EPA and State Department Square Off on Tar Sands Pipeline

Water use and greenhouse gas emissions are major concerns with developing “unconventional” hydrocarbon reserves

The Syncrude Canada Ltd. oil sands mining operation in Alberta, Canada is the largest in the world. For every barrel of oil produced from tar sands mining operations, four to six barrels of fresh water are withdrawn from the Athabasca River, according to experts.

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By Keith Schneider
Circle of Blue

Before July 16, when the U.S. Environmental Protection Agency issued its 18-page letter directing the State Department to more carefully assess the considerable risks of the $7 billion Keystone XL oil pipeline from Alberta, Canada to the Gulf Coast, Secretary of State Hillary Clinton was expected to issue a presidential permit approving construction in the fall.

EPA’s penetrating critique of the State Department’s permit review of the 1,702-mile pipeline, which the environmental agency called “inadequate,” puts that fall schedule on indefinite hold. The question for the oil industry, the governments of Canada and the activists in both countries desperate to tame oil sands development, is what other effects the EPA’s action could have.

The federal environmental agency has good reason to be vigilant. It has been busy since July 26 cleaning up a million-barrel tar sands oil spill from a ruptured pipeline in southern Michigan’s Kalamazoo River.

The proposed Keystone XL pipeline, to be built by TransCanada Corp., is the latest of three big oil pipeline construction projects that are at the vanguard of a new era in hydrocarbon development. Instead of drilling deep underground for pools of oil that are getting harder to find and more dangerous to punch open, energy developers are becoming miners, tapping what the energy industry calls “unconventional” reserves contained in oil-saturated sands and oil shales.

Near the northern end of the Keystone XL pipeline lies Alberta’s bitumen-saturated tar sands, a forested region as large as North Carolina that conservatively contains 175 billion barrels of recoverable oil: enough to satisfy U.S. demand at current rates of consumption until 2035. American, Canadian, Chinese, Korean and European oil companies are spending $15 billion a year to manage and expand immense open pit mines, processing plants, as well as toxic tailing ponds in order to boost production from 1.3 million barrels a day to more than three million barrels per day by 2025.

The investment in Alberta is the sharp tip of a long spear of unconventional oil development that reaches into the United States, the primary market. Energy and pipeline companies are spending $31 billion to ship oil in new pipelines from Alberta to U.S. refiners in the heartland, the Great Lakes and the Gulf coast. Refiners are spending more than $20 billion to expand refineries to produce fuels from tar sands oil. In all, the energy industry has said it wants to invest nearly $400 billion on tar sands oil production over the next 15 years.

Contrast that with annual investment in wind and solar energy, which reached $30 billion last year, according to the Department of Energy. Exxon Mobil Corp. paid more than that earlier this year—$41 billion—to purchase XTO Energy, which has big reserves in unconventional tar sands, oil shales, and deep shale natural gas reserves in the United States.

The bottom line is that the race between clean energy alternatives and much dirtier unconventional reserves is an economic mismatch. Last year total investment globally in clean energy was $140 billion, according to solar and wind producers. The fossil fuel industry is spending an estimated three times that amount on developing unconventional oil reserves, according to the International Energy Agency.


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