My 2017 book, Bitumen: The people, performance and passions
behind Alberta's oil sands, its book of the year. I'm quite honoured.
Here is an intro to the oil sands, based on information from that book.
By Peter
McKenzie-Brown
Hudson’s Bay Company explorer James
Knight made a seminal observation in his diary on June 27, 1715. On an
expedition into today’s Alberta, he wrote that he had learned from Cree “Home
Guard” Indigenous people, local trappers and factory provisioners “abt the
Great River it runs into the Sea on the Back of this Country & they tells
us there is a Certain Gum or pitch that runs down the
river in Such abundance that they cannot land but at certain places &
that it is very broad and flows as much water.” In English, at least, this is
the first written reference to the Alberta oil sands which, in terms of
bitumen in place, rank among the world’s largest petroleum deposits.
But these vast resources were little more
than a scientific oddity until after Confederation, when the development of
oil and natural gas virtually created a second industrial revolution – one
more far-reaching by orders of magnitude t han the century-long event that began
in Britain with its development of the coal-fired steam engine in the
mid-1700s.
There are two main reasons for this. The
first is that liquid hydrocarbons fuelled a revolution in the technologies
used for transportation and manufacturing. One result was a sharp rise in
standards of living within the countries fortunate enough to own the
resources and develop infrastructure to exploit them. In many regions,
notably Western Canada, governments were the primary owners of these
resources, and the resources themselves are vast. Thus, their development
requires close cooperation among government, industry and the scientific
communities.
Within this context, a cacophony of
information about the oil sands has come out in traditional form, and the
numbers are growing. Four oil sands books came out in the late 1970s and
1980s – to a large degree as a celebration of the anticipated start-up of the
giant Syncrude plant.
Earle Grayfirst released one of those
volumes – The Great Canadian Oil Patch: The Petroleum Era from Birth to
Peak – in 1970, and a thoroughly revised edition 34 years later. Each
version was a comprehensive look at Canada’s petroleum sector at time of
publication.
In 1993, David Breenreleased his
magisterial study of Alberta’s petroleum industry and its regulator. A decade
later, Paul Chastko’sDeveloping Alberta’s Oil Sands: from Karl Clark to
Kyoto came out; it covers the period 1920-1997. A third volume is Joyce
Hunt’s massive, Local
Push Global Pull: The Untold History of the Athabaska Oil Sands. It primarily covers the first three decades of the 20th century.
In 2009, Satya Das– an engineer with an
oil sands background – published a book called Green Oil: Clean Energy for
the 21st Century? In that tome he argues that the oil sands can be
developed as a green commodity. Other recent contributions include The
Future of Oil: A Straight Story of the Canadian Oil Sands by Sanjay
Patel, another petroleum engineer; Alistair Sweeney‘s Black Bonanza;
and Ethical Oil: The Case for Canada’s Oil Sands by right-wing
commentator Ezra Levant.
A recent development has been the
publication of popular books focused on global warming, and zeroing in on oil
sands development as a threat to humanity. One such came from the pen of a
prolific Montréal-based writer, William Marsden. It’s title? Stupid to the
Last Drop: How Alberta is bringing environmental Armageddon to Canada (and
doesn’t seem to care). Not to be outdone, Andrew Nikiforukreleased Tar
Sands: Dirty oil and the future of a continent in the same year, 2010.
Before continuing this story, it is worth
putting the Marsden and Nikiforuk books in perspective. A 2012 report compares greenhouse gas
emissions from the 36 sources of oil used in the United States. According to
economist Jackie Forrest, if you factor extraction, processing,
transportation and consumption as fuel into the equation – that is, if you
use the “well-to-wheels” approach in making GHG calculations – emissions from
oil sands are in 14th place on the table. If you add Canadian well-to-wheels
calculations into the mix, the number rises to ninth place. Put another way,
the environmental enthusiasm of the writers seemed to have interfered with
the accuracy of their research.
I have spent the last 30 years following
these developments in various capacities. My object has always been to
provide balance and perspective to help the reader navigate the seemingly
endless debates about the financial viability and environmental costs of oil
sands development. It draws from a wide range of documents to provide a
current, informed and accessible account of the industry’s evolution,
achievements and drawbacks.
Like a living thing, the manuscript grew
over several years. My sources included numerous books and reports – some
originally published in the 19th century. Much of this nourishment came from
the Glenbow Archivesand from Alberta’s Provincial Archives.
My interest in the oil sands began with
my work as coordinator and one of six interviewers for the Petroleum History
Society’s Oil Sands Oral History Project. Access to those 117 transcribed interviews gave
me insights into the thinking of many industry leaders and government
officials. So did interviews I undertook in my day job, which involved
writing petroleum-related articles for a number of magazines.
Collectively, these materials –
especially the transcribed interviews – provided extraordinary insights. As
Victorian writer Thomas Carlylewrote, history is “the essence of
innumerable Biographies.” He added, “but if one Biography, nay our own
Biography, study and recapitulate it as we may, remains in so many points
unintelligible to us; how much more must these million, the very facts of
which, to say nothing of the purport of them, we know not, and cannot
know!”If this is true of a single biography, would an industrial history
covering three centuries be more unmanageable still?
Perhaps the answer to Carlyle’s dilemma
can be found in an idea presented by another 19th century thinker, American
philosopher William James. According to his “great man” theory of history, “sporadic great men come everywhere.”
In the context of this history, scientific investigation of petroleum and of
the oil sands began in Canada in the 19th century, with European records of
early interest in the commodity dating back three full centuries.
