Tar-Sands Oil Pollutes Less Than Thought, Report Says

July 23, 2009 | By Jim Efstathiou Jr., Bloomberg | read source

July 23 (Bloomberg) -- Tar-sands oil from Canada, the biggest supplier to the U.S., is cleaner than previously calculated, according to an Alberta government report that may benefit producers Nexen Inc. and Royal Dutch Shell Plc.

Carbon-dioxide emissions from producing oil in western Canadian sand deposits are about 10 percent higher than competing U.S. crude imports, the Alberta Energy Research Institute said in the report. Earlier studies found greenhouse gases from oil sands were as much as 40 percent more. The study was received with skepticism by environmental groups.

Nexen and Shell are among oil companies facing possible import barriers into the U.S., their biggest market, under new environmental rules being considered in Congress to limit emissions from gasoline and other transportation fuels. Canada sells about 60 percent of its tar-sands oil to U.S. refineries.

“This is a critical issue for the future of oil sands,” Dan Yergin, chairman of Cambridge Energy Research Associates and author of a Pulitzer Prize-winning book on the history of oil, said in an interview. “What is the overall net impact on CO2 compared to other oils?”

The new research will help establish standards to grade the global-warming impact of transportation fuels, said Eddy Isaacs, executive director of the Alberta institute.

“We want our crudes to be treated fairly,” Isaacs said in an interview. “We did this study more than anything else to make sure that we understood and could benchmark oil-sands crude against other crudes in North America” imported from competitors such as Saudi Arabia or Mexico.

Water Injection Measured

The Alberta institute report, to be released later today to the public, uses new models to calculate carbon emissions from oil produced in nations such as Saudi Arabia and Venezuela where operational information may not be available, Isaacs said. The energy used in injecting water into wells to coax out more oil, for example, is included in the new calculation.

Alberta oil is separated from sand and clay with intense heat in a process that releases more greenhouse gases than pumping conventional crude. Environmental rules proposed in California and under debate in Washington target carbon emissions from fuels before they are burned in a car or truck.

“My understanding is that the energy requirements of producing a barrel of oil from tar sands is two to three times higher than oil from sources like Saudi Arabia,” Bill Grant, associate executive director of the Izaac Walton League of America, a conservation group, said in an interview. “I would agree let’s be fair about it, but I’m skeptical that the gap closes as much as they’re claiming.”

California Initiative

California wants to reduce greenhouse gases from transportation fuels by 10 percent by 2020. The state would count the total “life-cycle” of emissions released, all the way from extracting oil to filling a car’s tank, toward the new target. A similar rule was removed from a House of Representatives bill to fight global warming before the measure was approved in June.

Today’s report is misleading because it compares the cleanest oil sands operations to some of the dirtiest conventional crude production, said Simon Mui, a scientist with the New York-based Natural Resources Defense Council, an environmental group. Mui, who is based in San Francisco, has reviewed data that went into the report.

“The oil tar sands industry has been trying to basically say ‘Hey, you don’t have to regulate us be we’re not different than conventional crude,’” Mui said in an interview. “I would take that report with a grain of salt given that the Alberta Energy Research Institute’s job is to promote tar sands.”

‘Complex’ Business

The Alberta institute, whose board includes Charles Fischer, former chief executive of Nexen, hired Pasadena, California-based Jacobs Engineering Group and Cambridge, Massachusetts-based TIAX LLC to prepare the report. No industry money was used to fund the report, Isaacs said.

Because the business is so complex, “we’ll get numbers all over the place,” Isaacs said. “We felt this could inform not only California but other policy makers.”

The U.S. imported about 780,000 barrels a day of tar-sands oil in 2008, according to the Canadian Association of Petroleum Producers. Calgary-based Nexen, owner of the C$6.1 billion ($5.6 billion) Long Lake oil-sands project in Alberta, together with Shell, Europe’s largest oil company, and other producers have planned to ship about 3.3 million barrels a day by 2020.