The Myths Behind the Tar Sands Stampede

Calgary, Alberta -- This is the heart of Canada's tar-sands boom, whose promoters, including the current governments both here and in Ottawa, Canada's capital, claim is Canada's economic future. Whether it is TransCanada's pipeline company's Alex Pourbaix saying in a debate with me at the Commonwealth Club, "The oil sands really represent the engine of economic growth for Canada for at least the next five decades," or Joe, Oliver, Canada's Minister of Resources, claiming in Calgary a year and a half ago "the oil sands also underpin Canada's growing natural wealth," the party line is, the tar sands are becoming Canada.

But like most stampedes, behind the bravado lies a lot of risk and a lot of panic. The tar sands are indeed, vast, but they are also the world's most expensive source of oil.  Canada makes less profit on each barrel than any other oil producer, and whenever the price of oil drops, as it did in the Great Recession, investment in the tar sands dries up.

For an advanced industrial nation of 34 million to bet its entire future on a single environmentally and economically sketchy resources like tar sands, seems reckless. I doubt that any registered  financial adviser would suggest to a client that they invest their whole retirement portfolio in futures on a single commodity -- say copper.  The farseeing among even the world's petro-economies are scrambling to diversify their energy and economic bases. Abu Dhabi, with the world's ninth largest and perhaps lowest cost stock of hydrocarbons, is also one of the world's leaders in renewable energy.

That's my core message here at the University of Calgary's Institute for Sustainable Energy, Environment and Economy, where I'm speaking.

Even at present levels of production, Canada is arguably overly dependent on tar sands. In making his case for the tar sands, Joe Oliver pointed out, "Oil and gas extraction now contributes to Canada's real GDP more than twice the vehicle manufacturing industry, more than five times the aerospace sector and more than the forest industry, fishing and agricultural industries combined…"

A lot of eggs in one basket.

All that is required for all these eggs to shatter is that a modest volume of something other than oil comes to market which can  power transportation, not something which costs less than tar sands oil at $80/barrel, but something cheaper than European or Asian $80 oil linked with $50/barrel taxes. If electric vehicles, or sugar cane ethanol, or compressed natural gas, or a half dozen other new technologies, scaled up to even 10 million barrels of oil a day, less than a tenth of current world consumption, the tar sands rapidly become a very dubious economic bet.

But the economic certainty of the tar sands bet is not the only myth swirling around this enormous but dodgy resource. A new study is being shilled about by tar sands advocates, claiming that it proves developing the tar sands isn't a such a big threat to the climate -- because there is a lot less carbon here than in all of the world’s coal reserves put together. That's true, but irrelevant -- and the authors of the study are anything but tar sands fans.  Bill McKibben called it "the least reassuring reassurance of all time."  For even this study "exonerating" the tar sands concedes that full development would raise the world’s temperature by .4 degrees, one-fourth of the total climate margin of error that remains -- and that carbon wouldn’t begin to meet a fourth of the world’s energy needs! Worse, tar sands are the great cap on the price of oil -- whenever oil starts to heat up over $100/barrel because other sources are unable to meet demand, additional tar sands oil staves off the moment when the world realizes it must move beyond oil. 

And unlimited oil is the key to excessive coal. You can't burn most of the world's coal without transporting it long distances -- which means lots of liquid fuels, typically diesel. So tar sands are not only a source of enough carbon to increase global climate by a huge amount -- they are also the key to keeping diesel prices low enough to enable the world to fry itself by shipping long distance coal where it can be burned profitably, if lethally -- for the climate.

Simultaneously, a "secret" memo written for the Canadian government suggests that the environmental damage from the extracting the tar sands is much worse than has been suggested. Indeed, the memo, prepared for the government of Canada by its most senior civil servant, says  the tar sands post "significant environmental and financial risk to the province of Alberta." The memo accurately calls-out the elephant in the room -- so called "in situ" extraction, which damages the surface less, also greatly exacerbates both carbon emissions AND the reliance on ultra-cheap natural gas for the technology to pencil out. "While the industry has taken steps to reduce emissions, the shift from mining to in-situ production, which is almost three times as emissions intensive as mining, is resulting in a continued acceleration of emissions from this sector."

Worried about encouraging the development of extreme oil like the tar sands, the European Union has been preparing to make sure that such oil accurately measured under the EU's cap-and-trade program -- as representing more carb on that, say, conventional light Saudi crudes.  Canada objects, claiming this is discrimination because there are smaller differences among other varieties of crude oil, although none comes close to the tar sands in their carbon footprint.

The EU hasn't backed down, even if Britain and Eastern European countries are siding with Canada already -- even though South African Archbishop Desmond Tutu has written to Britain urging it to support the proposal to discourage reliance on tar sands oil. Now Canada is upping the ante, threatening a trade war with the EU if the proposal passes -- even though tar sands oil is not currently exported to Europe anyway. Canada is worried about the bad reputation Alberta bitumen might get if its carbon content is properly labeled.

What all this has in common is that the tar sands industry is continuing to try to bully its way, because it knows that it can't really make a case on the merits. The oil industry is stunned that, this time, it’s bullying may not work -- a sentiment perhaps best captured in this marvelous Forbes article describing how environmentalists beat the Keystone Pipeline in the U.S. It contiains an interesting road map for how Canadians who would rather not be the next Venezuela may take their country back from its petro-princes.

Its conclusion: "While the NGOs act, the oil industry talks."

A veteran leader in the environmental movement, Carl Pope is the former executive director and chairman of the Sierra Club. Mr. Pope is co-author -- along with Paul Rauber -- of Strategic Ignorance: Why the Bush Administration Is Recklessly Destroying a Century of Environmental Progress, which the New York Review of Books called "a splendidly fierce book."