Category Archives: oil sands

US State Dept. finds no new issues with Keystone XL

Keystone XL is back in the news! Keystone XL, the controversial 1,900-mile pipeline carrying Canadian bitumen from Alberta to refineries as far south as Houston TX, passed another hurdle recently when an updated environmental report from the State Department found no new issues with the proposed pipeline since a similar report was issued last year.

Environmentalists have fought the production of Canada’s oil sands, citing the destructive nature of its production (primarily through strip mining) and the intensive amounts of energy required to extract the oil (known as bitumen) from the sand. They further argue that the corrosive nature of bitumen could eventually damage the proposed pipeline and increase the risks of a spill in areas where a major aquifer (the Ogallala) is most vulnerable to contamination.

Supporters of the project point out that Canada regulates its energy production, requires mitigation and reclamation costs to be included in development, and is a stable and reliable source of energy for the U.S. The proposed pipeline could significantly reduce U.S. dependence on Middle Eastern oil. Moreover, the Canadian reserves are significant.

The Associated Press (AP) reported that Susan Casey-Lefkowitz, the international program directory for the Natural Resources Defense Council, claimed the report didn’t adequately address pipeline safety, including the risks posed to the Ogallala Aquifer. “If this round of the Keystone XL tar sands pipeline environmental review is as superficial as it seems, the State Department will need to go back to the drawing board — perhaps the third time will be a charm and they will get it right,” she told the AP. A spokesman for TransCanada, the Calgary-based company behind the pipeline, said the company was pleased with the State Department’s report but declined to comment specifically.

Approval of the pipeline has been held up since the Environmental Protection Agency asked the State Department for the additional environmental report last summer. The State Department, which has authority over the pipeline since it crosses an international boundary, is expected to decide on approval of the pipeline by the end of the year.

The Keystone XL Debate

Location of bitumen depoits (

Location of bitumen deposits in Canada. Image via Wikipedia

The oil sands of northeastern Alberta represent the largest reservoir of crude bitumen in the world and make Canada second only to Saudi Arabia in terms of total oil reserves. In the past, the development of these oil sands was considered cost prohibitive. Bitumen is a heavy oil that is too thick to be conventionally pumped. Instead it must either be heated to a more liquid state or strip-mined and processed, both of which require a huge investment. With the rise of oil prices, however, these processes have become economically viable and Canada is positioned to become one of the largest oil producing countries in the world.

Currently almost all of Canada’s bitumen is transported to refineries in the U.S. where it is transformed into a variety of refined products representing about 20% of total U.S. oil and gas consumption. Each year, more oil is exported and Cambridge Energy Research Associates estimate that Canada could provide up to 40% of U.S. oil imports by 2035, but the refineries currently being supplied are estimated to run out of spare capacity by 2014. A critical component of increasing imports is a proposed pipeline known as Keystone XL, or the Keystone expansion project, that would transport oil to additional refineries.

The existing Keystone pipeline, owned by TransCanada Corp., supplies the midwest and has a daily capacity of 435,000 barrels of oil. The proposed expansion, running across the Great Plains to Texas and the Gulf Coast, could provide an additional 500,000 – 900,000 barrels. At first glance, the project seems promising: the U.S. has an opportunity to get more of its oil from a trusted neighbor rather than hostile regimes, construction and manufacturing jobs would be created, and states along the route would gain billions in tax revenues. But as TransCanada’s permit application waits for State Department approval (since the pipeline crosses an international border), debates are erupting over the project.

This is a picture of Syncrude's base mine. The...

Syncrude

Critics have long complained that the environmental impacts of oil sand recovery are unacceptable. Large areas of the boreal forest have been strip-mined and though mitigation work is being performed, only a small amount of land has so far been labeled as reclaimed. The toxicity of tailings is also a fear, since it could possibly pollute nearby waterways or affect area wildlife. Moreover, the amount of energy expended in oil sand recovery means its production releases higher amounts of greenhouse gas emissions compared to other sources. Finally, it is unclear whether Canadian regulators can keep pace with potentially rapid industry growth, leaving environmentalists to complain that U.S. energy money should be funneled towards efficiencies and alternatives rather than increasing production of the “dirtiest” of oils. Industry leaders have tried to fight back by pointing to the mitigation and reclamation gains that have been made, worried that the public impression of oil sand development is unbalanced. The Economist quotes government water scientist Preston McEachern comparing the oil sands to “the harp seal of the environmental movement.” The harp seal is considered to be an easy target.

