CANADA: The Canadian Oil Boom: Scraping Bottom

Dust hangs in the sunset sky above the Suncor Millennium mine, an open-pit north of Fort McMurray, Alberta.Photograph by Peter Essick


One day in 1963, when
Jim Boucher was seven, he was out working the trap­line with his
grandfather a few miles south of the Fort McKay First Nation reserve on
the Athabasca River in northern Alberta. The country there is wet,
rolling fen, dotted with lakes, dissected by streams, and draped in a
cover of skinny, stunted trees-it's part of the boreal forest that
sweeps right across Canada, covering more than a third of the country.
In 1963 that forest was still mostly untouched. The government had not
yet built a gravel road into Fort McKay; you got there by boat or in
the winter by dogsled. The Chipewyan and Cree Indians there-Boucher is
a Chipewyan-were largely cut off from the outside world. For food they
hunted moose and bison; they fished the Athabasca for walleye and
whitefish; they gathered cranberries and blueberries. For income they
trapped beaver and mink. Fort McKay was a small fur trading post. It
had no gas, electricity, telephone, or running water. Those didn't come
until the 1970s and 1980s.

In Boucher's memory, though, the change begins that day in 1963, on
the long trail his grandfather used to set his traps, near a place
called Mildred Lake. Generations of his ancestors had worked that
trapline. "These trails had been here thousands of years," Boucher said
one day last summer, sitting in his spacious and tasteful corner office
in Fort McKay. His golf putter stood in one corner; Mozart played
softly on the stereo. "And that day, all of a sudden, we came upon this
clearing. A huge clearing. There had been no notice. In the 1970s they
went in and tore down my grandfather's cabin-with no notice or
discussion." That was Boucher's first encounter with the oil sands
industry. It's an industry that has utterly transformed this part of
northeastern Alberta in just the past few years, with astonishing
speed. Boucher is surrounded by it now and immersed in it himself.

Where the trapline and the cabin once were, and the forest, there is
now a large open-pit mine. Here Syncrude, Canada's largest oil
producer, digs bitumen-laced sand from the ground with electric shovels
five stories high, then washes the bitumen off the sand with hot water
and sometimes caustic soda. Next to the mine, flames flare from the
stacks of an "upgrader," which cracks the tarry bitumen and converts it
into Syncrude Sweet Blend, a synthetic crude that travels down a
pipeline to refineries in Edmon­ton, Alberta; Ontario, and the United
States. Mildred Lake, meanwhile, is now dwarfed by its neighbor, the
Mildred Lake Settling Basin, a four-square-mile lake of toxic mine
tailings. The sand dike that contains it is by volume one of the
largest dams in the world.

Nor is Syncrude alone. Within a 20-mile radius of Boucher's office
are a total of six mines that produce nearly three-quarters of a
million barrels of synthetic crude oil a day; and more are in the
pipeline. Wherever the bitumen layer lies too deep to be strip-mined,
the industry melts it "in situ" with copious amounts of steam, so that
it can be pumped to the surface. The industry has spent more than $50
billion on construction during the past decade, including some $20
billion in 2008 alone. Before the collapse in oil prices last fall, it
was forecasting another $100 billion over the next few years and a
doubling of production by 2015, with most of that oil flowing through
new pipelines to the U.S. The economic crisis has put many expansion
projects on hold, but it has not diminished the long-term prospects for
the oil sands. In mid-November, the International Energy Agency
released a report forecasting $120-a-barrel oil in 2030-a price that
would more than justify the effort it takes to get oil from oil sands.

Nowhere on Earth is more earth being moved these days than in the
Athabasca Valley. To extract each barrel of oil from a surface mine,
the industry must first cut down the forest, then remove an average of
two tons of peat and dirt that lie above the oil sands layer, then two
tons of the sand itself. It must heat several barrels of water to strip
the bitumen from the sand and upgrade it, and afterward it discharges
contaminated water into tailings ponds like the one near Mildred Lake.
They now cover around 50 square miles. Last April some 500 migrating
ducks mistook one of those ponds, at a newer Syncrude mine north of
Fort McKay, for a hospitable stopover, landed on its oily surface, and
died. The incident stirred international attention-Greenpeace broke
into the Syncrude facility and hoisted a banner of a skull over the
pipe discharging tailings, along with a sign that read "World's
Dirtiest Oil: Stop the Tar Sands."

