House 112-128. March 20, 2012. The American Energy Initiative Part 17: A focus on the future of energy technology with an emphasis on Canadian oil sands. U.S. House of Representatives.
[ Excerpts from the 203 page transcript ]
President Obama in his speeches talks about America having only 2 percent of the world’s proven oil reserves. Today, we are going to discuss how Canada took action to increase its proven reserves several-fold by allowing the development of oil sands in Alberta.
ED WHITFIELD, KENTUCKY. There is a bountiful supply of untapped oil reserves here in the U.S., but frequently, it is too bottled up with Federal access restrictions and regulatory red tape. And I believe this needs to be changed. We will continue to fight for the Keystone XL pipeline expansion project that would bring an additional 700,000 barrels per day of this oil to Midwestern and Gulf Coast refineries.
In the vast onshore and offshore areas where the Obama administration must give the go-ahead before exploration and production can commence, the answer is usually no.
HENRY A. WAXMAN, CALIFORNIA. It is a Republican article of faith that we can drill our way to lower prices at the pump. But as we heard at the recent hearing on gas prices, if we increase production, it is easy for OPEC countries to reduce production by the same amount. That is the definition of a cartel—a group of entities that coordinates to control prices.
The fact is we are drilling more and prices are still going up. U.S. crude oil production is the highest it has been in 8 years, and the U.S. has more oil and gas drilling rigs operating right now than the rest of the world combined.
And I want to put up a chart that shows what has happened since 2000. Canada’s production and net exports have increased steadily for the past 12 years. Canada has increased its crude oil production by more than 35 percent. Canada is producing so much oil that it now exports 70 percent of all the oil they produce. If everything the Republicans have been telling us is true, then gasoline prices in Canada should have plummeted over the last 10 years. But that is not what happened.
Here is another chart I would like to have up. And this shows the U.S. and Canadian gas prices over that period. As you can see, U.S. and Canadian gasoline prices track perfectly because they are both driven by the same thing—world oil prices. In fact, Canada’s gas prices are actually higher than our prices due to taxes. More drilling, building a new tar sands pipeline or developing oil shale has not reduced gasoline prices in Canada and it won’t in the United States either. But that is not the only fantasy we will hear about today. We will also hear that the environmental harms from tar sands production have been minimized and will be solved by technology. In reality, the tar sands operations have vast and devastating effects on the land, water, air, and ecosystem. Canadian tar sands are produced in Alberta’s boreal forests. And the photo I would like to have put up you can see a pristine area before tar sands production begins. The landscape is beautiful. The air and water are clean. In the second photo of which we can put up you can see the effects of tar sands production. The land has been turned into an industrial wasteland. The forests have become an open pit mine. Maybe some of this damage can be avoided. Technology can reduce environmental impacts. But that won’t happen without stronger government regulation. I recognize that tar sands holds a large amount of oil. But it is a resource that should not be exploited without environmental safeguards that protect that land, water, and pollution, controls that stop the growing emissions of carbon and other dangerous gases. Until these problems are addressed, the oil in the tar sands is best left underground.
EDDY ISAACS. Alberta Innovates. We are one of four new provincial corporations launched by the Alberta Government in January 2010. We serve as the technology arm of the Alberta Government in Energy and Environment.
Heavy oil and bitumen are found in many places worldwide. Alberta has the largest global reserves of these hydrocarbons that are not under the control of the state.
We use in situ for the deeper deposits.
The major innovation in mining has been the development in the past 10 years of hydro-transport. Instead of using a truck and shovel, the ore is transported by a pipeline from the mine face as a slurry with water. The oil separates in transit to the plant. This method is operated at lower temperature than conventional extraction, thus reducing energy intensity and greenhouse gases. With in situ methods, our steam-based processes, cyclic steam stimulation, similar technology to what has been pioneered in California in the 1960s; steam-assisted gravity drainage, which has been only in commercial operation for the past 10 years.
New technologies are emerging that are poised to significantly reduce energy intensity, reduce water use and greenhouse gases. These include steam-solvent hybrid processes that are being applied at least by one company commercially today. Use of solvents without steam, you will be hearing about that from Dr. Nenniger and N–Solv is a good example of this type of technology. Electric heating and electromagnetic heating technology is coming into use. Electromagnetic uses radio frequency to heat the oil in the oil sands.
