in scale, and made more flexible. Fixed conveyer belts were replaced with huge trucks with the biggest tires in the world, and with giant shovels that gather up oil sands and carry them to upgraders that separate out the bitumen. Refining processes then upgrade the bitumen into higher-quality synthetic crude oil, akin to light, sweet crude oil, which can be processed in a conventional refinery into gasoline, diesel, jet fuel, and all the other normal products.
At the same time, a breakthrough introduced an alternative way of producing oil sands—not with mining but rather in situ (Latin for “in place”); that is, with the crucial link in the production chain done in place—underground. This was very significant for many reasons, including the fact that 80 percent of the oil sands resource is too deep for surface mining.
The in situ process uses natural gas to create superhot steam that is injected to heat the bitumen underground. The resulting liquid—a combination of bitumen and hot water—is fluid enough to flow into a well and to the surface. The best-known process is SAGD—for steam-assisted gravity drainage, and pronounced as “sag-dee.” It has been described as “the single most important development in oil sands technology” in a half century.21
Altogether, since 1997, over $120 billion of investment has flowed into Alberta’s oil sands, now defined as a “mega-resource.” Oil sands production more than doubled from 600,000 barrels per day in 2000 to almost 1.5 million barrels per day in 2010. By 2020 it could double again to 3 mbd—an output that would be higher than the current oil production of either Venezuela or Kuwait. Adding in its conventional output, Canada could reach almost 4 mbd by 2020.
Yet the development of oil sands brings its own challenges. The projects are large industrial developments in relatively remote areas. In terms of new oil development, they are among the highest in cost, especially when competition heats up for both labor and equipment. The offsetting factor is that there is no exploration risk, the resource does not deplete in the way that a conventional oil well does, and the projects will have a very long life.
One environmental challenge arises from the local impacts of mining development, which are visually dramatic. But they are also limited. To date, the entire footprint from mining oil sands is an area that adds up to about 230 square miles of land in a province of Alberta that is about the size of Texas. When part of a surface mine is exhausted, the operators are required to restore the land to its original condition. Mining wastes, a sort of yogurtlike sludge, are deposited in tailing ponds. These toxic ponds, like the rest of the industry, are regulated by the province. Recently the regulatory authorities have required new processes to further reduce the impact of these pools. Altogether the tailing ponds cover an area equivalent to about 66 square miles.22
The other significant environmental issue is definitely not local and is also the most controversial. This is greenhouse gas emissions, in particular carbon dioxide (CO2), associated with the in situ production process. These emissions are higher than the emissions released from the production of the average barrel of oil because of the heat that must be generated underground to get the bitumen to flow.
How much greater is the impact compared with conventional oil? The best way to assess the impact is from a “well to wheels” analysis. That measures the total CO2 emitted along the entire chain, from the initial production to what is burned in the auto engine and comes out the tailpipe. A range of studies finds that a barrel of oil sands adds about 5 to 15 percent more CO2 to the atmosphere than an average barrel of oil used in the United States. The reason the difference is so small is that, by far, most of the CO2 is produced by the combustion in an auto engine and comes out of the tailpipe.23
The technologies for producing oil sands continue to evolve, and increasing ingenuity is being applied to shrinking the environmental footprint and reducing the CO2 emissions in the production process. As the industry grows in scale, it will require wider collaboration on the R&D challenges not only among companies and the province of Alberta but also with Canada’s federal government.
Yet the very scale of the resource, and its reliability, puts a premium on its continued evolution of this particular industry. Oil sands are, after all, an enormous resource. For the 175 billion