The Midwest is the Leading Edge on Oil Sands

Can we reconcile our climate change and energy security goals with respect to oil sands? The Midwest is on the leading edge of U.S. attempts to answer this question.  The region is especially dependent on oil sands imports and is seeking solutions to this resource’s climate change challenges. 79% of Midwest petroleum imports come from Canada (see figure 1), and 22% of those imports come from oil sands, which are naturally occurring mixtures of sand, water and a form of petroleum called bitumen. Canada has at least 85% of the world’s reserves of natural bitumen and is the largest foreign supplier of oil to the United States (ahead of Saudi Arabia, Mexico and Venezuela). More than 60% of oil from the Province of Alberta is exported to the U.S., and well over half of the province’s oil production comes from oil sands.  Albertan oil sands currently produce 1.3 million barrels per day (bbl/d) of crude oil equivalent, more than the state of Texas produces daily (1.09 million bbl/d). 

It is clear that Canadian oil, and specifically oil from the Albertan oil sands, will be a critical source of liquid fuel supply into the future.  How can the Midwestern states balance their competing goals of reducing greenhouse gas emissions with ensuring a secure, cost-effective source of fuel?

fig1

Source: EIA http://tonto.eia.doe.gov/dnav/pet/pet_move_impcp_a2_r20_ep00_ip0_mbbl_a.htm

The Midwest Governor’s Association (MGA) is beginning the process of answering that question.  MGA’s Low Carbon Fuel Standard (LCFS) Advisory Group is tasked with providing a set of recommendations on how to craft an LCFS policy.  An LCFS is a standard for the greenhouse gas (GHG) content of the transportation fuel mix that declines over time, and allows producers to determine how to go about meeting the standard in the most cost-effective way.  The Advisory Group’s first meeting included a tour of three oil sands facilities in the boreal forest northeast of Edmonton in northern Alberta.   The appointees and advisors (including this blogger) were able to see, firsthand, the technology used and the many issues associated with this massive resource.  Finding the right policy and technology tools to balance competing climate and energy security objectives in the Midwest is emerging as the most important challenge for the Advisory Group to tackle.  

There are two major technologies for extracting oil sands from the ground.  Most crude bitumen has historically been produced from surface mining and extraction.  This is the image most people associate with oil sands production (see photos below).  More than 80 percent of remaining established reserves are estimated to be recoverable from newer in situ techniques, whereby bitumen is extracted from the sand in the reservoir by injecting steam into the formation to heat the bitumen, which is then pumped to the surface.  Bitumen from either process is then upgraded into synthetic crude oil (SCO). These production and upgrading processes are energy (and carbon) intensive.

surface mine
tailings pond
Surface mine (above) and a tailings (waste) pond in Fort McMurray, Alberta.

Estimates of just how GHG-intensive oil sands production is vary due to different approaches to life-cycle emissions accounting.  The majority of lifecycle emissions (60-85%) come from combustion of the final product (liquid transportation fuels), which is the same no matter what the original source is.  However, when measured on a well-to-wheels basis (which includes the extraction, processing, distribution, and combustion of the refined products), total GHG emissions from oil sands are approximately 5 to 15 percent higher than the average crude oil consumed in the U.S.  This difference arises from the energy-intensive production and upgrading processes.  As a result, in a policy scenario that favors fuels with lower lifecycle carbon emissions, Albertan oil sands are likely to feel the pinch. 

There are several possible solutions to this emerging dilemma.  Opportunities exist to improve efficiency and reduce the total amount of fuel input required in both types of mining and in upgrading. It is also possible to switch to lower carbon fuel sources, such as biodiesel or bioethanol, for oil sands operations.  Generating the most interest, however, is the potential application of carbon capture and storage (CCS) technologies at various stages of the production process.  CCS, or a combination of these three options, has the potential to make oil sands no more carbon intensive than an average crude.  The LCFS Advisory Group is well positioned to encourage the adoption of these solutions at oil sands facilities and move us toward reconciliation of our energy security and climate goals.

Jessica Shipley is a Solutions Fellow