The trouble with tapping Alberta’s tar sands

Time and money

JOHN BISHOP BALLEM December 1 1974

The trouble with tapping Alberta’s tar sands

Time and money

JOHN BISHOP BALLEM December 1 1974

The trouble with tapping Alberta’s tar sands

Time and money

JOHN BISHOP BALLEM

They lie there, exposed along the high cutbanks of the Athabasca River, dripping black gobs of tar; inland, they are covered by blankets of muskeg and the remnants of ancient glaciers. The Indians mixed the tarry excretions with spruce gum to waterproof their canoes. Today, the same black oil splatters swimmers and waterskiers.

The oil sands are exactly what their name implies, sands from an ancient inland sea saturated with heavy black oil which oozes from them at the slightest pressure. The richest sands are pure quartz grains, their edges sharpened by being rolled and tossed in the w ind and protected by a film of oil from the wearing effect of the waves — but these same abrasive sands, because they can grind mining equipment to shreds, are a present-day headache to those w'ho seek to produce oil from them.

Now that Canada is spinning inexorably toward an ever greater reliance on imported foreign crude, it has turned an anxious gaze on these long-neglected deposits. Are these unlovely black lumps Canada's guarantee that our lights need never dim. our thermostats never be lowered and our gasoline never be rationed?

Only certain parts of that ancient sea produced the phenomenon we call oil sands. The four main deposits, at Athabasca, Wabasca, Cold Lake and Peace River, total somewhere between 20,000 and 30,000 square miles and are all located in northern Alberta. The Athabasca deposit contains the only sands

close enough to the surface to be mined.

Oil sand workers often call their plant a “minery.” It’s an apt term since the project is really a combinatkm of a strip mine and a refinery. The overburden of earth is stripped to expose the sands, which are mined with gigantic bucket wheels. The chunks of gritty, tarry sands are then transported to an extraction plant. The Great Canadian Oil Sands Ltd. plant, the only existing commercial project, uses conveyor belts to move the sands from the mine face to the plant, and Syncrude, which has just started construction, has also decided to use conveyor belts. It’s a decision of some importance, for Syncrude will move 78 million tons of sand per year.

The extraction plant removes the heavy oil or “bitumen.” which is separated from the sands in huge hot water tanks. The extraction of oil is so efficient that the remaining sand is clean enough to use in a children’s sandbox. The separated oil is then sent to a processing plant for upgrading into synthetic crude.

However, the bitumen that impregnates the deeper sands can be recovered only by in situ techniques, w hich require the heavy oil to be separated from the sands on the spot. Oil companies are experimenting with a variety of these methods; ranging from fire floods to steam injection. In a fire flood, air is injected into the underground formation, and the oxygen is then ignited. The bitumen acts as a fuel and the resulting heat lowers the viscosity of the oil so that it will flow through the formation. Some-

times water is injected along with the air to produce steam and help distribute the heat through the formation. The idea of exploding a nuclear device to unlock the oil is raised from time to time. To date every proposal has been rejected because of the fear that even the deepest sands don’t have enough earth cover to insulate against a nuclear blast, together with uncertainty over whether the nuclear device would actually perform as expected.

Of all the experiments, Imperial Oil’s operation at Cold Lake is probably the closest to commercial development. It involves the injection of steam at 600 degrees Fahrenheit for one month to heat the formation, after which the heated oil is pumped for three months or so. Then the whole process is repeated. The encouraging thing is that the heat gradually builds up within the formation itself, increasing the responsiveness of the reservoir. The Imperial project is in the advanced pilot plant stage but, even so, it seems that further testing, design, engineering and construction will mean another 10 to 12 years before the first plant goes on commercial production.

The potential reserves locked in the oil sands are staggering; the latest figures from the Alberta Energy Resources Conservation Board estimate that 250 billion barrels ultimately may be recov-

John Ballem, a Calgary lawyer, has written two novels. The Devil’s Lighter and The Dirty Scenario, and a legal textbook, The Oil And Gas Lease In Canada.

Our oil production will likely start declining by 1977 and we’ll be short 750,000 barrels a day by 1985

ered from the sands. This is more than 25 times Canada’s present reserves of conventional oil and almost one half the conventional oil reserves in the entire non-Communist world. Unfortunately, only 38 billion barrels are minable by present methods and the remaining 212 billion depend on the development of new techniques. But even the minable figure of 38 billion is nearly four times our present reserves. Aren’t they enough by themselves to make Canada self-sufficient in energy?

This is a question that can only be answered by predicting the likely growth in Canadian demand for oil and the future of Canadian oil supplies — a notoriously chancy business. The critical period is between now and 1985, since beyond then new discoveries and new solutions may begin to have an impact. During the next few years western Canadian crude will continue to supply Canadian markets west of the Ottawa Valley and this market will increase by

50.000 barrels daily every year. Approximately 900,000 barrels a day of western Canadian crude currently are exported to the U.S. The fact that this export figure roughly equals the volume of foreign oil we import to supply the Atlantic and Montreal markets sometimes leads politicians to claim that Canada is self-sufficient in oil, but that is only a theoretical exercise. When and if the Interprovincial pipeline is extended to Montreal, western Canadian crude will initially supply 250,000 barrels per day, approximately 50% of that market.

