Dry Rivers, Low Prices Make a Double Whammy for Tar Sands Oil

August 25, 2015

tarsandds

Tar Sands Tomorrowland – the future climate deniers have in mind for you and your children.  But reality is not cooperating…

Much as water is a critical limiting factor for the supposed infinite fossil fuel development in China and Asia – it’s turning out to be a crimp on Canada’s massive Oil sands projects.

At the same time, slumping global oil prices – which are not projected to recover any time soon, are drying up investments in the expensive “exotic” oils that we’ve been told are going to extend fossil fuel dominance in this century.  That story is steadily fraying around the edges…

ClimateProgress:

Dozens of tar sands developers in Alberta’s tar sands have been suspended from taking water — needed for their operations — out of local rivers, after a low flow advisory was issued.

The Alberta Energy Regulator (AER) suspended 73 licenses to temporarily divert water (TDLs) from the Athabasca, Peace, and Wabasca rivers on July 24, after unusually dry weather caused water to fall to at or below healthy maintenance levels. Now, scientists are saying this could become a regular issue for Alberta’s tar sands industry.

Tar sands mining is a type of surface mining in which the top layer of organic matter — trees and plants — is scrapped off, and heavy crude oil is filtered from the sand and clay below. Three barrels of water are needed for every barrel of oil extracted from the tar sands, according to Friends of the Earth.

“More than 90 percent of this water, 400 million gallons per day, ends up as toxic waste dumped in massive pools that contain carcinogenic substances like cyanide,” the group says. Processing the oil from tar sands is incredibly carbon-intensive, and because of tar sands, the energy sector has become Canada’s biggest source of greenhouse gases.

As global warming worsens, some regions, including Alberta, can expect more and more dry summers, scientists say.

“This is absolutely a preview of the future,” Simon Dowell, a climate scientist at the University of British Columbia, told ThinkProgress.

Inside Climate News:

A dramatic reversal of fortune for Canada’s tar sands oil industry has cheered environmental advocates, and it may also leave Prime Minister Stephen Harper vulnerable in the coming federal election because of the economic repercussions, some have predicted.

Harper, who has essentially bet his career on the bounty from unlimited expansion of tar sands production, has spent his six terms in office as the champion of extracting as much energy as possible from Alberta’s vast bitumen deposits—the tar-like fossil fuel found in ancient sand formations.

But now the lowest prices in eight years have the tar sands industry reeling. Developers have already halted expansions and new projects. Some producers are selling their crude at a loss, while others are barely squeaking out a profit.

Short-term issues—a key refinery outage, a pipeline shutdown and a spurt of new production—have put extra pressure on the price for Canada’s heaviest crude, robbing producers of precious income during the U.S. driving season.  Ongoing pipeline stalemates and looming carbon restrictions are making long-term prospects for the controversial crude increasingly gloomy as well.

“It’s bad for oil companies and the profit they were expecting from those projects, but from a climate perspective, it’s tremendous,” said Danielle Droitsch, senior policy analyst at the Natural National Resources Defense Council, one of many environmental groups that oppose extracting the heavy oil sands crude. “Any of that oil that’s not developed will help the climate.”

Michael Klare at Moyers in Company:

Painful as the short-term consequences of the current price rout may be, the long-term ones are likely to prove far more significant.  To conserve funds and ensure continuing profitability, the major companies are cancelling or postponing investments in new production ventures, especially complex, costly projects like the exploitation of Canadian tar sands and deep-offshore fields that only turn a profit when oil is selling at $80 to $100 or more per barrel.

According to Wood Mackenzie, an oil-industry consultancy, the top firms have already shelved $200 billion worth of spending on new projects, including 46 major oil and natural gas ventures containing an estimated 20 billion barrels of oil or its equivalent.  Most of these are in Canada’s Athabasca tar sands (also called oil sands) or in deep waters off the west coast of Africa.  Royal Dutch Shell has postponed its Bonga South West project, a proposed $12 billion development in the Atlantic Ocean off the coast of Nigeria, while the French company Total has delayed a final investment decision on Zinia 2, a field it had planned to exploit off the coast of Angola.  “The upstream industry is winding back its investment in big pre-final investment decision developments as fast as it can,” Wood Mackenziereported in July.