The U.S. imports more oil from Canada than from any other nation,
about 19 percent of its total foreign supply, and around half of that
now comes from the oil sands. Anything that reduces our dependence on
Middle Eastern oil, many Americans would say, is a good thing. But
clawing and cooking a barrel of crude from the oil sands emits as much
as three times more carbon dioxide than letting one gush from the
ground in Saudi Arabia. The oil sands are still a tiny part of the
world's carbon problem-they account for less than a tenth of one
percent of global CO2 emissions-but to many environmentalists they are
the thin end of the wedge, the first step along a path that could lead
to other, even dirtier sources of oil: producing it from oil shale or
coal. "Oil sands represent a decision point for North America and the
world," says Simon Dyer of the Pembina Institute, a moderate and widely
respected Canadian environmental group. "Are we going to get serious
about alternative energy, or are we going to go down the
unconventional-oil track? The fact that we're willing to move four tons
of earth for a single barrel really shows that the world is running out
of easy oil."

That thirsty world has come crashing in on Fort McKay. Yet Jim
Boucher's view of it, from an elegant new building at the entrance to
the besieged little village, contains more shades of gray than you
might expect. "The choice we make is a difficult one," Boucher said
when I visited him last summer. For a long time the First Nation tried
to fight the oil sands industry, with little success. Now, Boucher
said, "we're trying to develop the community's capacity to take
advantage of the opportunity." Boucher presides not only over this
First Nation, as chief, but also over the Fort McKay Group of
Companies, a community-owned business that provides services to the oil
sands industry and brought in $85 million in 2007. Unemployment is
under 5 percent in the village, and it has a health clinic, a youth
center, and a hundred new three-bedroom houses that the community rents
to its members for far less than market rates. The First Nation is even
thinking of opening its own mine: It owns 8,200 acres of prime oil
sands land across the river, right next to the Syncrude mine where the
ducks died.

As Boucher was telling me all this, he was picking bits of meat from
a smoked whitefish splayed out on his conference table next to a bank
of windows that offered a panoramic view of the river. A staff member
had delivered the fish in a plastic bag, but Boucher couldn't say where
it had come from. "I can tell you one thing," he said. "It doesn't come
from the Athabasca."

Without the river, there would be no oil sands industry. It's the
river that over tens of millions of years has eroded away billions of
cubic yards of sediment that once covered the bitumen, thereby bringing
it within reach of shovels-and in some places all the way to the
surface. On a hot summer day along the Athabasca, near Fort McKay for
example, bitumen oozes from the riverbank and casts an oily sheen on
the water. Early fur traders reported seeing the stuff and watching
natives use it to caulk their canoes. At room temperature, bitumen is
like molasses, and below 50°F or so it is hard as a hockey puck, as
Canadians invariably put it. Once upon a time, though, it was light
crude, the same liquid that oil companies have been pumping from deep
traps in southern Alberta for nearly a century. Tens of millions of
years ago, geologists think, a large volume of that oil was pushed
northeastward, perhaps by the rise of the Rocky Mountains. In the
process it also migrated upward, along sloping layers of sediment,
until eventually it reached depths shallow and cool enough for bacteria
to thrive. Those bacteria degraded the oil to bitumen.

The Alberta government estimates that the province's three main oil
sands deposits, of which the Athabasca one is the largest, contain 173
billion barrels of oil that are economically recoverable today. "The
size of that, on the world stage-it's massive," says Rick George, CEO
of Suncor, which opened the first mine on the Athabasca River in 1967.
In 2003, when the Oil & Gas Journal added the Alberta oil
sands to its list of proven reserves, it immediately propelled Canada
to second place, behind Saudi Arabia, among oil-producing nations. The
proven reserves in the oil sands are eight times those of the entire
U.S. "And that number will do nothing but go up," says George. The
Alberta Energy Resources and Conservation Board estimates that more
than 300 billion barrels may one day be recoverable from the oil sands;
it puts the total size of the deposit at 1.7 trillion barrels.