In the resource sector, it takes 20 to 30 years to bring new technology to market, much longer than in other sectors, and this increases the risk profile and the financial commitments required. The role of my organization is to work with industry to significantly reduce the time lag for innovation and the risk of adapting new technology, especially next-generation technology.
The majority of oil producing countries having reached their peak of oil production. Globally, reserves are being replaced by the more difficult to produce resources such as deep offshore, highly water-flooded reservoirs, tight oil and heavy crudes.
Heavy oil and bituminous resources, bring a unique set of environmental and social challenges: they are hard to extract and sensitive to market and input costs; the sophisticated technologies used to produce these crudes require a skilled labor force; and careful management of environmental issues especially land disturbance, high water use and greenhouse gas emissions is essential. Innovation and technology development have been key to reducing costs of commercial deployment of oil sands and in making “technology oil” competitive against conventional crudes in world markets. Current oil sand production of about 1.7 million barrels per day is a direct result of sustained investments in technological innovation and decades of “learning by doing.”
The technology used to produce the bitumen from surface mined oil sands was already well understood when J. Howard Pew, the American industrialist and co-founder of Sun Oil Company (Sunoco), drove the development of the first commercial oil sands project. At the opening ceremonies for the oil sands plant in 1967, Pew told his audience, “No nation can be secure in this atomic age unless it is amply supplied with petroleum … It is the considered opinion of our group that if the North American continent is to produce the oil to meet its requirements in the years ahead, oil from the Athabasca area must of necessity play an important role The first years of commercial operations involved overcoming large technological challenges, especially in equipment reliability and process efficiency.
Canada—Alberta—has increased their proved reserves of oil to 176 billion barrels, second only in size to Saudi Arabia. In comparison, the United States has approximately 22 billion barrels of proved reserves. We can learn from the development of the Alberta oil sands development.
The USGS reports that technically recoverable heavy oil is 434 billion barrels with 2834 billion barrels stranded (uneconomic to recover). Technically recoverable Bitumen is 651 billion barrels with 2,210 billion barrels stranded. Better technology and/or higher prices will allow a portion of this stranded resource to be recovered economically. See Meyer, Attanasi; Heavy Oil and Natural Bitumen – Strategic Petroleum Resources, The Energy Resources Conservation Board publishes an annual report titled ST98 Alberta’s Energy Reserves and Supply/Demand Outlook. The 2011 version reports 1.8 billion barrels in place of which 1674 billion bbls are considered to be in-situ resource and 138 billion bbls of this in-situ resource is considered economic to recover. Thus, 1536 billion barrels of in-situ bitumen are stranded.
William McCaffrey, president and CEO of MEG Energy. I represent In situ Oil Sands Alliance, a group of independent Canadian companies dedicated to the responsible development of the Canadian oil sands using in situ technology. The main in situ technology used today is steam- assisted gravity drainage, or SAGD, as it is called. And SAGD is important because it is currently the most common commercially proven—pretty much the only commercially proven way to reach the deep reservoirs that contained 80 percent of Canada’s total oil sands reserves. And just to put that into perspective, that represents about 140 billion barrels of reserves, roughly equivalent to the entire reserves of Iran.
Now SAGD technology is pretty simple. It uses horizontal wells drilled from surface and we drill down to about 1,000 feet below the Earth’s surface. Once we reach the reservoir and complete the wells, we drill about half a mile out, inject steam into the reservoir, and bring the heated oil and the water back to surface. And from a well pad a fraction the size of this building, the subsurface equivalent of 95 NFL football fields can be accessed. This provides what is among the lowest ratios of surface disturbance to resource recovery in the oil and gas industries anywhere in the world. About 90 percent of the water that is used to create the steam is recycled with the portion we can’t recycle returned to deep, non-potable reservoirs. There are no tailing ponds created and it is essentially a closed-loop system.
One of the key research and development focuses is to reduce the amount of energy we need to produce a barrel of oil. That is critical because of both the emissions and costs associated with the energy consumption. One of the technologies we are currently applying alongside of the SAGD is cogeneration, a very energy-efficient process that produces both steam for our operations and electricity for the sale to the grid.
