Tar Sands: Building The Biggest Industrial Museum In History

At some point within the next decade or so the major nations of the world must start to make substantive progress in cutting the usage of fossil fuels. A major focus of such efforts would have to be within the transportation sector, which relies predominantly on oil as a fuel. The logical result would be that global demand for oil would start to fall year after year, creating a long-term downward pressure on oil prices.

With the decline in demand being a secular issue, rather than a short-term one, the viability of the highest cost operations would be fundamentally undermined. There would be no reason for producers to accept short-term losses in the hope of a later pick up in prices. A rational business option may be to walk away from currently unprofitable operations, and limit losses through declaring local operations bankrupt.

The lowest cost producers are the conventional wells situated in places such as the Middle East and Russia, followed by shale oil and conventional offshore production, followed by the Tar Sands, followed by Ultra Deep offshore production. The Tar Sands also tend to produce lower-quality oil that trades at a discount to benchmark crude prices[1]. The extra processing required to turn tar into oil also makes its production much more carbon intensive than the other options. Another reason, in addition to the high production costs, for producers to steer clear of it.

In the face of such risks Canada, and the provinces of Alberta and Saskatchewan, are still supporting ongoing expansion of the Tar Sands[2] [3] [4]. Within a decade they could be left with the biggest industrial museum in history, together with probably the biggest industrial waste problem in history. The private operators would have disappeared, as they tend to in such cases, leaving the mess to the citizenry to clean up. This is a reality with much historical precedent within the extractive industries of Canada. The documentary “The Hole Story”[5] shows well the privatization of profits and socialization of costs that is rampant within this sector.

The greatest irony within all this stupidity is that Canada is ideally situated to become a renewable energy superpower[6]. It has a large base of dispatchable hydroelectric energy to counterbalance intermittent renewables, and a huge landmass with massive potential for wind and solar. This includes both the provinces of Alberta and Saskatchewan! An integrated grid that included British Columbia’s and Manitoba’s hydroelectric resources would allow for the full exploitation of potential renewable energy resources of Alberta and Saskatchewan[7].

Canada is more beholden to the fossil fuel industries than most other countries. A test of its’ democracy is whether or not it can overcome that influence and move beyond fossil fuels before it is too late. The current Liberal government is failing badly as it supports one fossil fuel project after another.

References

[1] Kevin Brim (2016), Production cost and the Canadian oil sands in a lower price environment, HIS Markit. Accessible at http://blog.ihs.com/production-cost-and-the-canadian-oil-sands-in-a-lower-price-environment

[2] Jesse Snyder (2016), Could Alberta’s Cap on Oil Sands Emissions Hinder Growth?, Alberta Oil. Accessible at https://www.albertaoilmagazine.com/2016/05/albertas-cap-oil-sands-emissions-hinder-growth/

[3] John-Paul Tasker (2016), Trudeau cabinet approves Trans Mountain, Line 3 pipelines, rejects Northern Gateway, Canadian Broadcasting Company. Accessible at http://www.cbc.ca/news/politics/federal-cabinet-trudeau-pipeline-decisions-1.3872828

[4] John Paul Tasker (2017), Trudeau welcomes Trump’s Keystone XL decision, CBC. Accessible at http://www.cbc.ca/news/politics/trudeau-cabinet-keystone-xl-1.3949754

[5] Richard Desjardins and Robert Monderie (2011), The Hole Story, Colette Lournede. Accessible at https://www.nfb.ca/film/hole_story/

[6] Ralph D. Torrie at. al. (2013), An Inventory of Low-Carbon Energy for Canada, Trottier Energy Futures Project. Accessible at http://www.davidsuzuki.org/publications/downloads/An%20Inventory%20of%20Low-Carbon%20Energy%20for%20Canada.pdf

[7] Marvin Shaffer and John Richards (2015), Opinion: It’s time for a western electric power grid, Vancouver Sun. Accessible at http://www.vancouversun.com/technology/Opinion+time+western+electric+power+grid/11574875/story.html

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4 Responses to Tar Sands: Building The Biggest Industrial Museum In History

  1. Joe says:

    Perhaps. But based on the history of fossil fuel production since the danger of carbon emissions have become widely known, your assertion that "the major nations of the world must start to make substantive progress in cutting the usage of fossil fuels" amounts to wishful thinking.

    I doubt that Canada will be able to renounce fossil fuels when other countries do not. As long as our industrial civilization remains intact, I fear we will continue to use anything that will burn, including bitumen.

    I will only believe that progress has been made when I see the slope of the Keeling curve start to diminish. So far, its slope is still increasing.

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    • rboyd says:

      In the short-term I tend to agree with you, but I think that it is quite possible that we will get the cumulative impact of climate events over the next decade or so which will shake the lethargy of the non-fossil fuel elites, as well as the populace in general.

      For example, the climate chaos and warming acceleration that could be driven by an Arctic Blue Ocean event, could be overwhelming; even without any methane feedbacks etc. Just the extra heat intake from the albedo effect could rapidly accelerate warming and completely upend the Northern Hemisphere climate systems. There are many other systems that are approaching tipping points, when one goes it could rapidly drive the others.
      - These issues are covered very well in Neven Arctic Forum (https://forum.arctic-sea-ice.net/index.php?board=3.0), an amazing resource. One topic covers the albedo effect, which has substantially increased over the past few years, and appears to be heading for an exponential period of growth.

      It won't be up to Canada, but up to the customers for its oil. It being the most costly at the margin, it will be one of the first to lose in a battle for demand with the low-cost providers. Its reputation as "dirty oil" will only make it worse, and it may also get a larger carbon tax because of that.

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      • Joe says:

        I just don't think that "low cost producers" will supply enough fossil fuels to keep industrial civilization going. In the very near future demand will exceed supply once more, prices will rocket upwards and anyone that can supply carbon will have a willing buyer.

        I don't think that demand will decline unless the economy does, especially since, as I noted in a recent comment, constructing the renewable energy systems that could create a permanent decline in demand for fossil fuels will cause a temporary increase in demand for them.

        The viability of fossil fuels can only be diminished by world-wide political decisions against their use or by dramatic scarcity, even at economy-killing sky high prices. Neither of these events look likely.

        Even less likely is the prospect that dramatic and disruptive climate related events will change anyone's mind. Everything is "fake news" now, even the truth. After all, sea level rise will only affect those lefties living on the coasts. Who's going to believe them?

        Sad as it is, economic collapse is our only hope, small as that hope may be.

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        • rboyd says:

          With China rapidly driving down its energy intensity, including oil, its demand growth is moderating fast. The IEA keeps revising down its overall demand growth forecasts and there is still quite a lot of supply off the market. So I see the rebalancing taking a lot longer, and a possible fall in prices in the short-term. The US rig count just keeps increasing as well!

          Longer term, there is enough coal and NG to build the new renewables at least for the next decade, not good for carbon emissions up front of course. The possible collision between a lack of carbon emission reductions (even using the CO2 only and highly-gamed current way of counting) and intensifying CC impacts may drive an emergency response.

          A Blue Arctic event could rapidly drive absolute chaos in the Northern Hemisphere climate, as well as a higher rate of warming overall. Resulting food shortages and price spikes in the US could do what Katrina+Sandy did not.

          There is then the possible worst case with constrained energy supplies (depletion and carbon constraints) just as CC hits really hard. Early 2030's maybe.

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