Tuesday, March 13, 2018

Capturing a Cacophony of Voices

My  2017 book, Bitumen: The people, performance and passions behind Alberta's oil sands, is The Petroleum History Society's book of the year. I'm quite honoured. Here is an intro to the oil sands, based mostly on information from the first chapter of that book.

By Peter McKenzie-Brown

Hudson’s Bay Company explorer James Knight made a seminal observation in his diary on June 27, 1715. On an expedition into today’s Alberta, he wrote that he had learned from Cree “Home Guard” Indigenous people, local trappers and factory provisioners 
abt the Great River it runs into the Sea on the Back of this Country & they tells us there is a Certain Gum or pitch that runs down the river in Such abundance that they cannot land but at certain places & that it is very broad and flows as much water.
In English, at least, this is the first written reference to the Alberta oil sands which, in terms of bitumen in place, rank among the world’s largest petroleum deposits.

But these vast resources were little more than a scientific oddity until after Confederation, when the development of oil and natural gas virtually created a second industrial revolution – one more far-reaching by orders of magnitude t han the century-long event that began in Britain with its development of the coal-fired steam engine in the mid-1700s.

There are two main reasons for this. The first is that liquid hydrocarbons fuelled a revolution in the technologies used for transportation and manufacturing. One result was a sharp rise in standards of living within the countries fortunate enough to own the resources and develop infrastructure to exploit them. In many regions, notably Western Canada, governments were the primary owners of these resources, and the resources themselves are vast. Thus, their development requires close cooperation among government, industry and the scientific communities.

Within this context, a cacophony of information about the oil sands has come out in traditional form, and the numbers are growing. Four oil sands books came out in the late 1970s and 1980s – to a large degree as a celebration of the anticipated start-up of the giant Syncrude plant.

Earle Gray first released one of those volumes – The Great Canadian Oil Patch: The Petroleum Era from Birth to Peak – in 1970, and a thoroughly revised edition 34 years later. Each version was a comprehensive look at Canada’s petroleum sector at time of publication.

In 1993, David Breen released his magisterial study of Alberta’s petroleum industry and its regulator. A decade later, Paul Chastko’s Developing Alberta’s Oil Sands: from Karl Clark to Kyoto came out; it covers the period 1920-1997. A third volume is Joyce Hunt’s massive, Local Push Global Pull: The Untold History of the Athabaska Oil Sands. It primarily covers the first three decades of the 20th century.

In 2009, Satya Das – an engineer with an oil sands background – published a book called Green Oil: Clean Energy for the 21st Century? In that tome he argues that the oil sands can be developed as a green commodity. Other recent contributions include The Future of Oil: A Straight Story of the Canadian Oil Sands by Sanjay Patel, another petroleum engineer; Alistair Sweeney‘s Black Bonanza; and Ethical Oil: The Case for Canada’s Oil Sands by right-wing commentator Ezra Levant.

A recent development has been the publication of popular books focused on global warming, and zeroing in on oil sands development as a threat to humanity. One such came from the pen of a prolific Montréal-based writer, William Marsden. It’s title? Stupid to the Last Drop: How Alberta is bringing environmental Armageddon to Canada (and doesn’t seem to care). Not to be outdone, Andrew Nikiforuk released Tar Sands: Dirty oil and the future of a continent in the same year, 2010.

Before continuing this story, it is worth putting the Marsden and Nikiforuk books in perspective. A 2012 report compares greenhouse gas emissions from the 36 sources of oil used in the United States. According to economist Jackie Forrest, if you factor extraction, processing, transportation and consumption as fuel into the equation – that is, if you use the “well-to-wheels” approach in making GHG calculations – emissions from oil sands are in 14th place on the table. If you add Canadian well-to-wheels calculations into the mix, the number rises to ninth place. Put another way, the environmental enthusiasm of the writers seemed to have interfered with the accuracy of their research.

Challenge and Method
I have spent the last 30 years following these developments in various capacities. My object has always been to provide balance and perspective to help the reader navigate the seemingly endless debates about the financial viability and environmental costs of oil sands development. It draws from a wide range of documents to provide a current, informed and accessible account of the industry’s evolution, achievements and drawbacks.

Like a living thing, the manuscript grew over several years. My sources included numerous books and reports – some originally published in the 19th century. Much of this nourishment came from the Glenbow Archives and from Alberta’s Provincial Archives.

My interest in the oil sands began with my work as coordinator and one of six interviewers for the Petroleum History Society’s Oil Sands Oral History Project. Access to those 117 transcribed interviews gave me insights into the thinking of many industry leaders and government officials. So did interviews I undertook in my day job, which involved writing petroleum-related articles for a number of magazines.

Collectively, these materials – especially the transcribed interviews – provided extraordinary insights. As Victorian writer Thomas Carlyle wrote, history is “the essence of innumerable Biographies.” He added, “but if one Biography, nay our own Biography, study and recapitulate it as we may, remains in so many points unintelligible to us; how much more must these million, the very facts of which, to say nothing of the purport of them, we know not, and cannot know!” If this is true of a single biography, would an industrial history covering three centuries be more unmanageable still?

Perhaps the answer to Carlyle’s dilemma can be found in an idea presented by another 19th century thinker, American philosopher William James. According to his “great man” theory of history, “sporadic great men come everywhere.” In the context of this history, scientific investigation of petroleum and of the oil sands began in Canada in the 19th century, with European records of early interest in the commodity dating back three full centuries.