CERr, a non-profit Canadian energy and environmental research institute, examines the impacts of developing Canadian oil sands on the United States’ economy. The study covers the period from 2009 to 2025 and is based on the 2009 CERr “Economic Slowdown Projection”. This production forecast envisions raw bitumen production slowly climbing from current levels of approximately 1.2 million barrels per day to around 4 million barrels per day in 2025. CERr estimates the capital investment and operating costs needed during the 2009-2025 period to achieve this output at $379 billion.
The oil sands are located predominantly in Alberta, but stretches into neighboring Saskatchewan. With an estimated initial volume in-place of approximately 1.7 trillion barrels of crude bitumen, Canada’s oil sands are one of the largest hydrocarbon deposits in the world and provide the most secure supply to the US. By year-end 2008, about 10 percent (I.e., 170.4 billion barrels) of this volume is recoverable using today’s technology. Of this recoverable bitumen reserves, 18 percent is accessible through surface mining technologies, while the remaining 82 percent requires in situ recovery technologies.
As reserves and production of conventional crude oil decline, unconventional resources have moved to center stage in Canada, and are becoming increasingly important to the global oil industry.
Canada’s oil sands are composed of approximately 80 to 85 percent sand, clay and other mineral matter, 5 to 10 weight percent water, and anywhere from 1 to 18 weight percent crude bitumen. Bitumen content greater than 12 percent is considered rich, while anything less than 6 percent is poor and not usually considered economically feasible to develop.
In the Athabasca region, the oil sands are hydrophilic or “water wet”. A thin film of water, which is surrounded by crude bitumen, envelops each grain of sand. The sands are unconsolidated with grain-to-grain contact. Being silica quartz, the sands are extremely abrasive, thus posing significant challenges in the mining and extraction processes. This abrasive product damages pipelines and equipment, so alternative methods to transport the bitumen in pipelines, such as creating bitumen emulsions and adding large quantities of water into pipelines for hydro transport. These and other innovative initiatives helped turn the resource into a viable source of oil.
Crude bitumen is a thick, viscous crude oil that, at room temperature, is in a near solid state. The definition used in the industry is that crude bitumen is “a naturally occurring viscous mixture, mainly of hydrocarbons heavier than pentane, that may contain sulphur compounds and that, in its naturally occurring viscous state, will not flow to a well”.
The term crude bitumen generally refers to petroleum with a density greater than 960 kilograms per cubic meter. Much of the bitumen in Canada’s oil sands deposits has densities that exceed 1,000 kg/m3 (API Gravity of less than 10 degrees). Because of its high gravity and high viscosity characteristics, crude bitumen may be blended with a light hydrocarbon liquid (condensate) before it is shipped to markets by pipeline.
|Crude Oil Type||Density|
|Athabasca Crude Bitumen||1,015|
|Cold Lake Crude Bitumen||1,009|
|Athabasca Bitumen Blend (a)||919|
|Cold Lake Bitumen Blend (a)||919|
|Bow River Blend||894|
|West Texas Intermediate||827|
Table 2.1 Curde Oil Densities (kg/m3). (a) Athabasca and Cold Lake Bitumen Blends are derived by adding diluent to crude bitumen to reduce viscosity prior to being transported by pipeline. The most commonly used diluent is very light natural gas liquid (C5+ or pentanes plus), which is a by-product of natural gas processing. A condensate diluent typically constitutes 24-32 percent of the bitumen blend. Sources: Markets for Canadian Bitumen-Based Feedstock, CERI Study No. 101; and (2) Alberta Research Council Open File Report 1993-25.
Currently a majority of the oil derived from oil sands being produced are by surface mining, although only about 20 percent of oil sands are recoverable through this method. This method is used when bitumen is close to the surface. The remaining 80 percent of resources are recoverable through in-situ technology. This method is employed when the bitumen deposits are further underground. Most in-situ operations use steam-assisted gravity drainage (SAGD). This involves pumping steam underground through a horizontal well to liquefy the bitumen and pump it to the surface. Current investments in advanced technology will make this method of extraction more widely used in the years to come.