Getting oil from oil sands is simple but not easy. The giant
electric shovels that rule the mines have hardened steel teeth that
each weigh a ton, and as those teeth claw into the abrasive black sand
24/7, 365 days a year, they wear down every day or two; a welder then
plays dentist to the dinosaurs, giving them new crowns. The dump trucks
that rumble around the mine, hauling 400-ton loads from the shovels to
a rock crusher, burn 50 gallons of diesel fuel an hour; it takes a
forklift to change their tires, which wear out in six months. And every
day in the Athabasca Valley, more than a million tons of sand emerges
from such crushers and is mixed with more than 200,000 tons of water
that must be heated, typically to 175°F, to wash out the gluey bitumen.
At the upgraders, the bitumen gets heated again, to about 900°F, and
compressed to more than 100 atmospheres-that's what it takes to crack
the complex molecules and either subtract carbon or add back the
hydrogen the bacteria removed ages ago. That's what it takes to make
the light hydrocarbons we need to fill our gas tanks. It takes a
stupendous amount of energy. In situ extraction, which is the only way
to get at around 80 percent of those 173 billion barrels, can use up to
twice as much energy as mining, because it requires so much steam.

Most of the energy to heat the water or make steam comes from
burning natural gas, which also supplies the hydrogen for upgrading.
Precisely because it is hydrogen rich and mostly free of impurities,
natural gas is the cleanest burning fossil fuel, the one that puts the
least amount of carbon and other pollutants into the atmosphere.
Critics thus say the oil sands industry is wasting the cleanest fuel to
make the dirtiest-that it turns gold into lead. The argument makes
environmental but not economic sense, says David Keith, a physicist and
energy expert at the University of Calgary. Each barrel of synthetic
crude contains about five times more energy than the natural gas used
to make it, and in much more valuable liquid form. "In economic terms
it's a slam dunk," says Keith. "This whole thing about turning gold
into lead-it's the other way around. The gold in our society is liquid
transportation fuels."

Most of the carbon emissions from such fuels comes from the
tailpipes of the cars that burn them; on a "wells-to-wheels" basis, the
oil sands are only 15 to 40 percent dirtier than conventional oil. But
the heavier carbon footprint remains an environmental-and public
relations-disadvantage. Last June Alberta's premier, Ed Stelmach,
announced a plan to deal with the extra emissions. The province, he
said, will spend over $1.5 billion to develop the technology for
capturing carbon dioxide and storing it underground-a strategy touted
for years as a solution to climate change. By 2015 Alberta is hoping to
capture five million tons of CO2 a year from bitumen upgraders as well
as from coal-fired power plants, which even in Alberta, to say nothing
of the rest of the world, are a far larger source of CO2 than the oil
sands. By 2020, according to the plan, the province's carbon emissions
will level off, and by 2050 they will decline to 15 percent below their
2005 levels. That is far less of a cut than scientists say is
necessary. But it is more than the U.S. government, say, has committed
to in a credible way.

One thing Stelmach has consistently refused to do is "touch the
brake" on the oil sands boom. The boom has been gold for the provincial
as well as the national economy; the town of Fort McMurray, south of
the mines, is awash in Newfoundlanders and Nova Scotians fleeing
unemployment in their own provinces. The provincial government has been
collecting around a third of its revenue from lease sales and royalties
on fossil fuel extraction, including oil sands-it was expecting to get
nearly half this year, or $19 billion, but the collapse in oil prices
since the summer has dropped that estimate to about $12 billion.
Albertans are bitterly familiar with the boom-and-bust cycle; the last
time oil prices collapsed, in the 1980s, the provincial economy didn't
recover for a decade. The oil sands cover an area the size of North
Carolina, and the provincial government has already leased around half
that, including all 1,356 square miles that are minable. It has yet to
turn down an application to develop one of those leases, on
environmental or any other grounds.

