connor left Alberta for Nova Scotia while the College of Physicians investigated the charges. He was cleared of wrongdoing in 2008 but decided not to return to Alberta.

"Dr. O'Connor was our martyr," said Mercredi. "He sacrificed part of his career to inform people about what was happening to us."

Forest fragmentation from oil exploration in northern Alberta (Photo: Dan Woynillowicz/ Pembina Institute and courtesy .OilSandsWatch.org)

While the Chief of Ft. Chipewayn has spoken out vigorously about the social and environmental impacts of rapid tar sands expansion, other First Nations, including the Ft. Mackay Band, have embraced the mega-project because they say it brings jobs, money and development to the region.

Mercredi and other critics the of development say fish from the Athabasca River, which supplies water to the tar sands, are exhibiting strange deformities and mutations. In August, a group of children pulled a fish with two mouths from Lake Athabasca, near an area where tar sands tailings water had leached into the soil.

"One of the companies admitted to our community that a tailings pond was leaking into a stream," said Mercredi.

Elders from Ft. Chipewayn say the mutant fish is "a sign of what will happen to human life," according to testimony from a water conference held in the community in August.

Water is crucial for tar sands extraction: separating one barrel of oil from the sand requires at least three barrels of water.

According to peer-reviewed scientific articles written by Dr. David Schindler, Killam Memorial Chair and Professor of Ecology at the University of Alberta, the whole province and neighboring regions will soon face "a crisis in water quantity and quality with far-reaching implications." Tar sands producers extract 2.5 million barrels of water per day from the Athabasca River.

Water becomes toxic during the oil extraction process and ends up in massive tailings ponds. In April, more than 400 ducks died after the flock landed on a tailings pond, owned by Syncrude, the largest tar sands consortium.

The largest tailings pond, controlled by Syncrude, contains 540 million cubic metres of poison waste water, making it the second largest dam on earth, according to the U.S. Department of the Interior.

"We are the most efficient user of water in the oil sands," said Steve Gaudet, the environmental manager for Syncrude, a joint venture between Imperial Oil, ConocoPhillips, Petro Canada, Nexen and several smaller players.

During a tour of Syncrude's main site, Gaudet told IPS that the consortium will eventually be able to "reclaim" the tailings water, making it safe again, by mixing tailings with fresh water and gypsum, so the water becomes a solid.

"The industry has not demonstrated the ability to reclaim tailings ponds," countered Simon Dyer from the Pembina Institute.

In March, the government of Alberta issued the first land reclamation certificate for a tar sands operator to Syncrude, for successfully reclaiming a 104-hectare parcel known as Gateway Hill. The company frequently showcases the area to visitors. A herd of bison graze nearby as Syncrude employees pass around boxed lunches to a delegation of journalists touring the area.

But, according to the Pembina Institute's Simon Dyer, Gateway Hill "isn't representative of the challenge industry is facing" because the area is "just topsoil that was stripped away" in previous decades. Over the long term, Dyer says the companies have to incorporate poison tailings into a dry landscape, and they have not proven their ability to do so.

While the gargantuan trucks trolling the land at Syncrude and Albian Sands can leave skeptical journalists in awe, they are not the most important tool for tar sands extraction. Roughly 20 percent of the oil here in northern Alberta can be extracted through surface mining; the rest requires underground techniques know as in-situ.

These underground techniques disturb less surface land, but critics say they are particularly energy intensive and wasteful. The energy equivalent of one barrel of oil is required to produce three barrels of oil from the tar sands, according to the Pembina Institute's Dan Woynillowicz.

Cyclic steam stimulation, colloquially referred to as "huff and puff," is one popular in-situ method where oil companies blast steam into underground bitumen deposits through pipes for a month at a time. Once the bitumen is hot enough, other pipes will suck the oil back up to the surface.

Michael Mercredi says that First Nations are in a unique position to slow or stop tar sands development, but that doesn't seem likely in Alberta's current political climate. If anything will slow the world's largest industrial project, and its voracious appetite for water and land, it will likely be factors far away from this province's muskeg flatlands.

While most oil company officials are mum on exact figures, it is estimated that extracting one barrel of oil from the tar sands costs between 25-35 dollars. If the world economy hits a prolonged recession and the price of oil drops below 50 dollar a barrel, investors may look away from the tar sands.

Without a major recession, or political changes in United States, the largest consumer of tar sands crude, it seems likely that Caterpillar 797Bs will continue hauling oil 24/7, regardless of the environmental costs.

As Canada's tar sands extraction expands full steam ahead, a perfect storm of internal and external opposition could derail some of the voracious growth at the world's largest energy project.