As the price of oil continues on its downward course, the cancellation or postponement of such mega-projects has been sending powerful shock waves through the energy industry, and also ancillary industries, communities, and countries that depend on oil extraction for the bulk of their revenues. Consider it a straw in the wind that, in February, Halliburton, a major oil-services provider, announced layoffs of 7% of its work force, or about 6,000 people.  Other firms have announced equivalent reductions.

Such layoffs are, of course, impacting whole communities.  For instance, Fort McMurray in Alberta, Canada, the epicenter of the tar sands industry and not so long ago a boom town, has seen its unemployment rate double over the past year and public spending slashed.  Families that once enjoyed six-digit annual incomes are now turning to community food banks for essential supplies.  “In a very short time our world has changed, and changed dramatically,” observes Rich Kruger, chief executive of Imperial Oil, an Exxon subsidiary and major investor in Alberta’s tar sands.

The initial near collapse of oil prices caused considerable pain and disarray in the oil industry.  If this second rout continues for any length of time, it will undoubtedly produce even more severe and unpredictable consequences. Some outcomes already appear likely: energy companies that cannot lower their costs will be driven out of business or absorbed by other firms, while investment in costly, “unconventional” projects like Canadian tar sands, ultra-deep Atlantic fields, and Arctic oil will largely disappear.  Most of the giant oil companies will undoubtedly survive, but possibly in downsized form or as part of merged enterprises.

All of this is bad news for Big Energy, but unexpectedly good news for the planet. As a start, those “unconventional” projects like tar sands require more energy to extract oil than conventional fields, which means a greater release of carbon dioxide into the atmosphere. Heavier oils like tar sands and Venezuelan extra-heavy crude also contain more carbon than do lighter fuels and so emit more carbon dioxide when consumed. If, in addition, global oil consumption slows or begins to contract, that, too, would obviously reduce carbon dioxide emissions, slowing the present daunting pace of climate change.

6 Responses to “Dry Rivers, Low Prices Make a Double Whammy for Tar Sands Oil”

  1. GarryRogers Says:

    Reblogged this on GarryRogers Nature Conservation and Science Fiction (#EcoSciFi) and commented:
    Let’s hope that Harper’s folly is seen for the disaster that it was. Perhaps a new government can drop the greed act and refocus on protecting the magnificent natural beauty of the country.

  2. Lionel Smith Says:

    It is about time that all fossil fuel companies are put on notice that they do not carry on business at the hazard of our water supplies.

    Of course some forms of agriculture, especially biofuels, are wasteful of water. Depleted aquifers are unlikely to fill as fast as emptied even with a ramped up hydrological system, more moisture in the atmosphere means there is less elsewhere.

  3. indy222 Says:

    Are sure it’s such good news? The attitude of the Saudi’s has been “drill it and burn it before they tax it and it’s stranded.. Better something than nothing.”, together with “flood the market with cheap oil so the American shale’rs are out of business”. Either way, it’s more CO2 rather than less.

    • greenman3610 Says:

      part of the reason we are flooded with oil, is that demand has not been climbing as expected, particularly in China. I maintain that demand will grow more slowly, if at all, due to a critical mass of efficiency, new technology and political will to deploy them.

      • indy222 Says:

        if you look at global fossil fuel, it’s still outstripping the deployment of renewables, and CO2 atmospheric levels continue to accelerate. While Guy McPherson has deep flaws in his evidence and logic. Very deep. Now, he likes to say his doom scenario is supported by cloud physicist Tim Garrett. I’m studying his work, and Garrett’s work is much more solid, and the upshot is that it’ll be much harder to reduce CO2 than most enviro-optimists think. MUCH harder. His thermodynamic arguments are testable, and are supported by the evidence. I’ve got more work to read through his economic assumptions before saying more.

  4. Andy Lee Robinson Says:

    There are lots of nasty benzene-like carcinogens in tailing ponds, but I don’t think cyanide is carcinogenic.
    Cyanide is an asphyxiant like carbon monoxide, binding with haemoglobin and making it unusable for carrying oxygen.


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