IHS Takes on Oil Sands Claims

on November 11, 2013 at 2:30 PM

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A recent report by consultancy IHS Cera takes aim at common arguments against development of Canadian oil sands, but acknowledges the need for continued – and improved – environmental monitoring and regulation.

Groups opposed to construction of the Keystone XL pipeline frequently feature the following claims on their websites: that the pipeline will not enhance US energy security, that bitumen has a corrosive effect on pipelines (and is therefore more likely to spill or leak), and that more heavy crude imports from Canada will actually raise gasoline prices in the US. Assertions about oil sands’ environmental impact include the following, from the Natural Resources Defense Council: that their development “destroys Boreal forests and wetlands, causes high levels of greenhouse gas pollution, and leaves behind immense lakes of toxic waste”.

The IHS Cera report, Critical Questions for the Canadian Oil Sands, counters several common anti-oil sands arguments. But while it makes the case that from an environmental standpoint, oil sands are in some ways comparable to other sources of imported oil, it also stresses a need for improved understanding of long-term adverse impacts, and for policies that can help to mitigate them.

1. Keystone XL won’t contribute to US energy security.

“Energy security refers to the uninterrupted availability of energy sources at an affordable price,” according to the International Energy Agency. This suggests – strongly – that having greater access to supply of a necessary form of energy, such as oil, would enhance US energy security.

Canada is the largest foreign supplier of crude to the US. Imports last year averaged more than 2.9 million barrels per day, according to the Energy Information Administration. And much of that came from existing oil sands developments, says IHS. “The oil sands alone are now the largest foreign source of US oil supply, providing more oil than Saudi Arabia or Mexico (the second and third largest suppliers), which accounted for 16% (1.4 mbd) and 11% (1.0 mbd), respectively, in 2012.”

IHS forecasts suggest that the US will need much more oil from Canada. “Even with tight oil, the United States will still need over 5 million barrels per day of net crude oil imports over the next two decades, and Canada will be key to helping meet this demand,” according to IHS. And the light, sweet crudes that come from tight rocks are ill-suited to the US refining system, which is configured for heavy oil. After Canada, Mexico and Venezuela are the two biggest suppliers of heavy oil to the US, and both are suffering from declining oil production.

The report adds that Canada is a more reliable source of supply than many of the US’ other suppliers, not only because it is an ally, but because proximity and an existing infrastructure system mean shipments are less vulnerable to disruption.

2. Pipelines carrying crude from oil sands are at greater risk of corrosion and spills.

Available evidence suggests that this is not the case, according to IHS, echoing the conclusions of a congressionally mandated study conducted by the National Academy of Sciences, released earlier this year.

“Pipeline corrosion is a well understood phenomenon, and a number of scientific studies have found no evidence that oil sands crudes subject pipelines to greater risk of damage or spills than other crudes,” writes the consultancy. It cites studies from Alberta’s lead agency for energy and environmental research (AI-EES) and Canada’s Natural Resources Ministry as additional sources.

3. Imports from Canada’s oil sands will raise US gasoline prices.

You can find this claim on many anti-Keystone XL lobbying groups’ websites, often in reference to gasoline prices in the Midwest. IHS sees higher US gasoline prices from more oil sands imports as unlikely, in part because adding more oil to global supply tends to have a dampening effect on prices.

For more on this, see Why Hasn’t the Oil Boom Brought Down Gasoline Prices? It Probably Has.

Importing oil from Canada’s oil sands may in fact have the opposite effect. “As oil sands production expands, it can help boost global spare capacity, which can help moderate global prices, which in turn affects US gasoline prices,” writes IHS. “The global price of oil is the most important factor shaping global and US gasoline prices,” and “the price of gasoline…is set on the world market”.

What About the Environment?

The crux of many of the arguments against Canadian oil sands development is its impact on the environment. And extracting oil sands – or coal, or oil, or natural gas – raises a host of environmental concerns, from greenhouse gas emissions to land and water use to waste disposal.

Oil sands development is subject to environmental regulations at both the federal and provincial levels, with at least some degree of success. At present, ” air quality in the oil sands is typically better than in major urban cities”, says IHS. It also notes that greenhouse gas emissions from oil sands are comparable to those of other suppliers of similar crudes. “The GHG emissions of Venezuelan crude, the most likely alternative to oil sands in the USGC, are in the same range as oil sands (4–20% higher than the average crude refined in the United States).”

But the report warns that what remains to be assessed are the cumulative effects on air quality over time. “Air pollutants are set to increase in line with rising oil sands production,” the report says. “A recent cumulative environmental assessment completed as part of an oil sands mine regulatory review has confirmed that if all planned oil sands projects are built and no new air pollutant measures are taken, the levels of air pollutants such as nitrogen dioxide (NO2) and sulfur dioxide (SO2) could exceed regional limits under Alberta’s new air quality regulations.”