Together, skyrocketing construction costs, falling crude prices, increasingly vocal opposition from some native groups, and a little known section of the 2007 U.S. Energy Independence and Security Act all threaten growth projections in northern Alberta.

"If I was an investor, I wouldn't want to take the risk of putting money into the tar sands right now," said Liz Barratt-Brown, a senior attorney at the Natural Resources Defense Council, an NGO leading U.S. lobbying efforts against Canada's heavy oil industry.

Canada is the largest foreign exporter of oil to the United States, with Alberta's tar sands sending roughly 500,000 barrels to the U.S. every day. Losing access to the U.S. market would significantly affect expansion plans.

And Canadian oil industry lobbyists are concerned about section 526 of the U.S. Energy Independence and Security Act of 2007 which bars U.S. federal agencies such as the military and the postal service from buying synthetic or unconventional fuels if they create more greenhouse gases emissions than conventional fuels.

Aerial picture of the Syncrude oil sands mine north of Fort McMurray, Alberta (Photo: Chris Evans / Pembina Institute and courtesy .OilSandsWatch.org)

"It was just one of those funny stories in Washington where this section [526] was overlooked," Greg Stringham from the Canadian Association of Petroleum Producers told IPS. "I don't think Canadians or oil companies knew about this section."

Between January and September of this year, Canadian oil lobbyists pushed hard to have section 526 amended or repealed, Barratt-Brown told IPS. Unlike other provinces, Alberta maintains its own special interests office in Canada's embassy in Washington.

In February 2008, Canada's ambassador to the United States, Michael Wilson, wrote to the U.S. defense secretary arguing that Canadian tar sands oil should not be included in the interpretation of this section.

Then on Mar. 17, Democratic Senator Henry Waxman, chair of the House Oversight and Government Reform Committee and author of the legislation, wrote a letter to Chairman Jeff Bingaman of the Senate Energy and Natural Resources Committee clarifying the legal meaning of section 526.

Waxman said section 526 of the Act prohibits U.S. government agencies, including the military, from purchasing "fuels derived from tar sands."

Lobbying continued throughout the spring. Two Republicans from Texas, Reps. Jeb Hensarling and Mike Conaway, sent a letter in late March to other members of the House of Representatives stating: "Section 526 would be problematic enough if it were clear and straightforward, however, the language contains several ambiguities, causing a flurry of attempts at legislative interpretation by the Air Force, the Canadian government, [and] the Center for Unconventional Fuels [an industry lobby group]."

To counter anti-tar sands campaigners, the Alberta government launched a 21-million-dollar advertising campaign in April aimed at improving the province's brand.

Environmentalists claimed victory in late September, when the Defense Authorization Bill passed without weakening or amending section 526. Oil industry lobbyists say environmentalists haven't won any victory and U.S. institutions will continue purchasing tar sands oil.

"This will be the first time government agencies have to look at greenhouse gas emissions for purchasing policies and that's positive," Barratt-Brown told IPS.

Oil from Canada's tar sands creates roughly three times the GHG emissions as conventional crude, according to environmentalists.

While environmentalists are claiming victory, plans in the U.S. are going ahead to retrofit old refineries to process tar sands synthetic crude, a sign that some industry players are not concerned about new legislation. U.S. drivers in Colorado, Ohio, and Indiana are already burning gasoline derived from tar sands oil.

"I was in Whiting, Indiana recently, where they are retrofitting one of the oldest refineries in the U.S. to process tar sands crude," Thomas Clayton-Muller, with the Indigenous Environmental Network, told IPS. Much of his community in Alberta is opposed to the development because of local health effects and broader environmental concerns, according to Clayton-Muller.

In January 2007, Governor Arnold Schwarzenegger announced that California would require a 10-percent reduction in carbon content from all fuels sold in the state by 2020, which would effectively ban imports from the tar sands.

The U.S. Conference of Mayors passed a resolution in June calling for an end to unconventional oil imports. "Our cities are asking for environmentally sustainable energy and not fuels from dirty sources such as tar sands," said Eugene, Oregon Mayor Kitty Piercy, who submitted the resolution.

Despite the actions of individual cities and the California's state government, the military is the largest consumer of transportation fuel in the U.S., so its interpretation of Section 526 and future purchasing habits are crucial.

From the office tower of the Canadian Association of Petroleum Producers in downtown Calgary, Greg Stringham is within a 15-minute walk from 150 oil companies and "rumours spread fast."

Stringham doesn't seem overly concerned about anti-tar sands legislation in Washington. He wouldn't comment directly on what a Barack Obama-Joe Biden Democratic administration and increased concerns about global warming could mean for the industry except to tell IPS: "I'm not confident of anything."