Economic engine or environmental hazard?

The oilsands in Alberta have had some high-profile visitors recently, with Microsoft co-founder Bill Gates and American investment sage Warren Buffett journeying north to look at the highly touted developments.

But it was NDP Leader Jack Layton's election fly-by, with campaign media in tow, that highlighted the issue of development in the area and the future and current implications on the environment.

As the campaign developed, Layton continued his oilsands crusade, employing the leaders' debates to take shots at Conservative Leader Stephen Harper, alleging that his political foe would give tax breaks to corporations and oil companies in particular.

The attacks shone a light on the oilsands — the pride of Alberta and the engine of Western Canada's economic growth — and were meant to underscore the gulf between the environmental approach of the political parties.

The NDP wants a moratorium on further oilsands development, the Liberals want to tax each tonne of emissions and the Tories want a more modest 20 per cent reduction in the intensity of greenhouse gas emissions by 2020, using 2006 as a starting point.

No walking away

These are not abstract points. The outcome on election day Oct. 14 will affect tens of thousands of Western Canadians who are employed directly or indirectly by the large oilsands conglomerates that are making $18 billion in capital investments in 2008 alone.

The political unknown is now coupled with falling oil prices and the current worldwide economic uncertainty (with the accompanying tightening of lending), prompting the trillion-dollar question: will the oilsands be what they are projected to be?

One thing is clear, despite the recent economic uncertainty and capital cost rising, the sticky bitumen in the ground will likely be extracted at some point. Profit margins may dip in uncertain times but the current price of oil is not anywhere near the "let's walk away from the oilsands" stage.

In a 2006 report, the National Energy Board indicated a 10 per cent rate of return for the industry (in 2005 dollars) based on oil being at $50 a barrel and the Canadian dollar at 85 cents versus the American dollar. Right now, the Canadian dollar sits at slightly more than 90 cents and oil is hovering at the $90-a-barrel level.

That is an awful lot of profit, particularly when you consider there is an estimated 173 billion barrels of oil — perhaps as much as 100 years of production of bitumen — in the deposits. Hence the visit of visionaries Gates and Buffett.

The investment

The political stakes are high, too. According to the Alberta government, the oilsands account "for more than two-thirds of investment in the province," and the proposed $100 billion worth of oilsands investment by the oil companies "generates approximately $1 trillion worth of economic activity."

According to the Alberta government:

• "There are 87 active oilsands projects in Alberta. Of these, three are mining projects; the remaining projects use various in-situ [in place] recovery methods."
• "In 2006, Alberta exported about 1.35 million barrels per day of crude oil to the U.S., supplying 13 per cent of their crude oil import and accounting for almost three-quarters of Canada's oil exports to the U.S."
• "Oilsands make up about five per cent of Canada's overall greenhouse gas emissions and less than one-tenth of one per cent of the world's emissions."
• "Oilsands projects have reduced their carbon dioxide emissions intensity by up to 45 per cent since 1990 and are working towards further reductions."

The environmental issues

On a website called "Canada's oilsands, a different conversation," Rick George, CEO of Suncor (one of the biggest developers), captures quite nicely the essence of the debate over the oilsands.

"Most of the discussion that has occurred about the oilsands to date (on this website and elsewhere) results in people 'taking sides.' You're either for oil sands development — because our economy relies heavily on crude oil production. Or you're against it — because of the environmental impacts that result.

"I know it sounds funny coming from an oilsands CEO, but I'm not a supporter of either side. That's because I believe we can do both … produce the crude oil our economy needs (and consumers demand) while also taking action to reduce our environmental footprint."

That last statement by George reaches the heart of the argument: is there an economic-environmental balance?

He later answers his own question.

"If you don't believe an oilsands company CEO can make environmental spending a priority, believe this: going green simply makes good business sense," George wrote. "Every time our industry reduces water use or air emissions, or limits the amount of land we disturb, we save money. Moreover, many of the technologies we develop, such as mobile mining or ethanol production, create new business opportunities for us."

The Alberta government itself has recognized that emissions from the oilsands and from coal-fired plants are an issue and has created a $2-billion fund to kick-start carbon capture and storage projects.

The fund "will support [carbon capture and storage] projects that are expected to reduce emissions by up to five million tonnes annually," according to a release on the Alberta government website. "That is the equivalent of taking a million vehicles off the road, or one-third of all vehicles registered in Alberta."

All is not rosy, however, on the environmental front.

There has been ongoing contentious debate and study on what the health effects of the oilsands will be on local populations.

In August, three groups on an advisory body on the oilsand, the Pembina Institute, Toxics Watch Society of Alberta and the Fort McMurray Environmental Society, decided to quit the group.

They said it was not effective and government was not paying attention. The Cumulative Environmental Management Association had called on the province to protect up to 40 per cent of the land in the oilsands region around Fort McMurray from development and it recommended the government freeze oilsands leases until 2011, so the impact of development could be assessed.

The province did not move on either issue.

The amount of water needed for oilsands production is huge and the energy required to run the processes has raised fears of environmentalists that "clean" natural gas will be used to drive an industry they say pumps too much pollution into the atmosphere and ruins the land where the work takes place and puts the health of nearby residents at risk.

Recent concerns have surfaced in a report from the University of Toronto that even the Great Lakes will be affected as the bitumen is processed at expanded refineries in the area.

Total emissions to rise

In its 2006 report on the oilsands, the National Energy Board recognized the value of carbon capture and storage and discussed concerns associated with the extraction of the resource, pointing out that "although significant progress has been made toward decreasing the intensity of GHG emissions produced by oil sands operators, additional production offsets these gains and total emissions are expected to rise."

Makes sense, as production expands, so do emissions.

'The accumulation of changes to the air, land and water, which results from oil sands development, is a major area of concern.' — 2006 National Energy Board report

The energy board acknowledges other issues as well. Because of the increasing need for water in oilsands production, for example, the sustainability of the Athabasca River could be impacted, and the socio-economic impact on area residents must be a factor.

It summarizes the oilsands development issue this way: "The accumulation of changes to the air, land and water, which results from oil sands development, is a major area of concern.

"Environmental groups contend that there is currently inadequate scientific information to understand how the ecosystem will react to the impacts of development and that stricter environmental performance targets are needed. Industry continues to look at technological innovation that could be used to reduce environmental impacts."

Yes, innovation will help, but so will knowing what rules the industry will be operating under.

Which political plan will best address the delicate and important balance of socio-economic, environmental and economic issues? That's the issue that faces Canadian voters on Oct. 14.