Scrubbing the oil sands’ record

Canada’s bitumen giants say their crude has become less carbon-intensive than the average. How do their claims hold up?
A secondary extraction plant stands during a grand opening event for the Suncor Fort Hills oil-sands extraction site near Fort McKay, Alberta, Canada, on Monday, Sept. 10, 2018. New technologies such as driverless trucks and froth-treatments that eliminate the need for multibillion-dollar upgraders -- along with U.S. benchmark crude prices closer to $70 -- are helping make the industry profitable again. (Ben Nelms/Bloomberg/Getty Images)

This summer, with an election call in the offing and the debate over bitumen pipelines heating up anew, three of Canada’s oil sands giants ran full-page ads in newspapers across the country that made a bold—and to some minds, unlikely—claim: that some of their operations are producing oil “with a smaller greenhouse impact than the oil average.” What’s more, the ad suggested, shuttering the oil sands could result in higher carbon fuels replacing their products.

This comes, of course, after many years of environmentalists contending that oil sands are among the world’s dirtiest fuel sources, producing carbon pollution at a much higher rate—multiple times higher—than conventional oil extraction.

The response turns out to be part of the industry’s two-pronged strategy: first, to say that their detractors have cherry-picked and twisted data to make them look bad, and to use emissions numbers to make their own case to the public; second, to improve their emissions record for real.

The latter represents a massive challenge for an industry whose production entails, in essence, burning fossil fuel to create fossil fuel. But it’s one they’re tackling—not only because the public, government regulators and investors increasingly demand it, but also because efficiency is easier on the corporate bottom line: burning less fossil fuel saves money. Technological progress has brought companies leaps beyond the oil sands’ primitive days of hulking mine bucketwheels and draglines, and has driven down the sector’s per-barrel carbon emissions. The companies have improved to the point where executives are now trying to flip the script on critics’ “dirty oil” knock. On the contrary, they argue: let’s consider oil sands the low-carb option.

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Trouble is, a close look at the leading comparisons of the world’s crude oil sources, assembled by governments, academics and private-sector analysts, shows that, overall, producing a barrel of crude from oil sands still emits more greenhouse gas than the average of all sources. The best or newest oil sands developments, whose emissions are below the mean, remain exceptions. “You have a lot of amazing trees here. But it is not the forest,” says Benjamin Israel, senior analyst at the Pembina Institute, a clean energy think tank.

Industry leaders say they’ll continue to pursue ways to drive down the oil sands’ per-barrel emissions (also known as their carbon intensity) with a variety of promising innovations and huge sums invested in further research.

Still, given the challenges of creating oil out of northern Alberta’s sludge-like petroleum deposits—compared to the easy-flowing reserves in Texas or Saudi Arabia—making oil sands a cleaner option will require a sustained and lengthy effort. Some developments may never get to that point. And given that the sector’s objective is to produce more barrels of oil, even new efficiencies may not be enough to prevent its overall carbon footprint from expanding.

But it’s an industry in desperate need of demonstrable progress, and in a world increasingly concerned about the brutal toll of climate change, its future health may depend on how quickly it can turn its current boasts into fact.

The open letter by executives at oil sands giants Cenovus, MEG Energy and Canadian Natural Resources Ltd. (CNRL) was designed to shift opinion ahead of the federal election, in which debates about natural resources, pipelines and climate impact will be some of the most divisive. But the oil sands bosses routinely deliver the same messages to major investors. Before oil prices crashed five years ago, fund managers and institutional investors flocked to companies that could produce the highest volume of bitumen, with scant regard for their emissions records. Since then, global capital has become more gun-shy, scrutinizing not just a company’s balance sheet but also its environmental performance. Environmental activists have pushed a growing number of institutional investors to divest fossil fuel stocks altogether. Other players are asking questions they never used to.

Research analyst Kevin Birn, for one, has watched investor interest in carbon footprints rapidly increase. “Three years ago, I’d get a call [from investors] every six months. Last year it was once a quarter, and this year it was once a month,” says the vice-president for North American crude markets at IHS Markit. Birn is an apt guy to ask. Last year, he produced a report—oft cited by industry—which found that, sector-wide, oil sands’ carbon intensity had fallen by 21 per cent between 2009 and 2017. Future technical improvements, his study forecast, would drop levels on an intensity basis by another fifth by 2030. (Absolute emissions, it is important to note, will still rise, due to ramped up extraction, at a time when Canada has committed to substantial reduction.)

