This case outlines the ethical controversies surrounding the development of the Canadian oil sands. It sets out the pros and cons of the oil sands, and examines the role that these factors play in broader political decisions in the US and Europe about supporting imports from the Canadian oil industry. The oil industry is no stranger to controversy, yet Canada’s oil sands have become probably the most hotly contested development in decades. Extracting oil from the heavy, extremely viscous mixture of sand, clay, water and bitumen has only recently become economically viable, but critics argue that the social and environmental costs are excessively high. Tar sands extraction requires much greater quantities of water than for conventional oil, it imposes a far higher burden of carbon emissions, and has been associated with a range of other pollutants, including mercury contamination. According to the Sierra Club, the largest environmental NGO in the US, the oil sands produce ‘the most toxic fossil fuel on the planet’. However, oil sands development also has its legions of supporters, especially in Canada where most commercial extraction takes place. Rather than being branded a dirty oil, the Canadian Environment Minister has argued that the oil sands should in fact be seen as an ‘ethical’ source of energy. Since it generates enormous economic benefits for many, and is from a country that upholds democracy, human rights, and environmental protection, so goes the argument, output from the oil sands should really be recognized as ‘ethical oil’. Canada’s oil sands industry Oil sand is a naturally occurring substance that can be found in several locations around the globe, including Kazakhstan, Russia, and Venezuela. However, the deposits in the western Canadian province of Alberta are, so far, the largest and also the most commercially developed source in the world. Alberta’s oil sands are located in an area of around 140,000 square kilometres in the north of the province, with Fort McMurray being the main urban hub for the industry and supporting services. The Albertan oil sands have long been known to the local First Nations in the region who used the bitumen to seal seams on their canoes. European explorers provided the first written accounts of the oil sands in the eighteenth century, and the first patent for commercial separation processes to extract crude oil was awarded as early as the 1920s. However, commercial operations only began seriously in the late 1960s with the establishment of the first oil sands mine. Development initially occurred relatively slowly with the second and third mines only opening in the late 1970s and early 2000s, respectively. The initial slow pace of development was mainly due to the high cost involved in extracting crude oil from the oil sands, which coupled with low oil prices and relatively abundant supply from other sources, made the oil sands unattractive economically. With the spike in oil prices that began around the turn of the century, and the rush to secure greater energy independence in the face of an unsettled middle east and dwindling supplies elsewhere, investment flowed into the Albertan oil sands. More than $100 billion has been invested in oil sands development since the turn of the century, with current investment levels running into something like $20 billion every year. From just over half a million barrels of bitumen a day in 1997, the oil sands industry in 2014 produced almost 2 million barrels of bitumen every day. By 2022, production is projected to reach 3.8 million barrels per day and the Canadian Association of Petroleum Producers expects the industry will surpass 5 million barrels a day by the end of 2030. Most major companies now have operations in the oil sands, with over 50 energy companies having some kind of stake in mining and production facilities in the region. This includes Canadian companies such as Suncor Energy, which opened the first mine site some 45 years ago, and Syncrude, the second company to establish operations in the area, both of which now operate some of the largest oil sands mining operations. They have been joined by a swathe of global players such as Shell, Chevron, Total, Statoil, Exxon, and ConocoPhillips. Increasingly, Asian energy companies have also made investments in the oil sands, including the Korean National Oil Company and CNOOC, China’s largest producer of offshore crude. The oil sands development has catapulted Canada up the table of countries with proven reserves of crude oil. Even just counting the 9% of total oil sands volume that is currently recoverable using existing technology, Canada now has the third-largest proven oil reserves after Saudi Arabia and Venezuela. This constitutes some 11% of total global oil reserves, prompting Canadian Prime Minister Stephen Harper to claim that the country is an ‘energy superpower’. The pros and cons of the oil sands The rapid expansion of the oil sands has brought a host of economic benefits to the local Albertan economy and to Canada as a whole. According to the Canadian Energy Research Institute (CERI), almost every community in Canada has been touched by oil sands development through the stimulating impact it has on job creation and economic growth. Some of the headline impacts promoted by oil sands supporters include: • Employment in Canada