From a helicopter it's easy to see the indus­try's impact on the
Athabasca Valley. Within minutes of lifting off from Fort McMurray,
heading north along the east bank of the river, you pass over Suncor's
Millennium mine-the company's leases extend practically to the town. On
a day with a bit of wind, dust plumes billowing off the wheels and the
loads of the dump trucks coalesce into a single enormous cloud that
obscures large parts of the mine pit and spills over its lip. To the
north, beyond a small expanse of intact forest, a similar cloud rises
from the next pit, Suncor's Steepbank mine, and beyond that lie two
more, and across the river two more. One evening last July the clouds
had merged into a band of dust sweeping west across the devastated
landscape. It was being sucked into the updraft of a storm cloud. In
the distance steam and smoke and gas flames belched from the stacks of
the Syncrude and Suncor upgraders-"dark satanic mills" inevitably come
to mind, but they're a riveting sight all the same. From many miles
away, you could smell the tarry stench. It stings your lungs when you
get close enough.

From the air, however, the mines fall away quickly. Skimming low
over the river, startling a young moose that was fording a narrow
channel, a government biologist named Preston McEachern and I veered
northwest toward the Birch Mountains, over vast expanses of scarcely
disturbed forest. The Canadian boreal forest covers two million square
miles, of which around 75 percent remains undeveloped. The oil sands
mines have so far converted over 150 square miles-a hundredth of a
percent of the total area-into dust, dirt, and tailings ponds.
Expansion of in situ extraction could affect a much larger area. At
Suncor's Firebag facility, northeast of the Millennium mine, the forest
has not been razed, but it has been dissected by roads and pipelines
that service a checkerboard of large clearings, in each of which Suncor
extracts deeply buried bitumen through a cluster of wells.
Environmentalists and wildlife biolo­gists worry that the widening
fragmentation of the forest, by timber as well as mineral companies,
endangers the woodland caribou and other animals. "The boreal forest as
we know it could be gone in a generation without major policy changes,"
says Steve Kallick, director of the Pew Boreal Campaign, which aims to
protect 50 percent of the forest.

McEachern, who works for Alberta Environment, a provincial agency,
says the tailings ponds are his top concern. The mines dump waste­water
in the ponds, he explains, because they are not allowed to dump waste
into the Athabasca, and because they need to reuse the water. As the
thick, brown slurry gushes from the discharge pipes, the sand quickly
settles out, building the dike that retains the pond; the residual
bitumen floats to the top. The fine clay and silt particles, though,
take several years to settle, and when they do, they produce a
yogurt-like goop-the technical term is "mature fine tailings"-that is
contaminated with toxic chemicals such as naphthenic acid and
polycyclic aromatic hydrocarbons (PAH) and would take centuries to dry
out on its own. Under the terms of their licenses, the mines are
required to reclaim it somehow, but they have been missing their
deadlines and still have not fully reclaimed a single pond.

In the oldest and most notorious one, Suncor's Pond 1, the sludge is
perched high above the river, held back by a dike of compacted sand
that rises more than 300 feet from the valley floor and is studded with
pine trees. The dike has leaked in the past, and in 2007 a modeling
study done by hydrogeologists at the University of Waterloo estimated
that 45,000 gallons a day of contaminated water could be reaching the
river. Suncor is now in the process of reclaiming Pond 1, piping some
tailings to another pond, and replacing them with gypsum to consolidate
the tailings. By 2010, the company says, the surface will be solid
enough to plant trees on. Last summer it was still a blot of beige mud
streaked with black bitumen and dotted with orange plastic scarecrows
that are supposed to dissuade birds from landing and killing

The Alberta government asserts that the river is not being
contaminated-that anything found in the river or in its delta, at Lake
Athabasca, comes from natural bitumen seeps. The river cuts right
through the oil sands downstream of the mines, and as our chopper
zoomed along a few feet above it, McEachern pointed out several places
where the riverbank was black and the water oily. "There is an increase
in a lot of metals as you move downstream," he said. "That's
natural-it's weathering of the geology. There's mercury in the fish up
at Lake Athabasca-we've had an advisory there since the 1990s. There
are PAHs in the sediments in the delta. They're there because the river
has eroded through the oil sands."