“But for a community to get vibrating through and through with intensely active life, many geniuses coming together in rapid succession are required,” James said. “This is why great epochs are so rare. Blow must follow blow so fast that no cooling can occur in the intervals. Then the mass of the nation grows incandescent, and may continue to glow by pure inertia long after the originators of its internal movement have passed away.”  Surely that pattern describes the increasing interest in and development of the oil sands during the last 90 years.

The stories of those who found, explored and helped develop the oil sands are an integral part of Canada’s history, but primarily because politics, governments, regulators, corporations and scientific institutions enabled their efforts to prosper or – in more cases than we care to remember – caused them to fail. To a large extent because of great distances and the bitterness of winter in Alberta’s northern forests, in the early years those pioneers were exploring and investigating areas in which simple survival was a feature of daily life. When fast-flowing rivers were clear of ice, navigating scows full of equipment and supplies to the nearest railway was another, sometimes deadly, challenge.

At an 1888 committee meeting in Canada’s Senate, the Geological Survey of Canada’s R. G. McConnell provided the first creditable estimate of the oil sands’ potential. He used three assumptions based on field and lab work to come up with his calculations. First, he said, there were at least 1,000 square miles of bitumen-saturated sand in the area. Second, the sands were 150 to 225 feet thick. Third – and this result came from laboratory tests that involved boiling oil sand samples – the bitumen content averaged 12 per cent by weight. Therefore there were about 30 million “long tons” of bitumen in place – roughly speaking, 220 million barrels.

At this writing, the estimate of recoverable oil sands reserves is three orders of magnitude greater. Of course, McConnell’s number was an estimate of resources in place. It was not what today is known as a “reserves estimate.” At that time the concept of recoverable reserves – hydrocarbons that are economically producible at current prices using existing technology – was unknown. No one had any idea how to calculate what percentage of oil in the ground would ever see the inside of a pipeline. The problem of calculating oil sands reserves bedevilled the petroleum industry for another 120 years.

The Players
The players include people from Ottawa, the Alberta government, the private sector, the scientific community, Indigenous peoples and NGOs. This has not always been so, however. Between 1875 and 1918 the federal government was the principal actor, as an unpublished study by William Wylie explains – “at first from a sense of responsibility for regional development.” Near the end, it was because of “strategic considerations.”

“In the 1920s, the government of Alberta became the major force, in part in order to assert its claim to control provincial resources. In the 1930s, two private companies showed signs of promise and the two governments pulled back in deference to private development and in order to cut costs,” he wrote. “The 1940s were years of increased involvement on the part of both levels of government due partially to strategic considerations, and to the power struggle between them. In the 1950s, the conventional oil boom in the province took attention away from the oil sands and delayed their development until the 60s and 70s when the long run decline of the conventional reserves was finally anticipated. When commercial development occurred, private industry was the major agency, but with considerable governmental backing as well.”

Released in 1990, Wylie’s study coincided with industry/government negotiations that led to a new stage of oil sands development. Since 1992, financial responsibility for oil sands development has lain entirely with the private sector. The signal for this development began during the new Ralph Klein government, when the stars aligned for deregulation of the petroleum industry along free-market lines. Alberta dramatically reduced its royalties, and the federal and Alberta governments withdrew financial support from the OSLO oil sands plant and other petroleum projects. The era of government-funded loan guarantees and tax and royalty concessions was over. Since that time government has provided regulation and an improved fiscal regime for oil sands development, but no cash. Industry has taken the risks and benefitted from the rewards.

During this period, the sector developed important new production technologies. At its heart, participating in the oil sands industry is a journey of constant tests,” said Deborah Jaremko, editor of the industry’s trade magazine. “At first, it was that the technology was unproven. Then it was that low oil prices severely challenged the economics. Then, with rising oil prices and new technology, came the whirlwind of a boom coloured by the new visibility brought by the oil sands’ presence on the world stage.”

By overcoming continual challenges, the industry has benefitted the people of Canada – a reality that seems obvious, given the size of this resource. At 168 billion barrels of recoverable reserves, these deposits represent the third-largest oil reserves in the world, after those of Saudi Arabia and Venezuela.

According to the Canadian Energy Research Institute (CERI), oil sands development touched almost every community in Canada through its impact on job creation and economic growth. Every dollar invested in the oil sands created about $8 worth of economic activity. One-third of that value creation took place outside Alberta – in other provinces, the U.S. and around the world.

As I began writing, Alberta collected some $4.5 billion in oil sands royalties each year. As importantly, oil sands development and operations provide economic stimulus – $21 billion in 2012 and direct employment for 20,000 – many of whom flew in from across Canada for their 8-days-on, 10-days-off shifts. In real terms, investment related to the oil sands would generate an anticipated $79.4 billion in government revenues between 2012 and 2035. The NEB forecasts growth well into the future.

In recent years the world view has begun to change, as disruptive technologies began to affect the oil sands. Stanford University professor Tony Seba, for example, recently made a presentation suggesting that the oil sands’ days as an energy source are numbered – indeed, that the world will make a dramatic shift within less than a decade. Even if this were true, the oil sands’ value as a carbon-rich petrochemical feedstock would continue to in play for centuries. 

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