Canada's oil rush fuels environmental concerns

By Rob Gillies

updated 3:44 p.m. ET Aug. 29, 2008

FORT MCMURRAY, Alberta - The largest dump truck in the world is parked under a massive mechanical shovel waiting to transport 400 tons of oily sand at an open pit mine in the northern reaches of Alberta.

Each Caterpillar 797B heavy hauler — three-stories high, with tires twice as tall as the average man — carries the equivalent of 200 barrels of heavy oil worth $23,000 per haul at today's prices.

"It's like sitting on your back porch and driving your house," said Todd Dahlman, the manager of Shell Canada's Muskeg River open pit oil sands mine in Alberta's Athabasca region.

Shell, which has 35 of the massive loaders working 24 hours a day, 7 days a week, has ordered 16 more — at $5 million each — as it expands its open pit mines. And it is not alone among major oil companies rushing to exploit Alberta's oil sands, which make Canada one of the few countries that can significantly ramp up oil production amid the decline in conventional reserves.

Shell, Exxon-Mobil, Chevron, Canada's Imperial and other companies plan to strip an area here the size of New York state that could yield as much as 175 billion barrels of oil. Daily production of 1.2 million barrels from the oil sands is expected to nearly triple to 3.5 million barrels in 2020. Overall, Alberta has more oil than Venezuela, Russia or Iran. Only Saudi Arabia has more.

High prices — a barrel reached almost $150 last month — are fueling the province's oil boom. Since it's costly to extract oil from the sands, using the process on a widespread basis began to make sense only when crude prices started skyrocketing a few years ago.

Greenhouse gases growing
But the enormous amount of energy and water needed in the extraction process has raised fears among scientists, environmentalists and officials in an aboriginal town 170 miles downstream from Fort McMurray. The critics say the growing operations by major oil companies will increase greenhouse gas emissions and threaten Alberta's rivers and forests.

"Their projected rates of expansion are so fast that we don't have a hope in hell of reducing greenhouse gas emissions," said David Schindler, an environmental scientist at the University of Alberta.

Oil sands operations, including extraction and processing, are responsible for 4 percent of Canada's greenhouse gas emissions, and that's expected to triple to 12 percent by 2020. Oil sand mining is Canada's fastest growing source of greenhouse gases and is one reason it reneged on its Kyoto Protocol commitments. Experts say producing a barrel of oil from sands results in emissions three times greater than a conventional barrel of oil.

Worries about environmental damage have gotten enough attention that even the oil industry realizes it must tread softly on the issue. "Industry has to improve its environmental performance," Brian Maynard, a vice president of the Canadian Association of Petroleum Producers, said recently.

U.S. politics a factor
Questions about developing Alberta's oil sands have seeped into the U.S. presidential campaign and the debate in Canada and the U.S. over keeping down the price of gasoline while still protecting the environment.

The Bush administration sees Alberta as a reliable source of energy that will help reduce reliance on Middle East oil. U.S. Ambassador to Canada David Wilkins said the oil sands will define the relationship between the two countries for the next 10 years.

"We are blessed by the fact that our friend and neighbor is also our number one supplier of foreign oil," Wilkins told The Associated Press.

Robert Gillies / AP A Caterpillar 797B, the largest dump truck in the world, awaits another mission on June 25 at Fort McMurray.

However, Democratic presidential candidate Barack Obama's top energy adviser said oil sands emissions are "unacceptably high" and may run counter to Obama's plan to shift the U.S. away from carbon-intensive fossil fuels.

"The amount of energy that you have to use to get that oil out of the ground is such that it actually creates a much greater impact on climate change, as well as using much more energy than even traditional petroleum," Obama adviser Jason Grumet said.

Mining oil sands also was criticized by American mayors in a resolution adopted at their annual conference in June urging a ban on using oil sands-derived gasoline in municipal vehicles. They alleged the oil sands mines damage Canada's boreal forest — boreal refers to the earth's northern zone — and slows the transition to cleaner energy sources in the U.S.

John Baird, Canada's environment minister, warned that Washington would lose energy security if it doesn't take Alberta's oil.

"If American mayors want to send their money to unstable, undemocratic countries in the Middle East instead of to Canada, that will be their call. If they want to pay a premium for Iranian, Saudi, Iraqi oil that will be their call," Baird told the AP.

Alberta Premier Ed Stelmach said he doubted Americans would accept the resulting higher prices at the pump should the U.S. decide against exploiting Alberta's oil.

"Do you think Americans are going to be paying a buck or a buck fifty more because somebody said that our carbon footprint is higher than oil from Kazakhstan?" Stelmach told the AP. "It's a pocketbook issue."

Stelmach recently met with Wilkins in an effort to convince more U.S politicians of the importance of Alberta's energy supply. Oil from the sands goes only to the U.S. and Canada now. The sands provide 46 percent of Canada's oil production and that's expected to be 80 percent by 2020.

Mayor Melissa Blake of the Wood Buffalo municipal district, which includes Fort McMurray, also noted Alberta could sell its oil elsewhere if it does not flow south of the border. "We're still going to have a market somewhere," Blake said.

Dave Collyer, Shell's chairman in Canada, said world demand means oil companies must exploit unconventional sources of energy.

"You have to consider the environmental impact in a broader context," Collyer said. "There is significant economic benefit from the development of oil sands. The oil sands represent a very secure, reliable, long-term source of supply to the United States. People in the U.S. will have to judge whether that supply stacks up to other alternatives."

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