Various proponents of oil sands projects have withdrawn their applications, announced delays and/or placed their proposed projects on hold until the economy rebounds and the investment can generate a reasonable rate of return.
Figure 2.3 represents CERI’s outlook for oil sands production, which shows that somewhere between 4 and 6 MMbpd might be achieved.
In 2008, CERI was projecting a potential for oil sands production of over 5 million barrels per day (MMbpd) by 2015, and over 6 MMbpd by 2030. It was our opinion that the likely development path of the oil sands would be far lower than the CERI Unconstrained Projection (2008). The CERI Reference Case Projection (2008) indicated 3.4 MMbpd of bitumen production by 2015, increasing to just under 5 MMbpd by 2025.
The slowdown projection reflects a scenario in which the price of oil stays below US$60 WTI/bbl for most of 2009 and the credit markets still lack liquidity. Under this projection, economic recovery begins in early 2010, as indicated by the previously provided oil price forecast, and liquidity slowly starts to return to the economy. In conjunction with the economic recovery, oil sands development stalls until 2013, with no major growth until 2015. Previously announced and approved (by government) projects remain delayed, and some remain in peril. This scenario is similar to what is currently taking place in the oil sands industry. While the price of oil and the global economy are expected to rebound in 2010, it will take another two years before oil sands production growth resumes. CERI assumes this resumption to be limited to established oil sands projects and others with adequate financing in place prior to the credit collapse of 2008; it takes at least two years for most mining and in situ projects to start production after construction begins. However, many projects will not start construction in 2010, but will begin a reassessment and refinancing period that could take several years. Some projects are likely to be deferred until 2015, which will create a further backlog in projects, pushing those with 2015 plans (as announced in 2006 to early 2008) beyond 2020. While CERI does not anticipate a rapid recovery and explosion in growth, as many had previously projected, we have included a margin of error in our projections, as indicated by the grey area on Figure 2.3. This reflects the Probable Production Range for oil sands development, which is highly dependent upon the recovery in the price of oil and increased liquidity in the capital markets. In 2015 the total production band is 1.9 to 2.9 MMbpd, which broadens by 2025 to 3.5 to 5.1 MMbpd.
The Alberta Energy and Utilities Board (EUB) estimates the initial volume of crude bitumen in place to be 270.3 billion m3 (1,701 billion barrels) as of December 31, 2006. The Athabasca region alone accounts for almost 80 percent or 217.7 billion m3 (1,369 billion barrels) of the total. Table A.1 summarizes the volumetric resources by oil sands area (OSAs) and oil sands deposit (OSDs). OSAs define the geographical boundaries of crude bitumen occurrence, while OSDs contain the specific geological zones declared as oil sands deposits. Both, OSAs and OSDs are designated by the ERCB. Table A.l Initial In-Place Volumes of Crude Bitumen
As of December 31, 2008, remaining established reserves were estimated by the EUB to be 27.07 billion m3 (170.4 billion barrels). Remaining established reserves are calculated separately for those that are likely to be recovered by mining methods and those by in situ methods using established technology and under anticipated economic conditions.
Bitumen from the shallower oil sands deposits is extracted through open-pit mining operations. These mines expose the oil sands by stripping the overburden. The oil sand is then removed by using truck and shovel mining methods. Bitumen is separated from the sand through a process of adding warm water and agitation. Roughly two tons of sand are mined, moved and processed to produce one barrel of bitumen. In situ, on the other hand, means “in-place”, and indicates that the bitumen is extracted from the sand in the reservoir. These techniques are employed for deeper oil sands deposits (generally greater than about 75 meters to the top of the oil sands formation). The two main in situ processes currently being used are cyclic steam stimulation (eSS) and steam-assisted gravity drainage (SAG D). These methods inject steam into the formation to heat the bitumen, allowing it to flow and be pumped to the surface.
The EUB determined mineable established reserves by identifying potential mineable areas using economic strip ratio (ESR) criteria, a minimum saturation cutoff of 7 weight percent, and a minimum saturated zone thickness cutoff of 3.0 meters.
