07.20.08
Oil sands boom swamps the Canadian wilderness
RG
Environmentalists want tougher laws to halt the damage, writes Tim Webb
* Tim Webb
* The Observer,
* Sunday July 20, 2008
Todd Dahlman scoops up a handful of oily sand and smiles. ‘This is the
money – it even smells like money,’ says the manager of Shell’s Muskeg
River oil sands mine in the Athabasca region of North Alberta in Canada.
We are standing in the middle of a pit 50m deep that giant diggers
have hollowed out of the earth. Some 150m beneath our feet lie almost
a billion barrels of oil.
With Brent crude at $131 a barrel on Friday, the oil sands frenzy is
in full swing. Canada holds estimated reserves of 179 billion barrels
of oil, the majority from oil sands, putting it second only to Saudi
Arabia. Currently, Canada’s oil sands produce just over a million
barrels per day but this is set to triple by 2020, making the country
one of the largest producers in the world.
Shell, which operates the mine with Chevron and Marathon Oil, has 20
billion barrels of potential reserves in the sands, representing a
third of its entire potential reserve base. It currently produces
about 150,000 barrels a day from its oil sands operations, around 5
per cent of total production, but plans to increase this figure
fivefold.
For oil majors who are finding it difficult to locate new reserves,
the attraction of Canada’s oil sands is strong. Resource nationalism,
where countries bar foreign companies from their oil, is on the rise,
as shown by BP’s spat with its Russian partners over its joint venture
TNK-BP. The issue of reserves is particularly sensitive for Shell,
which had to downgrade almost a quarter of its booked proven reserves
four years ago, a scandal that led to the ousting of then chief
executive Phil Watts.
But development is controversial. Untreated oil sands have the same
consistency as peanut butter. Steam is pumped into the sludge to
separate the oil from the sand and water. Huge upgraders are needed to
treat the oil before it can be refined conventionally, and the process
creates at least three times as many greenhouse gas emissions as
conventional oil production. The environmental organisation, the
Pembina Institute, estimates that by 2030 the emissions produced by
the industry in Canada could total more than a quarter of the UK’s
current emissions. Production also devastates the boreal forests and
wetlands which cover northern Alberta.
Increasingly, Shell – and other oil sands operators – are being
targeted by environmentalists. The First Nations tribes – around 6,000
native Indians live in the Athabasca Region – are taking legal action
against some companies. And the US is passing an environmental law
which could restrict imports of the most polluting types of fossil
fuels such as oil sands.
George Poitras is a former chief of the Mikisew Cree, the largest
First Nation tribe in the Athabasca region. Now he negotiates on their
behalf when they lease land to oil companies. His office is in Fort
McMurray, an hour and a half away by plane from Calgary, and the
epicentre of the oil sands boom. With the highest GDP per capita in
Canada, locals have dubbed their town ‘Fort McMoney’.
Poitras says the development of the oil sands is poisoning the
Athabasca River. He says the fish taste different since development
began 40 years ago. ‘We think the water is giving us cancer.’
The three deposits of oil sands in the province, of which the one in
Athabasca is the largest, lie in 149,000sq km, covering a quarter of
the province. Not all of this will be extracted, and much will be
extracted using ‘in-situ’ methods where the material is pumped out of
the ground, rather than mined, and so less forest has to be cleared.
The industry says 420sq km of forest has been ‘disturbed’ so far.
Meanwhile, the Pembina Institute says that 2,000sq km of forest is
likely to be affected.
Oil companies are required by law to ‘reclaim’ the land after they
cease operations there, and promise to plant native species of grass
and trees and reintroduce wildlife. Poitras is scathing. ‘Our elders
laugh when the industry says this. Who do they think they are – God or
the creator?’
Campaigners say environmental regulations covering the industry are
inconsistent and ineffective. The Alberta government requires
companies to reduce the greenhouse gas emissions’ ‘intensity’ per
barrel produced by 12 per cent, but there are no limits on reducing
overall emissions which will mushroom as operations expand. The
federal government has proposed tougher laws and higher levies for
companies that miss their targets. It is not clear whether these will
take precedence over Albertan regulations.
Shell has put forward proposals to equip the Scotford Upgrader – which
treats the oil from the Muskeg River mine – with carbon capture and
storage technology to reduce emissions. Even if this happens, it would
only cut emissions from the upgrader, when it is expanded, by a fifth.