On the supply side, production of conventional Canadian crude has peaked at around 1.9 million barrels per day and it’s estimated that it will hold this level through 1976. In 1977 it will likely start to decline at an annual rate of 100,000 barrels per day. If deliveries to Montreal commence in 1976, simple arithmetic tells us that the demand for Canadian crude will then be 350,000 barrels per day greater than in 1974. Each year thereafter the estimated growth of demand and the decline in production will result in a net erosion of our ability to supply our own markets by

150.000 barrels per day. By 1980 this erosion will be 950,000 barrels per day, which, even if we completely eliminate exports, will leave only an intolerably thin margin of 50,000 barrels. Two years later the supply of Canadian crude will fall short of its estimated Canadian market by 250,000 barrels per day and this shortfall will increase to 750,000 barrels per day by 1985. The above scenario is only an approximate forecast and can be

adjusted by a year or two in either direction but the trend is undeniably there and the oil sands are the only source that has a chance of filling the gap.

Many Canadians still think of oil sands production as being exported to meet U.S. needs. In fact, however, Canada desperately needs this production for its own requirements. Without it, we will have to buy increasing volumes of expensive foreign crude — the hemorrhage of cash leaving Canada as a result of these purchases already amounts to millions of dollars per day. It will increase as both volumes and prices go up, and Quebec and the Atlantic seaboard will remain subject to the whims and caprices of Middle East rulers. The oil sands are the most likely source of oil in Canada that can make us truly self-sufficient in energy. But can they, produce oil quickly enough and are we prepared to pay the price?

The price comes high, in financial, environmental and cultural terms. The Syncrude consortium estimates that its 125,000-barrel-per-day plant will require an investment of more than $1.2 billion to complete.

The impact on the environment is easily described: immediate total obliteration of the landscape. The initial phase of the Syncrude project is a stunning demonstration: within the space of a few weeks, a crew of 500 workers and huge machines removed all signs of the forest that covered several thousand acres and reduced it to a flat expanse of bare land. Afterward, 40 chiefs of the local Cree and Chipewyan tribes were taken on a tour of the devastated area. They gazed around in stricken silence, unwilling to believe that their forest could have been destroyed so completely and so quickly.

Environmental devastation is unavoidable, because an oil sands project is essentially a gigantic earth moving job. Dykes and dams must be constructed to retain the waste water, mining pits must be dug and the waste sand and clay dumped into huge settling ponds. The Syncrude pond will cover nine square miles and will gradually fill with an ugly mixture of “sludge” and water. Even now the landscape keeps changing daily and the road you drive over in the morning is likely to be somewhere else when you return at night. In its place there may be a muskeg dump. As the operation grinds on, a large hill of overburden may entirely disappear, a stream be diverted, and a small island buried under a mountain of waste sand. The two bucket wheels at the Great Ca-

nadian plant are 100 feet tall and each gulps 4,500 tons of sand every hour. It’s an eerie feeling to stand on the highest catwalk and peer down at 150-ton trucks lumbering over the barren landscape, huge scrapers puffing black clouds of diesel smoke and bulldozers retrieving lumps of sand around the monstrous tracks of the excavator. With scarcely a human figure in sight it’s as though the machines have taken over and are playing a mad game of their own.

But if one must suffer a total environmental upheaval, Athabasca may be the ideal area. It is classic “moose pasture”; non-arable land, mostly noncommercial forest — mixed stands of spruce, poplar, aspen, tamarack and small clumps of birch. It’s great country for moose but the deer population is limited by heavy snow conditions and competition for winter food. Black bear live in some parts while coyotes, lynx and a few wolves roam everywhere. The only human visitors are trappers on their rounds.

The oil companies claim that when a project has come to the end of its economic life and the mine and processing plant are finally closed down, the area, even if it’s not restored to its original state, will be at least as attractive. The overburden and the waste sand will be dumped back into the mining pit, which will gradually fill and form a plateau somewhat higher than the surrounding lands since it is impossible to compact the sands as tightly as they were in nature. The sandy area will be contoured, covered with topsoil and planted. The settling ponds will slowly shrink but will remain as shallow sloughs. That’s the theory, but these mining plants have a long life-span — 25 years or more, so total restoration is far in the future. The Alberta Department of Environment has drawn up anti-pollution standards and closely monitors the operations, and the companies must post bonds as high as one million dollars a year to guarantee restoration. Despite this, large areas in the northern sector of the province will be turned into raw, ugly wounds on the landscape and will remain so for many years.