But his paper includes one table that should temper the excitement of those talking up oil sands’ carbon-competitive edge. Of the various types of oil sands extraction he forecast out to 2030, only one type—next-generation mining projects that pre-treat oil sands before upgrading—would have emissions per barrel at the same level as the average for crude from around the world. (Birn uses as his baseline 2012 numbers for oil shipped to and processed by U.S. refineries.) And they would reach the average only in a scenario where more aggressive improvements come online in the future. Traditional oil sands mining projects, which require an energy-intensive upgrading process, would remain 7.1 per cent above average in emissions intensity, while the “thermal” operations that pump steam into wells to extract bitumen would remain 2.6 per cent worse than average in this rosier scenario.

These are narrower gaps than the ones green critics tend to cite, because these gaps are based on the “life-cycle” for the oils. The metric includes emissions from the crude’s extraction to its final combustion in, say, a car engine. Seventy to 80 per cent of oil’s life-cycle carbon emissions happen when the fuel itself is burned—so while this measurement is generally a more precise gauge of a certain oil type’s overall carbon toll, it underplays the wide emissions disparities between the production of the world’s light oil and the heavier varieties common in Venezuela, Mexico and Canada’s oil sands.

It’s this measure, known as “upstream emissions,” that environmentalists cite when they charge that pollution from oil sands production is multiple times that of conventional oil. Even among oil sands operations, there is massive disparity when one looks only at extraction, minus the impacts of shipping, refining and burning. According to Birn’s study, the least carbon-intensive operations produced the equivalent of 39 kilograms of carbon dioxide per barrel, while the most intensive produced 127 kilograms—a threefold gap.

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A more comprehensive 2018 paper, published in the journal Science, compared upstream emissions estimates from 8,966 different oil fields in 90 countries. It ranked Canada’s average oil output fourth-most intensive in the world, behind only Algeria, Venezuela and Cameroon and well above the global average and rates of other major producers such as the United States, Russia, China and Saudi Arabia. Of the 34 Canadian oil sands operations measured in this study, led by Stanford University researchers, none fell below the global midpoint for emissions. Ten were double that mark; five of those were triple or higher.

Extracted bitumen is roughly the consistency of peanut butter, notes Joule Bergerson, co-author of the Science paper and professor of chemical petroleum engineering at the University of Calgary, so it naturally requires more energy than conventional crude to convert to gasoline. Oil sands generally sit in the top quartile in global oil emissions intensity, she says—though there’s a range depending on the type of operation and the quality of the deposit. “Our best is better than most in the heavy oil category,” she says. “But the worst [of our emitters are] on the high end.”

Converting thick oil sands bitumen to gasoline requires more energy than conventional crude (Ben Nelms/Bloomberg/Getty Images)

Canada’s oil lobby has long had a mission: “tell our story” to Canadians. In a recent “myth buster” post on its website, the Canadian Association of Petroleum Producers (CAPP) insists oil sands production is “cleaner than you think.” The post refers to data produced by the California government showing that numerous oil fields in that state have higher per-barrel emissions than Canadian oil sands. To ensure it is meeting its low-carbon fuel standards, California produces annual reports on intensities of all crudes that its refineries handle. And it’s true: a few aging California operations are terrible polluters. But they don’t produce as much oil as Canada’s oil sands. And, according to the state’s 2018 data for the 63 imported oil sources from 22 countries, the two products with the highest emission-intensity counts were from the oil sands. (California refineries handled dirtier crudes in past years from Brazil or Nigeria.) Other oil sands crudes ranked fourth, seventh, 10th, 13th, 14th and 20th. Only one, Suncor’s new Fort Hills mine, had emissions intensity below the weighted average of all fuels.

In a recent interview, CAPP president Tim McMillan spoke of continuous improvement since the first oil sands barrel was produced a half-century ago. “Today we’re on par with the average barrel; a decade from now we’re going to be another 20 per cent below where we are today,” he said. He conceded that he wasn’t sure which research declared oil sands to have reached parity levels. CAPP staff later pointed to Birn’s IHS study. After this reporter pointed out that the IHS study doesn’t say the oil sands sector outperforms the overall emissions average, an association spokeswoman said McMillan “misspoke.”

