Oil sands creating gold rush, conundrum
EVE BYRON/Independent Record
Editor's note: This is the first installment in a two-day series by the Helena Independent Record examining Canadian oil sands production, its impact on the economy and the environment, and the potential connection to Montana's own energy development.
FORT McMURRAY, Alberta - The helicopter slices above the Athabasca River with only a smokestack in the distance hinting at the development about to be unveiled.
Slowly at first, like a spotlight shining brighter, the stage unfolds on what is bringing billionaires and politicians from throughout the world to this remote town in Alberta's boreal forest: the oil sands of Athabasca.
These sands are a billion-dollar industry, the newest gold rush in the world of mineral extraction and energy production. Instead of precious metals or light, sweet crude oil, the natural resource sought here is a dirty, asphalt-like soil that stinks like tar.
The black oil sands are lining with gold the pockets of nearby communities, investors and the Alberta province, not to mention the Canadian government. But it's also tarnishing the image of Montana's northern neighbors, creating a public relations problem for the province.
It's an odd conundrum.
The United States and the world need more oil. Alberta has it, an estimated 173 billion barrels recoverable using today's technology, a mere fraction of the estimated 1.7 trillion barrels of oil locked in 56,000 square miles, an area about the size of Iowa. The sands are near the surface in many places, meaning they're easy to find and fairly simple to mine.
But removing the oil from this tar-like dirt is like mixing molasses in a sandbox, then trying to get the molasses back without the sand, to use one well-known analogy.
It takes energy. A lot of energy. In fact, producing fuel from the oil sands puts out three times as much carbon dioxide as creating fuel from fluid oil.
That carbon dioxide, or CO2, is perhaps better known as greenhouse gas, which many experts believe is contributing to the Earth's warming.
The process also uses large amounts of water and leaves behind tailings ponds that may take decades to reclaim.
In addition, the logging used to reach the oil sands involves the second-fastest deforestation after the Amazon Basin in Brazil, and the refining effort basically is an industrial site set in the middle of one of the largest intact ecosystems in the world.
The environmental impacts of producing fluid fuels from oil sands is of enough concern that at their annual conference in June, United States mayors passed a resolution trying to limit the use of oil sands-derived gasoline in municipal vehicles. Airlines are being pressured to stop their use, and environmental groups are targeting oil sands customers, the banks that finance them and the expansion of American energy infrastructure that further refines the oil.
Even former Vice President Al Gore took a swipe at the sands, telling Rolling Stone magazine that “for every barrel of oil they extract there, they have to use enough natural gas to heat a family's home for four days.”
The attack on oil sands production is of enough concern to Canadians that Alberta recently began a $25 million public relations campaign to improve the province's environmental image.
The Canadians note that they've already reduced the amount of CO2 being produced per barrel by almost 40 percent and will continue those efforts.
They remind the U.S. that Canada is a “secure, reliable and environmentally responsible producer of oil,” taking a clear swipe at the often unstable, feuding governments in the Middle East. Canada's extensive reserves make it second in the world only to Saudi Arabia.
Canadian officials also point out that the United States is the largest consumer of oil products worldwide.
But perhaps the strongest argument the Canadians make is simple and direct, not a threat but definitely a quiet warning in the most polite, Canadian manner.
If the U.S. doesn't want the oil, plenty of other countries do.
Alberta produced more than 1 million barrels of oil per day from three dozen oil sands projects in 2006 - more than all the wells in the state of Texas.
It's the world's seventh-largest crude oil producer, but expects to tie with the U.S. in third place by 2013, mainly because of the oil sands. It's also the largest supplier of crude oil and petroleum products to the U.S., notes Greg Stringham, a wiry, rapid-talking vice president with the Canadian Association of Petroleum Producers.
“We produce around 1.8 million barrels per day and invest about $50 billion per year in capital,” Stringham said recently.
The Canadian oil sands were laid down in a sea bed eons ago; generally speaking, they're grains of sand with microscopic bits of water around them. A heavy mixture of hydrocarbons, formally known as bitumen, pushed between those grains of sand.
If the sands are close to the surface, the trees are cut down, then the dirt and foliage above is scraped off. Enormous shovels (they cost $150 million each) scoop the sand into $6 million trucks the size of a cubed 747 airplane, riding on six tires that cost almost $60,000 each.
Stringham describes the removal of oil from sands in food terms. He used to think of the bitumen - a technical term for oil that will not flow to a well by itself - as molasses until corrected by an engineer who said it's closer in thickness to peanut butter. You can't pour that peanut butter, so you have to first heat it to make it become more fluid.
“You take that sand, add more water to it, agitate it and shake it up, then it separates like an Italian salad dressing,” Stringham said. “The sand drops to the bottom, the water goes to the middle and the oil floats to the top - and they scrape the oil off the top. Basically, that is the oil sands recovery technology.”
