Notes On the ethics and economics of the Sands and transport of its oil

Gordon Laxer

January 14, 2015


Burlington Discussion Group hosted by Jim Henry and Kiran Yashpal

I led a discussion among 16 or so people at the home of Jim Henry and Kiran Yashpal. The discussion group meets once a month to discuss a variety of topics.

Below are my notes for discussion.

Ethics of Sands oil

* Climate change. How significantly are the Sands contributing toward it?

* What to do about the destruction of the habitats of up to a quarter of Alberta. Sands oil deposits cover an area larger than the 3 Maritime provinces. Killing native people with rare cancers. Health dangers to the workers and non-native communities in northern Alberta. Killing wildlife eg woodland caribou, ducks etc.

* Does Ezra Levant’s ethical oil argument hold water? Extracting oil has never been about doing things ethically. Always about making money. What’s so ethical about Canada? Is it a rogue environmental outlier?

* Would capping and then phasing out the Sands, a policy I advocate, end thousands of jobs and turn Ft McMurray almost into a ghost town? Discuss the wrenching this would cause.

* Would phasing out the Sands create more jobs in other sectors eg. manufacturing, than are lost?

* Can we devise a just transition plan for workers in the Sands? Sands work is mainly construction work. Can those construction workers instead retrofit buildings, build high speed rail between Edmonton and Calgary, dig deep to Alberta’s geothermal heat. The proble of then shifting to a new kind of economy.

* Can the Sands be stopped for the good of Albertans, Canadians and the planet?

Economics of Sands oil

* Sands oil are a very low grade resource. The low hanging fruit was picked first. Each barrel of oil: Move 2 tons earth, Use 3 barrels water

* Very low EROEI (energy return on energy invested). Sands are very energy intensive to extract. Mining burns 750 cu ft natural gas to make 1 barrel of oil. In situ methods burn 1500 cu ft. natural gas to get a barrel of oil, enough to heat a Canadian home for about 8 days.

* Sands are very capital intensive (meaning they produce few jobs), and expensive. They are viable only because of huge government subsidies incl. very low royalties, free air to dump climate-changing carbon into, and removing environmental regulations on them. Huge free area to dump toxic wastes into – tailings ponds – more like toxic lakes – and their leaking into the Athabasca and ground water. Sands have the second largest dam in the world.

* Cost of producing Sands oil. What is the break even point? It varies. Suncor estimated it cost $30 to $31 to develop, extract, transport and sell the average Sands barrel in 2009. Assume normal rate of return of 10% and get $34 / barrel. Canadian Natural (CNRL) cost in 2015: $37. But with greater production, CNRL states that the cost could be cut to $27 a barrel.

* Price differential bitumen and West Texas Intermed (WTI). Jan 13 2015: bitumen selling at $32, & WTI at $46 a barrel.

* Jeff Rubin argues that oil at $40/barrel: project cancellations by global oil giants – Total’s Joslyn mine, Shell’s at Pierre River, and Statoil’s Corner oil sands venture – is only the beginning.

Transport of Sands oil:

* Pipelines. Discussed Enbridge line 9, TransCanada’s Energy East, Keystone XL line and 2 oil pipelines from Alberta to the B.C. coast.

* Rail and its limited capacity and dangers.

* Tanker

*Other modes: tanker trucks, barge, great lakes boats