Sunday, February 10, 2013

A Tar Sands Compromise, One They'll Have to Refuse

Today's bitumen trafficking contemplated by Enbridge, Redford and Harper is beset by indefensible problems.   The proponents are making it far worse than it needs to be.

A huge part of their problem is dilbit, the stuff that still lines the riverbed of the Kalamazoo River in Michigan.  It's truly noxious stuff.   Just to be able to be pumped through a pipeline, Alberta bitumen must be diluted.   It's mixed with dilutents to become what's commonly known as dilbit, diluted bitumen.   This dilbit is then pumped across Canada's borders for export to world markets.

What happens to dilbit once it reaches Asia or Texas?   The dilutents are refined out.   Then the crud is refined out of the bitumen to leave a functional, synthetic petroleum that can be further refined into conventional fuels such as gasoline, jet fuel, etc.

The really nasty nature of dilbit is that, when it is spilled, it creates a hell of a mess.  It's laced with heavy metals, acids and carcinogens.  If spilled on land, the soil usually has to be dug out.   If spilled  in waterways, like the Kalamazoo River, the dilutent separates out, rises to the surface, vaporizes into a toxic cloud, while the remainder, the bitumen, sinks to the bottom and contaminates the river bed or lake bed or seabed.

Regular oil tends to float or so we believed before the Deepwater Horizon spill in the Gulf of Mexico.   But a good deal of it does float and can even be broken up and dispersed by wave action.

So, why do Enbridge, Redford and Harper insist on trafficking in dilbit at all?   Why not do the upgrading/refining in Alberta and export, instead, synthetic crude oil - the stuff that floats?  

That's right.   Build the infrastructure, hire Canadians, and refine the bitumen into its safest form right on site in Alberta.   More economic activity for Alberta, more revenue, a product that they don't have to desperately shop around the globe.  No need to import costly dilutents into Alberta, far less volume to pump out.  That also translates into fewer tankers needed to ply British Columbia's coastal waters carrying far less hazardous cargo.   That sounds like win, win, win, win.

So what's wrong with that idea?   Plenty.   That would mean having to reveal that Athabasca bitumen is a major, sub-prime asset that, in refined form, can't compete on world markets.   That would invite scrutiny of the Athabasca Con game.

Exposed, the marketable price of Athabasca synthetic crude, would invite sober scrutiny of other aspects of the venture - the subsidies, tax deferrals, and minimal royalties; the true viability (or myth) of carbon capture and sequestration; the massive energy and water consumption for extraction and upgrading;  postponed costs of environmental remediation; environmental impacts, current and future including the tailing ponds; the havoc of inevitable "boom and bust" cycles resulting from having to market the world's most expensive petroleum; the corruption of governments, federal and provincial; perhaps even the contribution to climate change and the sullying of Canada's reputation.

And that's why this simple compromise would be a non-starter for Enbridge, the Calgary Petroleum Club, the Athabasca operators, Redford and Harper.   They haven't cloaked this venture in so many blatant lies so that they can be smoked out into the light of day.

Yet it's a good and reasonable policy alternative for the Liberals or New Democrats.  Be a good neighbour to British Columbia, only ship the clean stuff, not that rank bitumen or dilbit.   Keep those refining jobs in Alberta.   Keep that refining infrastructure and income in Canada.  Cut down on dangerous and unnecessary tanker traffic.  It sells itself.   What could be more reasonable?

Force Harper and Redford and Enbridge to say that it's such a lousy, high-carbon product that it's not viable if we have to refine it here before export.   Force them to show that Athabasca bitumen is a sub-prime asset.   Make them show how reckless and short-sighted their bitumen obsession has made them.


Where's Waldo said...

Connect the dots...

1 - The capital cost of a refinery is huge and the refineries are designed to handle very specific types of crude feedstocks.
2 - Several of the refineries along the Gulf coast are designed to handle crude imported from Venezuela.
3 - The US has a long standing problem with Venezuela.
4 - Alberta Bitumen is comparable to Venezuelan crude.

The Mound of Sound said...

Nice try, but irrelevant. This is about the argument over transporting dilbit through coastal BC. Curious you missed that.

Anonymous said...

When it comes to lies, manipulation, hiding facts, subterfuge, propaganda and regular spinning, there are few entities who can compare with the Oil industry. Partnered with their political friends, I doubt there is more than a handful of groups that could compete.

It's difficult to articulate in a few words, but the North American market is likely one of, if not the worst when it comes to the industry being elusive, secretive and hard to keep up with. Besides the opposing factions that get semi regular media exposure, i.e. oil Corps, pipeline Companies vs. environmentalists etc., there is a great deal of competitive maneuvering and throat cutting between the Companies themselves and their political arms. The means they employ and the effects of which are largely kept from the public.

Regarding Canada's bitumen, there are competing interests in the US and some want it to flow quicker, some want it slowed down and some are positioning themselves to continue to profit either way, but not necessarily all at once. Depends on where they are invested and in what.

The economics of bitumen for these industry players remains constant though, they must get it cheap for the time being or it's not worth the associated costs. Once the much touted US shale oil plays have peaked, then things will likely swing back to a much higher focus on bitumen supply.

Have read some interesting reports from oil and gas geologists who focus on things like depletion rates of shale wells compared to conventional, 38 to 42% per yr. for shale, 4 to 5% for conventional. Also discussed is the high cost of exploration, product produced, high numbers of dud wells etc and other reports focused on hugely downgraded estimates in the shale gas fields and some for the shale oil fields as well.

Other competing industry players fear demand for US light crude softening greatly, at least in the short term, and in proportion to the amount of bitumen flowing from Canada. Those heavily invested in light crude exploration, extraction etc. are not at all keen to see XL flowing at full capacity anytime soon.

Some discussion on that here;

Where's Waldo said...

My bad - I missed my last point with the dots...

#5 - In my opinion, only one pipeline will be built and the US needs will trump the other projects under discussion.

The Mound of Sound said...

@ anon. There have been recent suggestions that Wall Street has been gaming shale oil futures as 30-year assets that are turning out to be capable of viable yields for just 7 or 8-years. It seems the shale miracle may be somewhat hyped.

Thanks for your insights.

@Waldo. Point taken. Thanks