CNRL, which through acquisitions has become Canada’s largest oil sands producer, has driven down its emissions in various ways: making its mine more efficient, reducing the energy needed to make steam in its wells and by installing a massive, government-subsidized carbon-capture unit on its bitumen upgrader. Its corporate literature boasts that “in many cases” the carbon intensity of its crude falls below the global average, though a spokeswoman only highlighted one oil sands operation: the Kirby steam-injection project, CNRL’s sixth largest by production.

CNRL executive chairman Steve Laut argues that green-minded people should look upon oil sands crude more favourably than oil from anywhere else in the world. “Because greenhouse gas emissions will go down if you have Canadian oil—from oil sands or any source,” he told the ARC Energy Ideas podcast this summer. Laut went on to make a similar claim about Canadian natural gas, echoing arguments by industry advocates that exported Canadian liquefied gas has the potential to curb usage of higher-polluting coal power plants overseas. But environmentalists question those assertions, and the argument holds even less water when it comes to the oil sands. Reports like the Science paper and California refinery stats show that until Laut’s sector finds more substantial improvements, most world oil sources will remain better for the climate.

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Progress keeps coming, however. In September, Suncor announced it will replace its old mine’s coke-fired boiler with a cleaner-burning natural gas plant. Analysts even expect some mines to replace their hulking diesel trucks with natural gas-powered fleets—they’d no longer burn the carbon-intensive fuel the development itself produces. Meanwhile, several companies are testing systems that inject solvents into thermal wells; early results show the systems could reduce steam usage by 30 per cent, says Al Reid, executive vice-president at Cenovus, whose Foster Creek project is already one of the sector’s most efficient. “The data we have would suggest we’re competitive, and the technology we are working on and are already applying suggests that we’re going to surpass that,” he says of the race to cut emissions.

The challenge is sustaining that progress. Emissions intensity at Cenovus, while down by more than one-quarter since 2004, has changed little in the last five years. The quality of some future oil sands deposits will also challenge the industry; Environment Canada expects Teck Resources’ newly approved oil project will be more carbon-intensive than current mines, despite using new-generation technology.

Israel, the Pembina Institute analyst, agrees the sector has made progress on emissions. “We have definitely come a long way. The oil sands is a story about innovation, and they keep innovating,” he says. But it’s coming too slowly for a world that needs to decarbonize, he adds. “We don’t have time anymore for incremental improvements. We need breakthrough improvements if we want to stay competitive in a low-carbon world.”

With global oil supply abundant and electric vehicles on the rise, forecasters wonder when peak demand will hit—and some suggest it will come as soon as the next decade. Oil that can be produced cheaply with low emissions could then become more highly sought after, and the oil sands have long struggled on both those scores.

It’s not completely fair to compare oil sands crude to the conventional stuff, because some refineries look for heavier oils that are easier to make into products such as diesel (as opposed to lighter gasoline), Birn says. “Your competition isn’t everything, so it is a bit of an apples and tomatoes question,” he says. But the companies don’t see it that way; they’re aware the public and some investors don’t, either. When it comes to carbon footprints, says Reid, “I think we’re competing with every other barrel of oil in the world.”

So, in the race to tell a better story, oil sands advocates—including the ones elected to political office—will reach for the best-sounding proclamations they can extract from the sludge of data. “We should celebrate the fact and share with the world that Alberta heavy oil now has a lower carbon footprint than the average barrel of heavy oil around the world, and soon with this technology we will be catching up with the average barrel of oil generally in terms of carbon intensity,” Alberta Premier Jason Kenney said in September at a conference in Fort McMurray. (His government is launching a $30-million war room to help the energy sector fight misinformation.)

The “soon” in the second part of that sentence is a vague and relative term, of course. As for the boast in the first part, the data the premier’s officials shared with Maclean’s when asked for an explanation did not actually justify his statement.

This article appears in print in the November 2019 issue of Maclean’s magazine with the headline, “Scrubbing up the oil sands.” Subscribe to the monthly print magazine here.