The EUB determined in situ established reserves for those areas considered amenable to in situ recovery methods. Reserves attributable to thermal development were determined using a minimum saturation cutoff of three weight percent crude bitumen and a minimum zone thickness of ten meters. For primary development, the same saturation cutoff of three weight percent was used, with a minimum zone thickness of three meters. Recovery factors of twenty percent for thermal development and five percent for primary development were applied to the areas within the cutoffs. The recovery factor for future thermal development is assumed to be lower than recoveries being achieved by some of the active in Situ projects. This is to account for the uncertainty in the future recovery processes and the uncertainties inherent with developing poorer quality resource areas (areas under active development are of higher quality than future areas). While the resource base is very large, it is worth noting that many in Situ recovery technologies are still in the early development stage and there is still considerable uncertainty about how much crude bitumen will ultimately be recovered.
My name is Melina Laboucan-Massimo. I come from northern Alberta, Canada. I am a member of the Lubicon Cree First Nation, which is one of the many communities impacted by tar sands development.
For those of us in Canada who are experiencing the detrimental effects of tar sands, it is encouraging to see that many decision- makers and citizens in the United States are beginning to ask questions around whether or not the tar sands are in the right direction and which we should be pursuing in an already carbon-constrained world. In the past 5 years, I have worked in communities throughout Albert and British Columbia that are very concerned about the approval of tar sands pipelines not only because of potential spills but also because it will increase pressure for more tar sands expansion in Alberta. I personally have felt the impacts of both pipeline spills and tar sands-driven industrialization of the landscape in the north. Last spring, I returned home where I was born to witness the aftermath of one of the largest spills in Alberta’s history, which was 50 percent larger than the oil spill in the Kalamazoo River in Michigan. What I saw was a landscape forever changed where my family fished, hunted, and trapped for generations. Days before the Federal or provincial government admitted that this had happened, my family was sending me messages telling me of headaches, burning eyes, nausea, and dizziness, asking me if I could find out more information as to if it was an oil spill and how big it might be. This was one of the saddest and most frustrating points because my family was not the first, nor the last, to experience these effects. It was alarming to hear that the first phase of the Keystone had already leaked and spilled 14 different times in its first 12 months of operation. Where I come from billions of dollars are taken out of our traditional territories.
Yet, until this day, my family still has no running water. The indigenous communities have lived in these regions for thousands of years and yet are being pushed out, unable to access their traditional territories and unable to practice their treaty rights due to tar sands expansion.
Communities like Fort McKay First Nation can no longer drink the water from their taps and their children are developing skin rashes from bathing in this contaminated water. A cancer study done by Alberta Health Services reveal that there was a 30 percent increase in the community downstream of Fort Chipewyan. Leukemias and lymphomas were increased by three-fold and bile duct cancers increased by seven-fold. Almost all of the cancer types that were elevated were linked in scientific literature to chemicals in oil or tar. We have toxic tailing ponds sitting in the north of Alberta that span over 170 square kilometers, which is equivalent to 42,000 acres.
We have endured decades of promises that have taught us that promises of new technologies that will repair this damage feel like empty words. The reality is that SAGD solutions usually move the problem elsewhere such as pumping the toxic byproduct underground where they can leak into aquifers rather than storing them in tailing ponds from the mines. Meanwhile, the scale of production is increasing and the overall programs are getting worse.
Companies will leave irreparable damage to our lands and our homes, and the Alberta government claims to reclaim the land. However, many prominent scientists dispute that this is possible. Just last week, a report was published in the proceedings of the National Academy of the Sciences of the United States of America stating ‘‘any suggestion that oil sands reclamation will put things back to the way they were is greenwashing.’’
First Nations in British Columbia are also adamant that the Enbridge pipeline will not be built through their territories. Over 100 First Nations have signed on to this declaration to oppose the construction of the Enbridge pipeline and its associated supertankers on the west coast of Canada and First Nations are willing to pursue litigation if the Enbridge pipeline is approved in Canada as they have constitutionally protected rights under Section 35 of the Canadian Constitution.
