Mighty sources of energy, mighty big threats

JEFFREY SIMPSON
Globe and Mail
Friday, September 22, 2006

FORT McMURRAY, ALTA. — Oil sands mines are hideous marvels.

They are terrible to look at, from the air or from the ground. They tear the earth, create polluted mini-lakes called tailing ponds that can be seen from space, spew forth air pollutants such as sulphur dioxide and nitrogen oxide, and emit greenhouse gases such as carbon dioxide. They are voracious users of fresh water. A smell like that of gasoline infects the air for kilometres around.

They are also marvels. An afternoon at Syncrude, where a huge expansion was recently completed, revealed engineering feats that a layperson could not possibly understand. This is where the brute force of ripping earth meets cutting-edge technology to produce 350,000 barrels of oil a day, from a company that now supplies 18 per cent of Canada's crude oil.

Everything seems larger than life. The monster trucks that cart the sand within which nestles the oil, or bitumen, weigh 200 tonnes. Each carries a load of 200 tonnes, bringing the total weight of truck and load above that of a jet plane. Four scoops from a mighty, clawing shovel fill a truck. Two tonnes of sand eventually produce one barrel of oil.

Syncrude's North Aurora mine measures about two square kilometres. There are other Syncrude pits. Suncor, the other established firm, also has them. Canadian Natural Resources is building its huge open-pit operation nearby.

There are still other mines, but most of the bitumen in northern Alberta rests too far below the surface for mining. Instead, bitumen needs to be heated underground and pumped to the surface, “in situ” extraction that is less hideous to look at but also requires vast amounts of water and even more natural gas than mining. About 80 per cent of the oil sands will need “in situ” production techniques.

How fast is the landscape changing? Consider: In 2003, Alberta's Environment Ministry reported that 430 square kilometres of land had been “disturbed” for oil sands. The next year, the ministry upped the estimate for actual and anticipated “disturbed” land to 950 square kilometres. The most recent estimate: 2,000 square kilometres, or about a five-fold increase in three years.

Only 2 per cent of the oil sands has been developed. Alberta's conventional oil and natural gas production is declining, despite increasingly frantic efforts to find more. The oil sands, coal, natural gas extracted from coal — these represent the long-term future for Alberta's energy. They are mighty sources of energy. They are also big threats to the environment, unless bold business and political leadership arrives.

Syncrude employs more than 4,000 people, many at very well-paying jobs. It has hired 400 new employees in the past year. It has driven production costs down to about $20 (U.S.) a barrel, although this can vary with the price of natural gas the company must buy. Syncrude has found the skilled labour it needs in recent years; other firms are finding the labour market exceptionally tight. That's one reason their projects' costs are soaring such that some are now on hold.

With high world oil prices, Syncrude has been hugely profitable. It recently paid off its capital investment and so switched from the start-up royalty of just 1 per cent to a 25-per-cent rate. The result, Syncrude estimates, will be $750-million in royalty payments to the Alberta government.

Those high prices have energy companies investing $100-billion in the oil sands. Canadians, Americans, Chinese, French, Japanese — capital is flowing from a variety of sources to one spot, northern Alberta.

Technology is making companies such as Syncrude more profitable and, Syncrude insists, more environmentally friendly. The company is using less energy to produce a barrel of oil than it did five years ago. It needs less water, and it produces two-thirds of its own energy needs such as diesel fuel from its own bitumen sources. It is heavily investing in new scrubbing technology for reducing sulphur dioxide emissions.

The company is proud of reclamation work required of it by government. About 22 per cent of the “disturbed” land has been reclaimed, although none has been “certified” as such by the government. It's different land, though. The original boggy muskeg is being replaced by sandy, hilly, forested terrain. Suncor has reclaimed 9 per cent.

Whether land, over time, will truly be reclaimed is just one of the environmental bets on an industry driving the local, provincial and national economies — bets that, when it comes to greenhouse-gas emissions, are going to be lost without a serious change of direction.

jsimpson@globeandmail.com