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Economics and the Environment in Alberta Oil Sands

February 20, 2009

The world’s thirst for oil continues to grow even while proven reserves begin to stagnate and large new discoveries become increasingly infrequent. Multinational corporations such as Exxon, BP, and Chevron, once the largest players in the global oil trade, have been usurped by state-owned companies and increasingly relegated to minority partner status (Rowell 2007, 11). The importance of oil resources in politically stable, open economies is now more important than ever; both for the bottom line of the international oil industry as well as the continued sustainability of our oil-fueled society. Canada, already the United States’ largest supplier of foreign oil (Austen 2009) has been increasing output, and resultant pollution, from its Alberta oil sands even in the face of mounting political pressure.

Oil sands are intensely more economically and ecologically expensive to develop than traditional underground sources of oil such as the light, sweet crude found in Saudi Arabia.  Exploiting the unconventional resource, known as bitumen, requires separating it from a thick, heavy mixture of water and clay (Mintz Testa 2008, 31). This process requires large amounts of additional water and energy to be used before a refined, usable product is finally produced. The entire procedure produces more global warming emissions than conventional crude extraction (Galbraith 2008) and, in the case of Alberta’s oil sands, would require the removal of millions of acres of boreal forests (Mintz Testa 2008, 31).

The negative environmental impact of the further development of the oil sands has thus far been superseded by the enormous economic potential. It’s estimated that the province of Alberta may hold as much as 175 billion barrels of oil, making its reserves second only to the nation of Saudi Arabia (Lorinc 2009). The unprecedented run-up in world crude prices in 2008 and the expectation of future price increases has made the oil sands an undeniable source of future revenue in a world gripped by a global economic downturn. This potential has been highlighted by both Canada’s energy industry as well as Canada’s ruling Conservative party, whose political base is located in Alberta (Austen 2009). Since assuming power in 2006, Conservative’s have managed to significantly roll back restrictions on global warming emissions in an effort to enable the expansion of the nation’s oil production (Austen 2009).

In the United States meanwhile, the expansion of the Alberta oil fields would be welcome news to many politicians who’ve faced political pressure while trying to enable the development of the nation’s largest untapped oil reserves, located in the Anwar National Wildlife Refuge. Situated just north of the state of Montana, the province of Alberta is seen by many as the next best alternative to producing oil domestically. A growing legion of environmentalists, however, is unsatisfied with either solution. Groups such as Environmental Defence, based in Toronto, have called for the closing of the oil sands if the environmental impact cannot be mitigated (Austen 2009). With demand for oil in the United States and abroad unlikely to wane in the near future, tough choices will have to be made as to the economic and environmental premiums we’ll pay for the oil next door.

Austen, Ian. “Obama and Canada’s Controversial Oil Patch.” The New York Times, February 19, 2009: 1.
Galbraith, Kate. “The Costs of Unconventional Fossil Fuels.” The New York Times, October 8, 2008: 1.
Lorinc, John. “Alberta Addresses Oil Sands’ Gigantic Footprint.” The New York Times, February 18, 2009: 1.
Mintz Testa, Bridget. “Tar on Tap.” Mechanical Engineering, 2008: 30-34.
Rowell, Andy. “Oil Frontiers: The Future of Oil.” Multinational Monitor, 2007: 10-14.

Filed under: Environmental Economic Geography