An oil sands project creates cultural shock waves, too. The activity has been centred in Fort McMurray, which as recently as the early 1960s was a sleepy hamlet of 1.100 residents. Living up to its slogan, “Where Steel Meets Keel.” it was the terminus of the railway and the starting point for tug and barge movement into the western Arctic during the short ice-free season. Many of the resi-

The population of Fort McMurray has already multiplied by 10 and the town is preparing for a new wave of settlers

dents ran traplines during the winter and when the Great Canadian plant was under construction in the mid-Sixties, some of the local workers arrived at the job site by canoe in the summer and dogsled in the winter.

The new highway to Hay River diverted most of the river traffic, but the residents were too caught up in the oil

sands boom to notice. Today the population has multiplied bv 1Ö and Fort McMurray is braced for a new onslaught as the Syncrude program gears up. It has been a one-company town dominated by the existing GCOS operation; the appearance of Syncrude will help change that, although most of the inhabitants will still work in a “minery.”

As a “new town” it has been governed by a board of administrators directly responsible to the Provincial Department of Municipal Affairs. The Alberta government has established the office of commissioner — an appointed official whom people already call “czar” — with sweeping powers over every aspect of local government.

Physically Fort McMurray is a sprawl of trailer camps, mobile homes and burgeoning subdivisions, but it’s still not keeping pace with the influx of workers. Even some of the staff of the Great Canadian plant havé not yet been totally absorbed. The population is amazingly young — 69% are under 21 — and the residents have flung themselves upon the outdoors; the air is shattered with the rasping buzz of snowmobiles in the winter and motorboats in the summer.

Up to now the contribution from the oil sands to the Canadian oil supply picture is, almost literally, only a drop in the bucket. There is just one commercial plant in operation and it produces only 50.000 barrels per day. The Great Canadian project was built during the Sixties when low oil prices and lack of markets (only 40% of the potential western Canadian production could be marketed during much of the decade) made the economics of oil sands production uninviting. The design capacity was 45.000 barrels of crude per day but that figure turned into a humiliating, bitter joke as the Great Canadian project reeled from a series of equipment and design failures. The abrasiveness of the sands and harsh winter conditions took a fearsome toll of equipment. In the intervening years the company has built up an awesome loss of $88 million, although its most recent financial statement shows a profit. Even today, in its seventh year of operation, the plant suffers occasionally from malfunctions that shut it down. When 1 told Tony Allen. Great Canadian’s operations manager, that I’d been there back in 1967 when they were trying to get the plant started up, he grinned ruefully and said, "I guess we’re still trying to do that.”

But things have changed in the Seventies, crude oil prices have shot upward and increasing demand gobbles up every barrel of conventional crude. The parade of would-be sands developers is shaping up. The Syncrude project, a consortium of Imperial. Atlantic Richfield, Canada-Cities Service and Gulf, is already under construction. Shell has received approval from the Alberta Energy Resources Board to proceed with its project. Both Petrofina and

A lack of equipment and skilled workers could seriously delay new plants

Home Oil have recently applied to the board for permits to build plants. All of the proposed “mineries” are in the 100.000 to 125.000 barrel-a-dav range, which has become the standard size for first generation plants. The roster of applicants has a familiar and disturbing ring; with the exception of Home Oil. they are all foreign-owned multinationals. But they do come adequately financed; all of the applicants have established that even the astronomical sums required for the construction of these plants can be raised.

The reserves are unquestionably there and the necessary financing is available. However, the role that the sands can plav in meeting our needs depends entirely on the rate at which projects can be built. And here is the rub. Only a few manufacturing firms in the world are capable of fabricating the high-pressure processing equipment and giant earthmoving machinery that these projects require. None of these manufacturers is located in Canada and worldwide demand for this type of equipment and machinery is so great that orders must be placed six or seven years in advance. Contracts are made “subject to availability of steef’and left open as to price.

The manpower situation is equally discouraging at all levels of skill. For instance. the refinery portion of both the Great Canadian and Syncrude plants had to be designed in San Francisco simply because there were not enough

processing design engineers in Canada. Each project requires a peak construction force of 4.000 men including 23 crafts such as pipe fitters, welders, and machine operators — precisely the same skills that are needed to construct worldscale petrochemical and fertilizer plants and major pipelines. There is no qualified surplus labor in Canada for this type of construction, and everything points to a furious scramble for equipment and workers in the next decade.

A realistic timetable seems to be one plant reaching full production every three years. The addition of 100.000 to 125.000 barrels a day capacity at threeyear intervals will not keep pace with the decline in our conventional oil production. let alone supply additional demand. Even the radical step of putting the construction of the plants on a national emergency basis probably would not work since so much of the essential equipment cannot be made in Canada.

The sands will make an important contribution to Canada's oil supply but they can’t prevent us. for the next decade at least, from becoming more heavily dependent on foreign oil. Eventually the development of new technology and larger oil sand plants, hopefully combined with discoveries of large reserves beneath our ocean floors, will bring us nearer to self-sufficiency in oil. Meantime. we’d better take a hard second look at the advisability of the Montreal pipeline and be nice to the Arabs.