Extracting Oil from Canadian Sand Pits
Canada has some of the most oil in the world, and about half of it comes from the "oil sands." Oil companies use some of the most expensive, energy intensive technology to extract the oil from the sand -- which leaves an impact on the environment too.
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Kai Ryssdal: From the bottom up, the top five sources of American oil imports are Nigeria, Venezuela, Saudi Arabia, Mexico. And in the number one spot: Canada. Twenty-one percent of all the crude we use comes from north of the border. About half of that from something called the "tar sands." Big oil and many Canadians prefer to call it the "oil sands." Whatever you call it though, it has also been called the world's dirtiest oil. The way things are going, 20 years from now, a full third of our imported crude could be coming from the sands -- oil or tar, take your pick.
That's why we sent Sean Cole about 500 miles north of Calgary to look what we do to fill our gas tanks.
Sean Cole: This is the sound of the biggest dump truck in the world.
Imagine a two-story house on wheels with a guy steering it from the upstairs bedroom. There are more than 40 of these things rolling along a sprawling strip mine cut into a boreal forest.
Each can ferry 400 tons of sticky black sand from an oozy cliff to a nearby processing plant. The project is called Shell Albian Sands. Shell as in... Shell. I'm standing a safe distance away with one of the managers.
Cole: You can smell it.
Todd Dahlman: You can, yeah. You can smell the oil.
But it's not oil in the ground here. It's a hydrocarbon called bitumen that has to be processed into an oil equivalent, synthetic crude, using one of the most expensive and energy intensive processes in the world.
David Corriveau: The process requires a warm water process for the most part to separate it.
David Corriveau oversees the technical end of things at Shell Albian Sands.
Corriveau: It's much like a washing effect if you will.
Cole: It's like putting it in a washing machine.
Corriveau: Very much so, yeah. Yeah, exactly. And it can be a little... quite the stubborn stain if you're not careful so.
It takes two to four barrels of water to wring one barrel of fuel out of the sand. The water's heated with natural gas. This industry uses enough natural gas to heat two and a half million American homes a day. Almost every major international and Canadian oil company is somehow involved in the oil sands. After all, there are 170 billion barrels of proven reserves under northern Alberta, the largest petroleum reserve outside Saudi Arabia. The process of turning it into fuel would take the entire show to explain. It's a pain. Even the most loyal defender of the oil sands I spoke to had to level with me.
David Yager: Let's be honest about the oil sands -- this is the last place you wanna go.
His name's David Yager and he writes a column for Oil Week magazine.
Yager: I mean, why would you bother going to the middle of nowhere, and digging up sand and spending all this energy processing it.
And then he pretty much answered his own question.
Yager: You know, if we can go into Iraq without getting shot at, if you could go into Venezuela without getting nationalized.
Yager: Yeah, if you could go to Nigeria, if you could go to these places, I suspect gasoline would be 50 cents a liter and oil would be 20 bucks a barrel.
Weirdly, it's the price of oil that governs these projects though, not the other way around. Oil has to cost a certain amount in the first place to make digging in the oil sands worthwhile. And that's just the economics. There is, of course, another kind of cost.
Yager: That developing the oil sands is environmentally hazardous?
Yager: Well, yeah. The Gulf of Mexico's not lookin' too s***-hot these days either. I mean, there's no such thing as clean oil. This is the absurdity of the debate.
And this is an intractable debate with agendas and spin on all sides. Everyone agrees oil sands production emits more CO2 than producing conventional crude oil, but people measure this differently. The Canadian government was looking into potential water effects, but finally scrapped the investigation and destroyed draft copies of the report. Local aboriginal groups have sued over land rights.
Andrew Logan: If the industry doesn't take steps to aggressively manage those risks, then the industry's long-term growth and perhaps existence is in doubt.
Andrew Logan works for Ceres, a network of environmental groups and investment funds. Ceres released a report back in March saying these ecological hazards could leech into the money side of things.
Logan: You know, the oil sands are extremely water intensive in a world that is dry and getting drier. They are carbon intensive in a world that is increasingly carbon constrained. If companies aren't considering these kinds of factors when they make their investments, these investments may turn out to basically not be profitable.
Now, Shell, for one, says it is considering these factors. And even Ceres will tell you Shell's done a lot to reduce CO2 emissions and that it recycles most of the water it uses. The rub lies in how that water is stored.
You know we haven't even addressed the issue of the tailings ponds.
I know, that's where I'm going next. Every oil sands mine keeps used water in a giant lake called a tailings pond. Tailings ponds are toxic. And just recently, oil companies were required to hand in specific plans for reclaiming them, which means turning them back into forest.
Logan: You know, the clean up of these things will end up on the balance sheet of these companies pretty soon. And it's gonna have a pretty significant financial impact on any company that has to clean up these ponds.
But there's a more immediate issue with tailings ponds. Ducks and geese can get fouled up in the oily water and drown. Thus, Shell is using the latest in bird-deterrent technology -- a robotic falcon and a sound cannon.
Cole: And that scares away the birds.
Scott Wytrychowski: Yeah, the peregrine falcon is a bird of prey for the water fowl so they fear it.
Scott Wytrychowski is an environmental manager at Shell. He told me they lose fewer than 20 birds a year.
Wytrychowski: Our end goal is zero.
Cole: Zero birds.
Wytrychowski: Yeah, it's like safety -- we want to have zero incidents for safety for humans. It's similar to wildlife. Target is always zero.
Cole: But there are accidents.
Cole: And there are birds who die.
Wytrychowski: Yes. Yup.
In fact, two years ago, 1,600 ducks died after landing on another company's tailings pond. Pictures from the incident are now plastered across billboards in four U.S. cities. And all of this isn't even half the story. In fact, it's one-fifth of it. Eighty percent of the bitumen underneath Alberta is too deep to mine, which hasn't stopped the oil companies from going after it.
I'm Sean Cole for Marketplace.