While this might seem like an overly simplistic question, it’s clear that many Canadians just don’t understand the environmental and long-term economic impact of the Alberta oil sands.
As you can see from the facts on the main page, the oil sands have a world low EROI. The extraction process comes at a high cost, both in terms of finance, resources and emissions. Economically, the cost is well above foreseeable oil price levels. This does not bode well for Alberta or, for that matter, the rest of Canada.
As you can see from the facts on the main page, the Alberta oil sands have a world low EROI. The extraction process comes at a high cost, both in terms of finance, resources and emissions. Economically, the cost is well above foreseeable oil price levels. Aside from the environmental impact of the oil sands, the numbers long-term simply do not add up. This does not bode well for Alberta or, for that matter, the rest of Canada.
The oil sands in Alberta currently contain approximately 165 billion barrels of accessible oil. This is enough oil to supply current requirements in the USA for about 23 years. In Canada alone, it could last for hundreds of years or longer, given the rapid pace of the electrification of our ground transportation fleets. Electrification of large scale, long-distance air transport may not become viable for generations though.
Most people just aren’t aware of the oil sands’ low economic viability. This is just one of many hard facts about the Alberta oil sands that go ignored. In early 2021, the production rate stands at around 3.1 million barrels per day, giving the oil sands a lifespan of 145 years. At a projected rate of 10 million barrels per day, that lifespan drops to under 50 years. But the oil sands only become a truly viable resource when the legacy costs begin to drop. As long as legacy costs continue to increase, the case for the Alberta oil sands as a socially positive enterprise simply does not exist.
Canada has sufficient natural gas to extract and process all of the oil sands – but is that how we want to apply this cleanest of fossil fuels? Natural gas plants have the reaction speed necessary to act as the base load for an electrical grid system transitioning to high variability renewable sources. Natural gas plants can quickly respond to fill the gaps left by the variability of solar and wind generation.
The only other fast-reacting source is hydroelectric power, and Canada does not have enough potential sites to make 100% renewable energy reliable with the current number of people we have in the country, much less a growing population.
With natural gas plants, a stable population and an aggressive drive to electrify the economy and invest in renewable energy, it will be possible to reduce our carbon footprint by as much as 85%. Do the Alberta oil sands fit anywhere into this plan? What do the facts really tell us?
Development of the oil sands has resulted in the creation of huge tailing ponds, creating damage for which there is currently no known method of 100% remediation.
The environmental impact is unthinkable. As of 2020, 5% of the Alberta oil sands have been exploited and current cleanup liabilities for the Canadian oil industry as a whole are estimated to be $60 billion to $260 billion. Against this, the Alberta and Canadian governments are holding less than $2 billion in security deposits. In short, this leaves the bulk of the problem with Canadian taxpayers.
This begs the question: will Canadians be willing to spend literally billions of dollars to clean up these sites – or will they be forever left as a toxic wasteland? The oil sands are simply not the answer for Canada and the generations yet to come.
In the above figure, the total energy content of the natural gas and oil is 1000kWh + 3325kWh or 4325kWh. The power delivered to the wheel is 838kWh for a system efficiency of 19%. The rapid electrification of the ground transportation fleet will dramatically reduce the demand for oil in developed countries.
Biophysical Economics: A Long-Term Outlook
The Alberta oil sands are essentially a boom and bust industry with a highly questionable long term future. They are simply not a suitable resource on which to build a broad-based economy and a sustainable future. Our future must be based on biophysical economics, which is to say the reality of our physical world and our demands on it.
To fully appreciate how expensive and marginal the oil sands are, please look at this graph from Rystad Research. It shows the comparative extraction costs for major oil plays. Environmental costs are not built into this chart.
Canada and Alberta need to have broad economic bases and employ biophysical economics to assure high levels of stability and resilience. If a government’s operating budget is substantially based on oil royalty revenues, the social safety net will suffer severe cuts with the whiplash effect of resource-based revenues.
Coal faces the same problem – it is an environmental pariah and market prices are highly unstable.
With the profits flowing to corporations and the long term costs being borne by the public, the Alberta oil sands are not a sustainable resource and their environmental impact will be borne for generations. We need to modernize to a process based on biophysical economics which accounts for all costs and allows only those developments which meet the bar of both long-term environmental health and public revenue viability.
If Canada became a sustainable society with a stable, broad-based economy, the oil sands would only be used to fill needs absolutely requiring gasoline or diesel fuel, and they would therefore have a productive life-span of many centuries.
If Canada hopes to achieve sustainability through biophysical economics, it will have to reject the blind pursuit of growth of the commercial economy and conserve its non-renewable resources, rebuild the health of its renewable resources and focus on investing in the health and development of its people.