It takes about 2 tons of oil sands to produce one barrel of oil.
Oil sands deeper than 200 feet used to be reached by two deep, vertical shafts in a process called “huff and puff.”
That's been refined to vertical, then horizontal drilling in a method called Steam Assisted Gravity Drainage or SAGD (pronounced “sag-D”). An upper shaft is filled with steam to melt the oil adhered to the sand and make it more fluid. After about a month of heating, it drains into the lower well and can be pumped to the surface. This is known as “in-situ” or in-place mining.
“They pull the oil and the water out, separate the water to reuse it, and they extract the oil out of it leaving all the sand underground,” Stringham added.
No sands are displaced in this process.
Oladipo Omotoso is a research scientist with the CANMET Energy Technology Centre in Edmonton, a government-run laboratory that explores ways to better process oil sands and their byproducts. It's here in his cramped office that he clearly sets out one of the biggest environmental pitfalls for oil sands production.
In a glass vial about the size and shape of a film canister, Omotoso holds a sample of oil sands, coal-black and stinky.
“It's the smell of money,” Omotoso says with a grin.
He then picks up a mayonnaise-size jar holding about a liter of brownish, murky water, which is what remains after the water is used in the refining process. Every barrel of crude oil generates 10 barrels of this.
“This is the problem with the tailings,” he adds. “If you let (the water) sit for about three years, it gets to this” - he picks up another jar full of a silvery, slimy sludge - “that we call ‘fines' that are clay and silt and are still very, very fluid.”
Those fines coat the tailings ponds, and today the engineers and chemists at CANMET are trying to develop economically feasible technologies to turn it into something useful, because every barrel of oil produced creates a barrel of fines.
“So we have close to 1 billion barrels of this in the tailings ponds,” Omotoso said, adding it will cost billions of dollars to reclaim the tailings.
The oil companies pump the water out of the tailings pond to reuse in the product process. Current technology calls for companies to then add gypsum to the tailings, which makes them about
70 percent solid. Add some sand, plus a little CO2 for coagulating, and after a few chemical reactions, Omotoso said, it should be stable enough to drive on.
Dozens of settling ponds already dot the landscape north of Fort McMurray, where the bulk of oil sand production is occurring.
“Basically, what you have got is huge man-made lakes,” notes Kirk Michaelian, acting director general at the CANMET facility. “Suncor has one that's very big. The engineers say it's visible from the space shuttle.”
The oil sands developers, as well as Canadian officials at the local, provincial and federal levels, are well aware of the negative impacts of oil sands development. Even as they've garnered billions of dollars in revenues from the oil sands, they've also spent billions of dollars trying to lessen the damages.
Suncor Energy has been around Fort McMurray since the 1960s. In 1967, it invested $250 million in oil sands production, which was the largest private sector investment in Canada at the time.
Brad Bellows, Suncor's affable manager of external communications, notes that the company didn't turn a profit until the 1970s, and not much interest was shown in the sands for the next two decades. By the early 1990s, the company was considering “whether we would just turn out the lights here,” he said, standing on the helicopter tarmac outside of Fort McMurray.
Instead, Suncor's board decided on a $3.4 billion expansion, including an “upgrader,” which pulls the oil out of the sand. The expansion doubled the company's production capacity in 2001 from 110,000 barrels a day to 225,000 barrels. A subsequent $4 billion project increased capacity to 350,000 barrels per day.
At $100 per barrel, the math pencils out to about $35 million in income per day. Suncor is close-mouthed about the costs of producing a barrel of oil from the sands, but a 2005 Wall Street Journal report put the price at about $15 per barrel.
An aerial view from the helicopter shows the wide range of Suncor's operations. Even the two-story dump trucks are dwarfed by Suncor's mine pit, which is expected to grow to six miles in diameter in the next few years. Nearby is the upgrader plant with its maze of buildings, pipes and smokestacks, with another company's plant visible in the distance.
Beyond that, other companies' oil sands mining operations continue for miles up the Athabasca River.
Industrial features from the mines and upgraders dot the 1.4 billion-acre boreal forest. From the helicopter, brown rectangles the size of football fields outline where the in-situ drilling is taking place. Long, straight clearcut rows through the forest were created for seismic exploration, allowing scientists and engineers to gauge below-ground reservoirs; they've learned to make those cuts in a narrower, weaving manner so wolves can't hunt caribou as easily.
“It kind of upset the balance a bit,” Bellows says.
Since 1990, Suncor has reduced its greenhouse gas emissions per barrel by 44 percent. But overall emissions have gone up because of a four-fold increase in production. Estimates are that production will increase to 3.8 million barrels per day by 2020.
http://www.missoulian.com/articles/2008/09/01/news/local/znews05.txt