Independent scientists, to say nothing of people who live downstream
of the mines in the First Nations' community of Fort Chipewyan, on Lake
Athabasca, are skeptical. "It's inconceivable that you could move that
much tar and have no effect," says Peter Hodson, a fish toxicologist at
Queen's University in Ontario. An Environment Canada study did in fact
show an effect on fish in the Steepbank River, which flows past a
Suncor mine into the Athabasca. Fish near the mine, Gerald Tetreault
and his colleagues found when they caught some in 1999 and 2000, showed
five times more activity of a liver enzyme that breaks down toxins-a
widely used measure of exposure to pollutants-as did fish near a
natural bitumen seep on the Steepbank.

"The thing that angers me," says David Schindler, "is that there's been no concerted effort to find out where the truth lies."

Schindler, an ecologist at the University of Alberta in Edmonton,
was talking about whether people in Fort Chipewyan have already been
killed by pollution from the oil sands. In 2006 John O'Connor, a family
physician who flew in weekly to treat patients at the health clinic in
Fort Chip, told a radio interviewer that he had in recent years seen
five cases of cholangiocarcinoma-a cancer of the bile duct that
normally strikes one in 100,000 people. Fort Chip has a population of
around 1,000; statistically it was unlikely to have even one case.
O'Connor hadn't managed to interest health authorities in the cancer
cluster, but the radio interview drew wide attention to the story.
"Suddenly it was everywhere," he says. "It just exploded."

Two of O'Connor's five cases, he says, had been confirmed by tissue
biopsy; the other three patients had shown the same symptoms but had
died before they could be biopsied. (Cholan­giocarcinoma can be
confused on CT scans with more common cancers such as liver or
pancreatic cancer.) "There is no evidence of elevated cancer rates in
the community," Howard May, a spokesperson for Alberta Health, wrote in
an email last September. But the agency, he said, was nonetheless
conducting a more complete investigation-this time actually examining
the medical records from Fort Chip-to try to quiet a controversy that
was now two years old.

One winter night when Jim Boucher was a young boy, around the time
the oil sands industry came to his forest, he was returning alone by
dogsled to his grandparents' cabin from an errand in Fort McKay. It was
a journey of 20 miles or so, and the temperature was minus 4°F. In the
moonlight Boucher spotted a flock of ptarmigan, white birds in the
snow. He killed around 50, loaded them on the dogsled, and brought them
home. Four decades later, sitting in his chief-executive office in
white chinos and a white Adidas sport shirt, he remembers the pride on
his grandmother's face that night. "That was a different spiritual
world," Boucher says. "I saw that world continuing forever." He tells
the story now when asked about the future of the oil sands and his
people's place in it.

A poll conducted by the Pembina Institute in 2007 found that 71
percent of Albertans favored an idea their government has always
rejected out of hand: a moratorium on new oil sands projects until
environmental concerns can be resolved. "It's my belief that when
government attempts to manipulate the free market, bad things happen,"
Premier Stelmach told a gathering of oil industry executives that year.
"The free-market system will solve this."

But the free market does not consider the effects of the mines on
the river or the forest, or on the people who live there, unless it is
forced to. Nor, left to itself, will it consider the effects of the oil
sands on climate. Jim Boucher has collaborated with the oil sands
industry in order to build a new economy for his people, to replace the
one they lost, to provide a new future for kids who no longer hunt
ptarmigan in the moonlight. But he is aware of the trade-offs. "It's a
struggle to balance the needs of today and tomorrow when you look at
the environment we're going to live in," he says. In northern Alberta
the question of how to strike that balance has been left to the free
market, and its answer has been to forget about tomorrow. Tomorrow is
not its job. 

AMP Section Name:Energy
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