[R-G] Oil sands boom swamps the Canadian wilderness

[Anthony Fenton]

Oil sands boom swamps the Canadian wilderness
Environmentalists want tougher laws to halt the damage, writes Tim Webb
     * Tim Webb
     * The Observer,
     * Sunday July 20, 2008
http://www.guardian.co.uk/business/2008/jul/20/oil.canada

Todd Dahlman scoops up a handful of oily sand and smiles. 'This is the  
money - it even smells like money,' says the manager of Shell's Muskeg  
River oil sands mine in the Athabasca region of North Alberta in Canada.

We are standing in the middle of a pit 50m deep that giant diggers  
have hollowed out of the earth. Some 150m beneath our feet lie almost  
a billion barrels of oil.

With Brent crude at $131 a barrel on Friday, the oil sands frenzy is  
in full swing. Canada holds estimated reserves of 179 billion barrels  
of oil, the majority from oil sands, putting it second only to Saudi  
Arabia. Currently, Canada's oil sands produce just over a million  
barrels per day but this is set to triple by 2020, making the country  
one of the largest producers in the world.

Shell, which operates the mine with Chevron and Marathon Oil, has 20  
billion barrels of potential reserves in the sands, representing a  
third of its entire potential reserve base. It currently produces  
about 150,000 barrels a day from its oil sands operations, around 5  
per cent of total production, but plans to increase this figure  
fivefold.

For oil majors who are finding it difficult to locate new reserves,  
the attraction of Canada's oil sands is strong. Resource nationalism,  
where countries bar foreign companies from their oil, is on the rise,  
as shown by BP's spat with its Russian partners over its joint venture  
TNK-BP. The issue of reserves is particularly sensitive for Shell,  
which had to downgrade almost a quarter of its booked proven reserves  
four years ago, a scandal that led to the ousting of then chief  
executive Phil Watts.

But development is controversial. Untreated oil sands have the same  
consistency as peanut butter. Steam is pumped into the sludge to  
separate the oil from the sand and water. Huge upgraders are needed to  
treat the oil before it can be refined conventionally, and the process  
creates at least three times as many greenhouse gas emissions as  
conventional oil production. The environmental organisation, the  
Pembina Institute, estimates that by 2030 the emissions produced by  
the industry in Canada could total more than a quarter of the UK's  
current emissions. Production also devastates the boreal forests and  
wetlands which cover northern Alberta.

Increasingly, Shell - and other oil sands operators - are being  
targeted by environmentalists. The First Nations tribes - around 6,000  
native Indians live in the Athabasca Region - are taking legal action  
against some companies. And the US is passing an environmental law  
which could restrict imports of the most polluting types of fossil  
fuels such as oil sands.

George Poitras is a former chief of the Mikisew Cree, the largest  
First Nation tribe in the Athabasca region. Now he negotiates on their  
behalf when they lease land to oil companies. His office is in Fort  
McMurray, an hour and a half away by plane from Calgary, and the  
epicentre of the oil sands boom. With the highest GDP per capita in  
Canada, locals have dubbed their town 'Fort McMoney'.

Poitras says the development of the oil sands is poisoning the  
Athabasca River. He says the fish taste different since development  
began 40 years ago. 'We think the water is giving us cancer.'

The three deposits of oil sands in the province, of which the one in  
Athabasca is the largest, lie in 149,000sq km, covering a quarter of  
the province. Not all of this will be extracted, and much will be  
extracted using 'in-situ' methods where the material is pumped out of  
the ground, rather than mined, and so less forest has to be cleared.  
The industry says 420sq km of forest has been 'disturbed' so far.  
Meanwhile, the Pembina Institute says that 2,000sq km of forest is  
likely to be affected.

Oil companies are required by law to 'reclaim' the land after they  
cease operations there, and promise to plant native species of grass  
and trees and reintroduce wildlife. Poitras is scathing. 'Our elders  
laugh when the industry says this. Who do they think they are - God or  
the creator?'

Campaigners say environmental regulations covering the industry are  
inconsistent and ineffective. The Alberta government requires  
companies to reduce the greenhouse gas emissions' 'intensity' per  
barrel produced by 12 per cent, but there are no limits on reducing  
overall emissions which will mushroom as operations expand. The  
federal government has proposed tougher laws and higher levies for  
companies that miss their targets. It is not clear whether these will  
take precedence over Albertan regulations.

Shell has put forward proposals to equip the Scotford Upgrader - which  
treats the oil from the Muskeg River mine - with carbon capture and  
storage technology to reduce emissions. Even if this happens, it would  
only cut emissions from the upgrader, when it is expanded, by a fifth.