But the explosion of BP’s Deepwater Horizon rig in the Gulf of Mexico, along with a spill of about 800,000 gallons of oil from Enbridge’s southern Michigan pipeline, has brought new opponents into the debate. Farmers and ranchers along the proposed route of the pipeline are worried what the impact might be if a similar spill occurred. Not only is the land of the Great Plains difficult to maintain in a productive state, but the main water source for the area is the shallow Ogalalla Aquifer. And with the release of a joint report from the National Resources Defense Council (NRDC), the Sierra Club, the Pipeline Safety Trust, and the National Wildlife Federation claiming the acidic and corrosive composition of bitumen crude puts pipelines at a greater risk of developing leaks, these fears seem well-founded. TransCanada, meanwhile, defends their state-0f-the-art pipeline system for detecting and stopping leaks, while Alberta’s Energy Resources Conservation Board called the NRDC report’s analysis flawed and misleading.

Environmental concerns aren’t the only issue being debated. The economics of the project have become contentious, with worries of cost overruns, foreseeable delays in reaching pipeline capacity, and assessments that shuttling the oil to the Gulf Coast will actually increase the price per barrel since there will no longer be an oversupply (and associated discounts) in the Midwest. Meanwhile lawsuits have been filed in Oklahoma over the ability of a foreign company (TransCanada) to exercise eminent domain rights in the U.S. in order to get the pipeline built.

America is not in a good position to replace its daily energy consumption with renewables any time soon; the threat from the Republican’s continuing resolution to current solar projects is just one indication that we aren’t moving away from fossil fuels. Nor is it likely we’ll be able to substantially reduce demand through conservation and efficiencies in the foreseeable future since no immediate or broad-reaching actions have been taken. Moreover, energy consumption is closely related to economic growth and as the weak economy begins to pick up, we’ll probably see an increase in energy demand rather than a decrease. And though we may not like the environmental impacts of bitumen extraction, we’re currently getting just as much oil from countries with reprehensible human rights records, little regulation or mitigation, and undergoing potentially volatile political situations.

Only time will tell how the U.S. plans to deal with the debate over Keystone XL (the State Department isn’t expected to issue a decision until later in 2011) as well as the larger debate over energy use and supply. While we bluster about without a clear energy plan, the planned northern extension of Keystone XL will allow Canada to export heavy crude from its west coast ports. The U.S. might fret about Canada’s dirty oil, but international markets, such as those in China, will be only too happy to take delivery. Perhaps it’s time to finally get serious about planning our energy future.

Koch Industries could win big in Wisconsin

Wisconsin has been in political turmoil since 14 Senate Democrats left the state last week in protest over a bill by Gov. Scott Walker (R) that would eliminate collective bargaining rights for most public employees. Their absence has left Republicans without the quorum needed to vote on the plan. Meanwhile protestors have continued to fill the Capitol for a second week.

Mike Konczal at Rortybomb points out  that while significant attention has been given to the issue of collective bargaining rights, there has been little attention paid to what the bill would actually do. From the legislation (emphasis added):

16.896 Sale or contractual operation of state−owned heating, cooling, and power plants. (1) Notwithstanding ss. 13.48 (14) (am) and 16.705 (1), the department may sell any state−owned heating, cooling, and power plant or may contract with a private entity for the operation of any such plant, with or without solicitation of bids, for any amount that the department determines to be in the best interest of the state. Notwithstanding ss. 196.49 and 196.80, no approval or certification of the public service commission is necessary for a public utility to purchase, or contract for the operation of, such a plant, and any such purchase is considered to be in the public interest and to comply with the criteria for certification of a project under s. 196.49 (3) (b).

In other words, the bill allows the state to sell state-owned heating, cooling, and power plants without going through a bid process and without concern for the public interest. Conveniently, there is a private interest already acquiring Wisconsin energy companies and infrastructure and poised to continue doing so, Koch Industries, Inc.

According to Forbes magazine, Koch Industries is one of the largest private companies in America, completing over $32 billion in acquisitions and investments, and almost $11 billion in capital expenditures, since 2003. The company already owns a coal subsidiary and a network of pipelines in Wisconsin and their Pine Bend Refinery in Minnesota supplies 30 to 40 percent of Wisconsin’s transportation fuel. Much of what the Koch refinery processes is the heavy crude coming from Alberta’s oil sands.