Companies will leave irreparable irreversible damage to the land and our homes. The Alberta government claims otherwise, vowing to “reclaim” the land – however, many prominent scientists dispute that this is even possible. As of December 2010, only 0.15% of the land devastated by tar sands mining operations has been certified as reclaimed. The Proceedings of the National Academies of Sciences of the United States of America published research just last week stating that “companies have no obligation to restore or compensate for the destroyed wetlands” and “any suggestion that oil sands reclamation will put things back the way they were is greenwashing.,,
First Nations are not the only ones to oppose this pipeline. In British Columbia, surveys show that 80% of British Columbians oppose super tankers on the Pacific West Coast. Many people do not think the pipeline or super tankers will benefit the province of BC especially with a thriving fishing and eco-tourism economy, which brings in over $1 Billion dollars to BC annually.
As we see the landscape change, my father who is a Cree hunter has more and more difficulty in finding moose to feed our family and community. A couple of years ago, he found 3 tumors in the carcass of a moose while hunting in our traditional territory. Pristine forest, wetlands, bogs and fens are torn up and destroyed which will be replaced by acidic soil, end cap lakes and tree farms – a mere shadow of what once was.
Tailing ponds contain a whole slew of toxic chemicals from arsenic, cyanide, mercury, lead, benzene, ammonia, polycyclic aromatic hydrocarbon and naphthenic acids some of which are known carcinogens.
Last week I was visiting the community of Fort McKay, which is completely surrounded by tar sands mines and in situ projects. They have been advised NOT to drink water or cook with the tap water or take long showers. Children are developing sores on their bodies from exposure to the water they have to bathe in. The First Nation has had to cart bottled water in from Fort McMurray for community members, which is just under an hour’s drive away. Communities are also pulling mutated fish with tumours and boils on them out of the various rivers and lakes in the region and unable to consumed these as a part of their diet. We are also seeing elevated rates of cancers in the north of Alberta. I myself have had family members live and die with cancer. And we are also seeing increased rates of respiratory illnesses such as emphysema, asthma, and chronic pulmonary disease due to the increased level of sulfur dioxide, and hydrogen sulfide. A cancer study done by Alberta Health Services revealed that there was a 30% increase in cancers in Fort Chipewyan compared with expected over the last 12 years. Leukemias and lymphomas increased by 3-fold and Bile duct cancers increased by 7-fold and other cancers such as soft tissue sarcomas, and lung cancers were elevated. Almost all of the cancer types that were elevated have been linked scientifically to chemicals in oil or tar.
Many types of cancers have also been linked in scientific literature to petroleum products, including VQCs, dioxin-like chemicals, other
Extracting oil from the tar sands is one of the most expensive and most environmentally destructive ways to produce oil in the world. While open pit mines are more visually horrifying, SAGO is far more carbon-intensive, water-intensive, and energy-intensive, which will be 80% of the way tar sands will be produced.
Continuing to produce this type of fossil fuel in an already carbon distraught world – is essentially carbon suicide. Not only are we producing CO2 emissions at an unsustainable rate, but we are also fragmenting and destroying one of the last intact boreal forests in the world that helps us to keep carbon in check. And this is the path that the Harper government wants to keep us on for the next 50 to 100 years.
We have a choice to change the direction we are taking in the world. We could become world leaders in the clean, renewable energy solutions that meet our energy needs without undermining the health of our communities and ecosystems. We won’t get there, however, if we try to attach techno-fixes onto what is, at every stage, a profoundly destructive form of energy. The reality is that the tar sands are managed to maximize profits, and not to protect the environment or downstream communities like the one where my family lives. We have endured decades of broken promises, which has taught us that corporate promises of new technologies that will repair this damage are simply empty words – greenwash intended to reassure people like yourselves that this time it will be different.
I urge you to look beyond what is good for the oil companies’ next few quarterly profits, and think about what is in the best interest of the next generation.
JOHN SHIMKUS, ILLINOIS. It is good to continue to talk about energy security and lower-priced crude oil, lower-priced gasoline, decrease in our reliance from Iran, decrease in our reliance from the Strait of Hormuz, countries that dislike us and looking north to our friends and allies, the Canadians. I am not a big carbon guy, OK? If you follow my public testimony and my comments, this climate change thing, pricing carbon, I am not in that camp. But if you go in that direction, 80 percent of this oil sands recovery can be in situ, and that is what I hope my colleagues on the other side learn about today. Two different types of recovering oil sands, mining operations, in situ. Eighty percent of the oil up there now is in situ and it is in pipelines and there is no footprint.