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April 12th, 2012

Canadian Tar Sands Oil Flowing South

by Andrew Price, President & COO

An enormous reservoir of oil sits just to our north in Alberta Canada. The Canadian tar sands hold almost 200 billion barrels of oil by some estimates, giving Canada the world’s third largest oil reserves behind Venezuela, and Saudi Arabia. Much has been written recently about efforts to bring tar sands oil to the US via Transcanada Corporation’s new Keystone XL pipeline. While the Keystone XL pipeline has been delayed, at least in part, for political reasons, other pipelines are quietly jumping in to meet the growing demand. Most recently the 236-mile Portland Maine to Montreal Canada pipeline has been connected with the Canadian tar sands.

Montreal Pipe Line Ltd and its subsidiary Portland Pipe Line Corp., own a pipeline which currently pumps crude oil from Portland Maine to refineries in Montreal. The line has moved more than four billion barrels of oil since 1941 and has made Portland one of the largest ports (by value of product received) on the eastern seaboard. The pipeline - partly owned by Suncor Energy, a large player in the Canadian oil sands – has reportedly explored reversing direction to move Canadian tar sands oil to Portland where it could be moved by ship to US or overseas refineries.

Other companies looking to compete with Keystone XL include Enterprise Products Partners LP and Enbridge Inc. who would combine to bring oil sands by pipe through existing oil hubs in Flanagan Illinois and Cushing Oklahoma and finally to refineries and ports along the Gulf Coast of Texas. The Enterprise / Enbridge venture could bypass the US State Department review that has delayed Keystone XL by virtue of having an existing cross boarder connection.

Depending on who you talk to, tar sands will either hasten the end of the world or be a resource that helps to bring economic prosperity and stability to the US. There is little doubt that the process for extracting tar sands can be very damaging to the local environment. The predominate method of extracting oil from tar sands has, to date, been strip mining. Large amounts of water and fuel (mostly natural gas) are needed to extract the oil from the sand. Once the oil has been removed the residue is pumped into large and horribly un-photogenic tailing ponds to settle. By most estimates, the process of making fuel from tar sands emits much more greenhouse gas as compared to using “conventional” crude.

 On the other hand, it can be hard to account for the costs – both economic and environmental – associated with the extraction of “conventional” crude. These costs include: US taxpayer funding of military forces to protect oil deposits and shipping lanes around the world; decades of war in Iraq; environmental disasters in places like Nigeria that US consumers pay little attention to; and economic support for repressive regimes in the Mid-East and Africa. Companies operating in the tar sands are also exploring new extraction and processing methods that have moderately lower impacts. These new methods my help improve the public image of tar sands oil but may  also give access to ever deeper deposits that are too far below the surface to strip mine. 

One thing seems certain, at current prices for crude oil, extracting oil from tar sands is very profitable, and production in Canada will continue to ramp up rapidly. Those seeking to halt this flow by going after the pipelines, may find that as soon as they stick one finger in the proverbial dike, three more gushers appear.

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