Saturday, August 2, 2008


The second of two parts.

Another potential solution exists for our lack of oil production. I’m speaking of the Athabasca oil sands located in Alberta and Saskatchewan, Canada. Even there, we have problems with the environmentalists in the United States. A year ago, the New York Times published an article outlining the environmental problems with the oil sands. Recently, Congress passed a bill questioning the quality of the oil from the oil sands. On June 23, the State Governors Conference passed a resolution prohibiting the United States from importing oil sands oil from Canada. Again the environmentalists have struck forcing this resolution. There is absolutely no common sense in this at all. The oil sands are not drilled, as with most production — they are mined with enormous equipment. The mined material is called bitumen; it is very near the surface, and so the volatiles have escaped to the atmosphere, leaving a heavy, almost asphaltic substance. It took many years to develop processes to remove the oil from the bitumen. This was accomplished about five years ago. After the on-site oil has been removed from the bitumen it is shipped to treatment plants in the Edmonton area where it is cleaned up and hydrogen is inserted. It is then piped to the refineries in the United States for processing into various petroleum products which meet every U.S. standard of finished product. You could not differentiate them from the best refined products from U.S. crude. Since then the system has been perfected so that they are as environmentally safe and clean as oil from regular drilling sites.

Most environmental problems are due to oil seeping from the bitumen in cliff faces into the Athabasca River. This has nothing to do with processing the mined bitumen, which is carefully monitored and is as safe as any production site in the U.S. Most of the mined area still has bitumen scattered on the surface. This area will be replanted after the mining is complete, similar to the way we treat surface-mined coal areas in the states. Believe me, the Canadian government is overseeing the environment very thoroughly.

The oil sands cover an area of 800 by 200 miles, although not continuously. Approximately 1/3 to 1/2 of the area has been explored. The thickness of the formations varies significantly, as does the consistency of the bitumen. Recent exploratory drillings have revealed a formation 350 feet thick. Some $80 bilion to $100 billion have been put into development work to date by approximately 20 companies, both large and small. At least another $80 billion have been set aside for future development. This is probably the largest oil production development in the world today.

Official estimates of recoverable reserves just in the explored area are around 800 billion barrels. Unofficial estimates have been made that exceed 1.6 trillion barrels of recoverable oil. These estimates do not include the unexplored one-half to one-third of the oil-sands region. Such an amount would be enough to supply the world for years. At the recent offshore technology conference, a Canadian publication reported that oil-sands recovery and processing cost has come down to $25 to $30 a barrel. Production is currently at 1 million to 1.5 million barrels per day. Production within five years will probably be 3.5 million to 5 million per day. Three years ago, an article published in the Calgary Herald estimated a potential of 10 million barrels per day in the foreseeable future, and this goal appears realistic. T. Boone Pickens, the famous Texas oil man recently said, “It’s not going to offset high demand, but Canada is going to add to its production with the oil sands. They are really as big as you want to make them.” There are also extensive gas reserves in the area.

If the potential is accurate, and the United States can work out appropriate arrangements with Canada, we can perhaps end dependence on the Middle East. However, we have competition. The Chinese have already bid to get as much of the oil sands oil as possible. They have even offered to build new harbor facilities at Prince Rupert, on the Pacific coast of British Columbia. They would then build a pipeline at their own expense to Fort McMurray to transport the oil sands oil to the port at Prince Rupert. I am not privy to the current status of these arrangements.

Recently, two major oil companies have contracted to build a pipeline from the processing plants in Edmonton to Illinois. Subsequently, they plan to extend the pipeline to Port Arthur, Texas the home of many refineries. This will help the United States secure access to the reserves in the oil sands. Appropriate U.S. government offices are aware of the potential of the oil sands, and I believe they are in constant communications with the Canadian government. However, if the environmentalists get their way as described above we may get shut out again. The Chinese are standing by to take it all and again we’ll be left holding an empty bag.

There is another technology that has not been fully exploited in the United States. All of the petroleum that has been reduced to plastics and other forms of municipal waste is totally recoverable as diesel fuel, high octane gasoline and other valuable recyclable products. The technology needed to take methane out of garbage dumps and convert it to power and heat so the municipal waste can be cracked and recycled without an external energy source has been around for 30 years. The technology and equipment needed to make this happen has been used by two or three enlightened U.S. municipalities for 20 years. The city of Tucson mines the methane produced by its land fill, compresses and bottles it and uses it to power all its trucks and school buses. It sells its excess propane in bottles for people to use as they choose. This is a cash crop that is infinitely renewable.

This technology is both proven and affordable -a properly managed landfill operation can create a reprocessing facility for less than $20 million. The cash-flow numbers are staggering - a $20 million investment in a landfill reprocessing system will produce out-put products valued at more than $3 million a month for the life of the system, which means that the no matter what the startup costs are, the whole thing will pay for itself in less than a year. And then several problems are solved at the same time: (a) the landfills get reprocessed and stabilized in size, (b) the methane emissions which contribute to global warming are recycled to reduce the carbon footprint, and (c) the fuel needed to power cars and trucks can be produced on a continuous basis for as long as people generate garbage. The cities make money, the cost of fuel is reduced by 75 percent and the economy suddenly realizes an infusion of capital the likes of which has never ever been seen in the history of macroeconomics. Almost every city in the world has a problem of getting rid of its solid waste. They could use this technology to get rid of their mountains of waste and make a little spending money in the process. One of the companies with which I am associated proposed this general technology to New York City, where it has to haul its garbage to dumps hundreds of miles away. The proposal was turned down.

In summary, there is no oil shortage. Within the U.S. and its coastal waters there is enough oil to last the nation for years, even without the oil shale. Fields potentially holding billions of barrels are currently being developed worldwide, without considering the Middle East or Venezuela. The most positive potential is in the Canadian oil sands, ANWR, and domestic drilling, both onshore and offshore. So, Congress must act and act soon, or we will remain indentured to the Middle East. I am convinced that the requirements for oil will be reduced extensively within the next five to 10 years as the result of development of many new unpublished technologies (without using biofuels). Let’s hope so.

Dick Shamp served as president of Engineering Services Associated Inc. from 1960 to 2000.

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