as a result of new oil sands investments is expected to grow from 75,000 jobs in 2010 to 905,000 jobs in 2035. • The energy sector (oil and gas extraction/mining) accounted for 11% of jobs in Alberta and over 22% of Alberta’s GDP in 2012. • New oil sands development is expected to contribute over $2.1 trillion to the Canadian economy and $521 billion to the US economy over the 25-year period from 2010 to 2035. • The oil sands industry will pay an estimated $783 billion in provincial and federal taxes and royalties between 2010 and 2035. • Oil sands development creates thousands of jobs for First Nations communities—there were more than 1,700 Aboriginal employees in permanent operations jobs in the oil sands industry in 2010 (10% of the total workforce). • Oil sands companies regularly contract more than $1 billion of business with Aboriginal-owned businesses every year. This was as much as $1.8 billion in 2012. Oil sands companies have also provided anywhere from $5 million to $12 million a year to support Aboriginal community programmes between 2010 and 2012. On the other hand, many critics have highlighted the significant environmental problems caused by oil sands development. Although all oil sands developments must meet Canada’s environmental protection regulations, since production began ramping up in earnest after the turn of the century, environmentalists and other critics have pointed to a litany of negative environmental impacts. For example, some of the studies conducted by researchers and environmental groups conclude that: • Average greenhouse gas emissions for oil sands production (extraction and upgrading) is 3.2 to 4.5 times more per barrel than for conventional crude oil production. Overall, emissions per barrel have been increasing since 2006. • Oil sands emissions accounted for 7% of Canada’s greenhouse gas emissions in 2010 and are forecasted to be 14% in 2020. Canada is now among the top ten greenhouse gas producers on an absolute and per capita basis. • Water monitoring being conducted by the Regional Aquatic Monitoring Program, a joint industry-government environment body, appears to be inadequate. For example, a 2010 academic study found that levels of pollutants cadmium, copper, lead, mercury, nickel, silver, and zinc in areas around the oil sands exceeded federal and provincial guidelines. • Another academic study in 2013 found that oil sands development was polluting nearby Alberta lakes with rising levels of toxic carcinogens, refuting long-standing industry claims that waterway pollution in the region was largely naturally occurring. Contaminated water is a particular problem for local First Nations communities who rely on fishing. • The current water withdrawal management framework prioritizes industry use over aquatic protection. Water allocations from the nearby Athabasca River have nearly doubled between 2000 and 2010. In 2011, the oil sands industry used 170 million cubic metres of water, equivalent to the residential water use of 1.7 million Canadians. • Tailings, the waste by-product from oil sands extraction processes, are toxic and are stored indefinitely in open lakes that cover an area approximately 50% larger than the city of Vancouver. These tailings lakes seep, but the exact amount of seepage is either not known or has not been made public. One estimate suggests approximately 11 million litres of seepage a day. • Only 0.15% of the area disturbed by oil sands mining is certified as reclaimed—much of the peatlands and old growth forests that have been destroyed will never return to their natural state. These and many other environmental criticisms have continued to plague oil sands companies despite some companies investing considerable resources into environmental enhancements of various kinds including better water efficiency at mine sites and new technologies such as carbon capture and storage (whereby waste carbon dioxide is captured and stored to prevent it being released into the atmosphere). Most environmental groups remain unconvinced that these improvements are making a tangible difference given the speed and scale of development in northern Alberta. Many have taken a strong position against any further development, with groups like the Canadian NGO Environmental Defence labelling the oil sands ‘the most destructive project on Earth’, while Greenpeace is ‘calling on oil companies and the Canadian government to stop the tar sands’. Some more moderate voices, such as the Pembina Institute, have a goal to advance what they call ‘responsible oil sands development’, which involves a cap on environmental impacts and a reduced environmental footprint per barrel of oil produced. Even the terminology of the oil sands remains contentious with critics typically labelling it the ‘tar sands’ whilst industry and the Canadian government prefer the more benign sounding ‘oil sands’.
This case outlines the ethical controversies surrounding the development of the Canadian oil sands. It sets out the pros and cons of the oil sands, and examines the role that these factors play in broader political decisions in the US and Europe about supporting imports from the Canadian oil industry. The oil industry is no stranger to controversy, yet Canada’s oil sands have become probably the most hotly contested development in decades.
Aug 21, 2021 | Hire us to write