Special Report: COMMENT: N. American strategy should link energy, climate concerns

July 12, 2009
Energy and climate change are important topics. And because energy production and use are sources of greenhouse gas (GHG) emissions, the two are linked.

Energy and climate change are important topics. And because energy production and use are sources of greenhouse gas (GHG) emissions, the two are linked.

Many activists and some policy-makers embrace an approach requiring ultimate elimination of the use of all fossil fuels. They support their replacement with renewable alternatives such as hydrogen, electricity, and biofuels.

Others believe these alternatives are merely wishful thinking. They see the alternatives as having promise for the future but nowhere near the technological readiness or affordable availability that would allow them to compete with conventional fuels in the marketplace.

As is often the case, reality lies somewhere between these extremes and encompasses both energy sources and worldwide energy demand. North America’s oil sands reserves are squarely in the middle of the debate.

Global energy demand is increasing rapidly and shows no signs of declining. That is actually a good sign, as energy fuels economic growth. The exploding growth of emerging economies such as China and India and the desire of their citizens for the quality of life long taken for granted by Western nations guarantee more energy use, not less.

A study last month by Cambridge Energy Research Associates (CERA), Growth in the Canadian Oil Sands: Finding the New Balance, projects that by 2035 global oil demand will reach upwards of 97 million b/d in its lowest growth scenario. In 2008 the total was 85 million b/d.

“Even in a world of relatively slow demand growth, new supplies of oil will be needed, especially to meet demand for greater mobility among those entering middle income levels around the world and to offset declining production in existing oil fields,” the CERA study says.

“Alternative forms of energy, such as biofuels, wind, and solar power, will play a growing role in satisfying higher demand, but so will fossil fuels, including oil,” adds the report. “Indeed, all forms of energy–as well as greater efficiency–will be needed to deliver and support higher living standards around the world.”

In the US, where energy demand is growing more slowly, the Energy Information Administration estimates usage will still be 11% more in 2030 than in 2007.

In any growth scenario, in North America and around the world, we’re going to need all the energy resources we can get. And while new sustainable and renewable fuels will play an increasingly important role, experts agree that fossil fuels will constitute the majority of our energy supply portfolio long into the foreseeable future. We need to develop potential new energy sources and intelligently use the ones we already have. This includes conventional and unconventional oil and gas, coal, and nuclear, plus renewable sources.

Oil sands story

The story of the oil sands is a story about people and communities. When industry talks about the economic benefits of the oil sands, it does so at the risk of being accused of downplaying the importance of environmental issues. But, clearly, Canadians and Americans expect oil sands development to occur responsibly, and the oil sands industry is focused on meeting those expectations without sacrificing jobs, economic benefits, or strategic energy supply advantages.

The CERA report also highlights the direct link between economic growth and the need for continuous improvement in environmental performance. Can higher environmental standards be achieved? The record shows that the industry has a strong track record, including a 38% reduction in greenhouse gas emission intensity since 1990, 80–95% recycle rate on process water, use of undrinkable water from deep salty aquifers for new oil sands projects, ongoing reclamation of project sites, as well as a suite of emerging technologies that promise to further reduce energy input requirements and subsequent emissions as well as improve water management.

It’s also worth noting that Alberta was the first jurisdiction in North America to implement a carbon pricing system ($15/tonne of CO2 levy into a technology fund), and it has created a market for offsets. In addition, Alberta last year established a $2 billion fund to stimulate early development of carbon capture and sequestration projects.

The stakes are high for both the US and Canada. Numerous reports, including CERA’s recent report, point to the potential for significant growth in Canada’s share of US oil imports. But the study also notes that “a key challenge for continued cooperation is the development of a common framework for regulating greenhouse gas emissions.”

“We need to develop potential new energy sources and intelligently use the ones we already have.”

David Collyer, president Canadian Association of Petroleum Producers

Catherine Reheis-Boyd executive vice-president and chief operating officer, Western States Petroleum Association

“We need to develop potential new energy sources and intelligently use the ones we already have.”<
David Collyer, president Canadian Association of Petroleum Producers Catherine Reheis-Boyd executive vice-president and chief operating officer, Western States Petroleum Association

Greenhouse gas emissions from oil sands have become a favorite target for critics, but considered in context, oil sands produce 5% of Canada’s total greenhouse gas emissions, or 0.1% of the world’s total emissions. And recent studies indicate that oil sands crudes are comparable in GHG emissions per barrel on a full life-cycle basis to average crude oils in the US.

Canada can provide the US with a blend of both conventional oils—currently about half of the nation’s production—and oil sands that is similar to the basket of imported oil from other nations. Oil sands would no longer incorrectly be categorized as exceptional in terms of GHG emissions. Meanwhile, according to CERA, “the ‘average’ conventional barrel imported into the United States may become heavier over time as high-quality light crude becomes scarcer.”

Developing strategy

That is not an argument for the status quo. On the contrary, the link between understanding GHGs, improved environmental performance, and energy security is critical to developing a strategy that meets increased demand and economic growth while responsibly increasing the overall energy supply mix.

Canada has enormous reserves of crude oil in oil sands—an estimated 173 billion bbl—second only to Saudi Arabia. Currently, Canada’s oil sands produce more than 1 million b/d, with production expected to grow by about 3 million b/d by 2020.

It’s only logical that the US and Canada explore the energy opportunities inherent in oil sands development. The countries are friendly neighbors that enjoy mutually beneficial trade relations and a common commitment to the environment.

Even with heightened awareness of and a commitment to reducing greenhouse gas emissions, the world is moving toward more, not less, energy use. While it’s important that we diversify our energy portfolio with the introduction of new, less carbon-intensive fuels, we also need to use those we already have.

This should and can be done in an environmentally sensitive manner while providing the energy necessary to keep the modern world running. Oil sands are an important part of the equation that will allow a smooth journey to the energy world of the future while adequately fulfilling our needs on the way there. Their inclusion in our energy supply strategy is critical.

The US and Canada share the largest energy trading relationship in the world. Canada is currently the largest supplier of energy to the US, including 18% of American petroleum imports and 82% of American natural gas imports. It is in the best interest of both countries to ensure the energy trading relationship remains intact and vital.