Koch Industries is owned by Charles and David Koch, the conservative brothers who infamously use their wealth to fight legislation they hate. Reports are now emerging that Wisconsin Gov. Walker received his second-largest contribution of $43,000 from the Koch Industries PAC. The PAC also gave significant money to the Republican Governors Association, which spent $65,000 on independent expenditures to support Walker during his election race as well as buying $3.4 million in TV ads and mailers to attack Walker’s opponent. With legislation pending that would allow Koch Industries to snap up state-owned power plants, it looks like those contributions have resulted in significant benefits.

Mike Konczal points out that it is important to consider the role of the state in light of these revelations. Is it in the “public interest” to break labor and sell off state utilities to political cronies under the guise of balancing a state budget?   Additionally, how much will Koch Industries stand to gain from their energy acquisitions if there is a significant increase in the amount of oil flowing out of Canada and into the upper midwestern United States? We’ll continue to watch this developing story.

UPDATE: Since this story was posted, a number of pieces have appeared around the blogosphere. Politico’s Ben Smith quoted a statement from Koch Industries spokeswoman Melissa Cohlmia, who said, “Any suggestion that Koch Industries has some financial interest in the outcome of the legislation at issue in Wisconsin is false.” Smith went on to note the following:

Of course, Americans for Prosperity — a Koch group — is pushing the bill. Of course Koch, a conservative outfit, backs Walker. But the combined desire of AfP to take credit and of Democrats to give it to them shouldn’t be mistaken for actual causation. The Koch group is, in a way, like the DNC: Rushing to aide — and to seek credit for — a conflict that clearly developed organically.

You can read the entire article here. It should be noted that the Koch-backed Americans for Prosperity launched a website, Stand With Walker supporting the governor.

As reported in a New York Times article, U.S. Rep. Gwen Moore (D-Wis) was claiming, “The Koch brothers are the poster children of the effort by multinational corporate America to try to redefine the rights and values of American citizens.” Meanwhile another spokesman for Koch Industries scoffed at the idea and responded, “This is a dispute between public-sector unions and democratically elected officials over how best to serve the public interest.” Again we have to wonder, what is the “public interest” in this case?

UPDATE 2: Eric Lach at talkingpointsmemo.com has written a good counterpoint to the rumors of big wins for Koch Industries. In a nutshell, the people he’s interviewed aren’t that worried about the provision since Wisconsin’s power assets might be more of a liability than an asset. Moreover, a similar provision came up in the Wisconsin budget under Gov. Jim Doyle (D). Read the entire article here.

The Bitumen Question

The Economist recently published an article on the foreseeable future of Canada’s tar sand development. Included is a discussion of the approaching bitumen bottleneck: without new development, the midwestern US coking facilities will be filled to capacity processing Canadian bitumen. Keystone XL, a $7 billion pipeline proposed by TransCanada, aims to send an additional 510,000 barrels/day of Canadian oil to Texas. The project could additionally allow for increased international shipments.

Meanwhile environmental groups continue to fight development and some US states, including California, don’t want to support the environmentally damaging production of this “dirty oil.”

The fight over the production of these vast northern reserves continues, and if the US isn’t willing to buy Canada’s oil, China would be only too happy to take delivery. What do you think about the use of this resource?

Read the full article here: Muck and Brass

Chicago Tonight reports on Canadian oil sands

Chicago tonight recently ran a report on Canadian oil sands created by Elizabeth Brackett whom we met in Canada last month. She interviewed me too, but I did not make it in. Too bad! Perhaps in the PBS version of this story to be broadcast later this month, but despite the lack of any Dutch accents, this is a nice piece.

A bit of controversy about the numbers. Environmental group interviewed mentions a factor of 3 over conventional oil. This is for extraction and upgrading only. In a wells-to-wheels analysis (so total emissions from production to car driving) it is around 10%.
My comments to Elizabeth were related to the desire by environmental groups to stop Albertan tar sands imports to the US. This is only a good idea if alternative sources of the marginal barrel provide a cleaner oil. I doubt it. The only way to reduce growth of Albertan tar sand production is to save, save, save and move to electric transport. It’s the consumers in the US who drive the Albertan production as nearly all the oil is exported to the US.

A student’s perspective on the oil sands in Alberta

We visited the oil sands, also known as tar sands, near Ft McMurray in Alberta last week. Here’s the perspective of Samora Garling on this trip. Samora is a sophomore at Stanford and my, in his words, personal research assistant for the summer. We took him along. I suppose a bit as a reward for his summer long suffering under my supervision.