“But for a community to get vibrating
through and through with intensely active life, many geniuses coming together
in rapid succession are required,” James said. “This is why great epochs are
so rare. Blow must follow blow so fast that no cooling can occur in the
intervals. Then the mass of the nation grows incandescent, and may continue
to glow by pure inertia long after the originators of its internal movement
have passed away.” Surely that pattern describes the increasing interest in
and development of the oil sands during the last 90 years.
The stories of those who found, explored
and helped develop the oil sands are an integral part of Canada’s history,
but primarily because politics, governments, regulators, corporations and
scientific institutions enabled their efforts to prosper or – in more cases
than we care to remember – caused them to fail. To a large extent because of
great distances and the bitterness of winter in Alberta’s northern forests,
in the early years those pioneers were exploring and investigating areas in
which simple survival was a feature of daily life. When fast-flowing rivers
were clear of ice, navigating scows full of equipment and supplies to the
nearest railway was another, sometimes deadly, challenge.
At an 1888 committee meeting in Canada’s
Senate, the Geological Survey of Canada’s R. G. McConnell provided the first
creditable estimate of the oil sands’ potential. He used three assumptions
based on field and lab work to come up with his calculations. First, he said,
there were at least 1,000 square miles of bitumen-saturated sand in the area.
Second, the sands were 150 to 225 feet thick. Third – and this result came
from laboratory tests that involved boiling oil sand samples – the bitumen
content averaged 12 per cent by weight. Therefore there were about 30 million
“long tons” of bitumen in place – roughly speaking, 220 million barrels.
At this writing, the estimate of
recoverable oil sands reservesis three orders of magnitude greater. Of
course, McConnell’s number was an estimate of resources in place. It was not
what today is known as a “reserves estimate.” At that time the concept of
recoverable reserves – hydrocarbons that are economically producible at
current prices using existing technology – was unknown. No one had any idea
how to calculate what percentage of oil in the ground would ever see the
inside of a pipeline. The problem of calculating oil sands reserves
bedevilled the petroleum industry for another 120 years,
The players include people from Ottawa,
the Alberta government, the private sector, the scientific community,
Indigenous peoplesand NGOs. This has not always been so, however. Between
1875 and 1918 the federal government was the principal actor, as an
unpublished study by William Wylieexplains – “at first from a sense of
responsibility for regional development.” Near the end, it was because of
“strategic considerations.”
“In the 1920s, the government of Alberta
became the major force, in part in order to assert its claim to control
provincial resources. In the 1930s, two private companies showed signs of
promise and the two governments pulled back in deference to private
development and in order to cut costs,” he wrote. “The 1940s were years of increased
involvement on the part of both levels of government due partially to
strategic considerations, and to the power struggle between them. In the
1950s, the conventional oil boom in the province took attention away from the
oil sands and delayed their development until the 60s and 70s when the long
run decline of the conventional reserves was finally anticipated. When
commercial development occurred, private industry was the major agency, but
with considerable governmental backing as well.”
Released in 1990, Wylie’s study coincided
with industry/government negotiations that led to a new stage of oil sands
development. Since 1992, financial responsibility for oil sands development
has lain entirely with the private sector. The signal for this development
began during the new Ralph Kleingovernment, when the stars aligned for
deregulation of the petroleum industry along free-market lines. Alberta
dramatically reduced its royalties, and the federal and Alberta governments
withdrew financial support from the OSLOoil sands plant and other petroleum
projects. The era of government-funded loan guarantees and tax and royalty
concessions was over. Since that time government has provided regulation and
an improved fiscal regime for oil sands development, but no cash. Industry
has taken the risks and benefitted from the rewards.
During this period, the sector developed
important new production technologies. At its heart, participating in the oil
sands industry is a journey of constant tests,” said Deborah Jaremko, editor
of the industry’s trade magazine. “At first, it was that the technology was
unproven. Then it was that low oil prices severely challenged the economics.
Then, with rising oil prices and new technology, came the whirlwind of a boom
coloured by the new visibility brought by the oil sands’ presence on the
world stage.”
By overcoming continual challenges, the
industry has benefitted the people of Canada – a reality that seems obvious,
given the size of this resource. At 168 billion barrels of recoverable
reserves, these deposits represent the third-largest oil reserves in the
world, after those of Saudi Arabia and Venezuela.
According to the Canadian Energy Research
Institute(CERI), oil sands development touched almost every community in
Canada through its impact on job creation and economic growth. Every dollar
invested in the oil sands created about $8 worth of economic activity.
One-third of that value creation took place outside Alberta – in other
provinces, the U.S. and around the world.
As I began writing, Alberta collected
some $4.5 billion in oil sands royalties each year. As importantly, oil sands
development and operations provide economic stimulus – $21 billion in 2012
and direct employment for 20,000 – many of whom flew in from across Canada
for their 8-days-on, 10-days-off shifts. In real terms, investment related to
the oil sands would generate an anticipated $79.4 billion in government
revenues between 2012 and 2035. The NEB forecasts growth well into the
future.
In recent years the world view has begun
to change, as disruptive technologies began to affect the oil sands. Stanford
University professor Tony Seba, for example, recently made a presentation suggesting that the oil sands’ days as an energy source are
numbered – indeed, that the world will make a dramatic shift within less than
a decade. Even if this were true, the oil sands’ value as a carbon-rich
petrochemical feedstock would continue to in play for centuries.