Samora’s oil sands reflection

Location of bitumen depoits (

Image via Wikipedia

My trip to the Alberta Oil Sands served as one of those times in life when we’re reminded that nothing is black and white, but rather complex shades of gray. After a week spent researching the activities of oil companies in the Oil Sands, I was convinced that I would confront a dying earth. I steeled myself for what I thought would be clear signs of devastation, but I soon realized that nothing could prepare me for what I would encounter.

During our first day in Fort McMurray, we toured SynCrude’s open pit mining operations. SynCrude is the largest producer of bitumen in the Oil Sands and the only company utilizing open pit mining. These pits were deep, and they were so large that their full scale could not be assessed from the ground. Despite the size of the operation, it was immensely well ordered and seemingly immaculate. I was even lulled into thinking that it was not so bad. This lull was partially due to the fact that SynCrude’s reclamation efforts were substantial, with 20% of the mined land in some stage of reclamation. I learned that reclamation takes place almost synchronously with the mining, and most components of the mined earth are saved for reuse when the pits are refilled for reclamation. I was also lulled because all the people working in the mine were quite friendly, even the drivers of the 400-ton dump trucks waved as they drove by. The dump trucks that are used there are the largest in the world and cost roughly $6 million. However, throughout the tour, I tried to look for that grain of salt, and I found it later that night when we got an aerial view of the mines by helicopter.

This is a picture of Syncrude's base mine. The...

Image via Wikipedia

The aerial tour shattered all of the illusions I had formed earlier in the day about open pit mining. The sheer scale of the mines was only comprehensible from the air, and it was in the helicopter that I realized that open pit mining was truly a blight on the land. First, there was the stark contrast between the endless boreal forests and the vast pits that had been hewn into the ground. Second, there were the toxic tailings ponds, some of which appeared larger than the mines themselves. The word “pond” in this case is a complete misnomer because they were easily the size of lakes. As the flight continued, my disdain for open mining only grew. Reclamation efforts aside, I wondered how anyone could justify environmental destruction on this scale.

The next day, we toured Surmont’s in-situ facility, which is located to the south of SynCrude’s mines. Surmont uses the most common in-situ technique: Steam Assisted Gravity Drainage (SAGD). With a physical footprint much like that of conventional oil and gas operations, it was immediately more palatable than the open mines. In-situ extraction is slightly more energy intensive than open pit mining, and it releases a bit more in terms of greenhouse gases. But, in-situ extraction is better than open mining in that it causes less physical damage to the environment and utilizes much less space.

After completing both tours, I began to wonder if any of these specialized facilities were even necessary. However just looking around Fort McMurray, I was reminded of the fact that we live in a society that has chosen to rely heavily on oil. Almost everyone in Fort McMurray drives either a truck or an SUV. It seemed like these people would fit right into the Midwest, and really Fort McMurray seemed more Texas than Texas. But do people in the states and in Alberta even realize the costs of this dependence, much less care? When one considers the fact that the lowest starting wage in the Oil Sands is roughly $100,000 a year, it’s hard to look past the economic opportunity. However do we even need to be reliant on oil? I say this because since 2000, over 200 billion dollars have been invested into development in the Oil Sands, that’s a little larger than one fourth of the $787 billion stimulus passed earlier this year, which only allocated $43 billion towards energy. Why was some of this $200 billion not invested in renewables? It’s hard to argue that windmills are more of an eyesore than massive holes in the ground. Furthermore even with 1.7 trillion proven barrels of oil reserves in the Oil Sands, oil remains a finite source as opposed to renewables.

However that argument is too simple. What I realized while interacting with people from API and the oil industry is that there is a prevailing mindset that says that oil is the way to go. All the people I met were good people yet it was clear that we disagreed when it came to energy use and production. I was then able to step outside myself and examine my own biases. I’m from the West Coast, a place that has largely been on the cutting edge in regard to adoption of new energy technology and sustainable practices, whereas many of the people on the tour were from Rust Belt states, heavily dependent on fossil fuels for power. I had always assumed that renewables were the logical step but for these people the idea is that technology will improve so that we can continue to use oil and other fossil fuels. This is part of why it will be so hard to make the widespread adoption of renewables a reality; yet it is a cause worth fighting for.