The Oil Sands by Gordon Kelly

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Information about The Oil Sands by Gordon Kelly
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Published on October 10, 2009

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Table of Contents, sample chapters, bibliography from The Oil Sands: Canada's Path to Clean Energy? by Gordon Kelly, published by Kingsley and distributed by Fitzhenry & Whiteside

PUBLISHING

Copyright © 2009 Gordon Kelly All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, recording, or otherwise, without the prior written permission of the publisher, except in the case of a reviewer, who may quote brief passages in a review to print in a magazine or news- paper, or broadcast on radio or television. In the case of photocopying or other repro- graphic copying, users must obtain a licence from Access Copyright. Cover and interior design by Dean Pickup Project management by Kingsley Publishing Services www.kingsleypublishing.ca Printed in Canada by Friesens on 100% recycled paper 2009 / 1 Library and Archives Canada Cataloguing in Publication Kelly, Gordon, 1933– The oil sands : Canada's path to clean energy? / Gordon Kelly. Includes bibliographical references and index. ISBN 978-0-9784526-5-0 1. Oil sands–Environmental aspects–Alberta. 2. Oil sands–Environmental aspects–Saskatchewan. 3. Oil sands–Economic aspects–Alberta. 4. Oil sands–Economic aspects–Saskatchewan. 5. Clean energy industries–Alberta–Forecasting. I. Title. TN870.54.K45 2009 333.8'232097123 C2009-903190-6 Ordering information: www.kingsleypublishing.ca

Contents Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vi Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xi 1. Rising to the Challenge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 The Path to Clean Energy? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Where Is Oil Going? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Keeping the Oil Sands Viable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Funding Alternative Energy Research . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 2. Background and History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Early History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 “The Board” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 The First Oil Sands Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 The Oil Wars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 OSLO and Husky Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 AOSTRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 Alberta Today . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 Saskatchewan Today . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 3. The Peak Oil Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 The Ability to Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 Hubbert’s Peak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 World Demand and Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 4. The Geology of the Oil Sands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 The Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 Athabasca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69 Cold Lake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 Peace River . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 Formation Thickness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 Saskatchewan’s Oil Sands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72 5. The Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75 Mining Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76 Heavy Oil Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81 Imperial Oil and Cyclic Steam Stimulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83 Steam Assisted Gravity Drainage (SAGD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86 The Well Drilling Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90 SCC and SAGD Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93 Newer Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .95 Future Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101

6. Mining Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105 Syncrude . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .109 Athabasca Oil Sands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111 CNRL’s Horizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .114 Kearl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115 Fort Hills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .117 Northern Lights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .118 7. The In Situ Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121 Husky’s Heavy Oil Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122 Imperial’s Cold Lake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .124 CNRL Wolf Lake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .126 Encana’s Foster Creek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .127 Blackrock Hilda Lake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .129 Shell’s Peace River . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .129 Petro-Canada’s MacKay River . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .131 JACOS Hangingstone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .132 ConocoPhillips Surmount Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . .133 Total’s Joslyn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .135 Suncor’s Firebag . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .137 Petro-Canada’s Meadow Creek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .139 Opti-Nexen’s Long Lake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140 EnCana’s Christina Lake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .143 Devon’s Jackfish . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145 MEG Energy’s Christina Lake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .147 Connacher’s Great Divide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .148 8. The Province and Climate Change . . . . . . . . . . . . . . . . . . . . . . . . . .151 Kyoto and Climate Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .152 Carbon Capture and Sequestering (CCS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .160 The U.S. Cap and Trade Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . .165 9. Reducing Oil Sands Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .167 The In Situ Footprint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .181 Impact on Local Residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .190 10. Improving the Fiscal Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .195 Alberta Royalties and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .196 The Alberta Royalty Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .202 Sovereign Wealth Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .207 11. The Provincial Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . .215 The Infrastructure Gap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .216 The Need for a Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .225

12. Marketing Bitumen and Synthetic Crude Oil . . . . . . . . . . . . . . . . . . .227 Canadian Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .227 U.S. Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .229 Major Export Pipelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .230 The Bitumen Differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .232 The Upgrading Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .234 Alberta’s Upgrading Dilemma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .236 Upgrader Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .237 U.S. Refinery Upgrades . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .239 13. Possible Future Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .241 The Arctic Pipelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .241 The Need for Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .250 Broadening the Supply Channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . .252 Project Scheduling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .255 Finding Jobs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .256 TILMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .257 Accommodation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .258 On-site Accommodation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .260 Fly-In, Fly-Out Jobs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .262 The Benefits to North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .264 14. The Bumpy Slope from Hubbert’s Peak . . . . . . . . . . . . . . . . . . . . .267 Finding Energy Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .268 The Impact of Peak Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .271 The Impact of Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .272 The Ability to Cut Back . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .273 The Implications for Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .274 Implications of NAFTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .275 The Ideal Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .278 15. The Path to Clean Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .279 The Need for a New Direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .281 Carbon Sequestering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .285 Battery-Powered Cars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .285 Hydrogen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .291 Hydrogen Transfer and Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .294 Improving Wind and Solar Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . .297 Hydrogen Fuelled Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .303 The Research Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .306 Alberta’s Ability to Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .307 Closing Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .310 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .313 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .320

Technical Abbreviations Metric Gas Volumes Gas Price m3 cubic metres GJ Gigajoule Km3 thousands of cubic metres $/GJ dollars per trillion joules Mm3 millions of cubic metres Bm3 billions of cubic metres Oil Volumes Gm3 trillions of cubic metres m3 cubic metres Tm3 thousands of cubic metres GHG Gases Mm3 millions of cubic metres te tonnes Bm3 billions of cubic metres Kte thousands of tonnes Mte millions of tonnes Land Areas Gte billions of tonnes ha hectares km2 square kilometres 1 km2 100 hectares Imperial Gas Volumes Bb billion barrels Mcf thousands of cubic feet Tb trillion barrels Mmcf millions of cubic feet Bcf billions of cubic feet Land Areas Tcf trillions of cubic feet ac acre mi2 square mile Oil Volumes section 640 acres b barrels township 36 square miles Mb million barrels Electric Power Units Fuel Consumption kW kilowatt km/l kilometres per 100 litres MW megawatt mpg miles per gallon GW gigawatt TW terawatt Volumes or Amounts over Time Mm3/d millions of cubic metres/day Power Supply Bcf/d billions of cubic feet/day kW-hr kilowatt-hour Bcf/yr billions of cubic feet/year MW-hr megawatt-hour Mte/yr millions of tonnes/year GW-hr gigawatt-hour Gte/yr billions of tonnes/year m3/d cubic metres/day Pressure Mb/d millions of barrels/day kPa kilopascals Bb/d billions of barrels/day mPa megapascals Bm3/yr billions of cubic metres/year psi pounds per square inch vi

Abbreviations AECL Atomic Energy Canada Limited CHOPS Cold Heavy Oil Production with Sand AERCB Alberta Energy Resources Conservation CLAWR Cold Lake Air Weapons Range Board CME Canadian Manufacturers and Exporters AERI Alberta Energy Research Institute CMO Collateralized Mortgage Obligations AEUB Alberta Energy & Utilities Board (now AECB and AUC) CN Canadian National Railway AHFMR Alberta Heritage Foundation for Medical CNG Compressed Natural Gas Research CNOOC China National Offshore Oil Company AHPP Alaska Highway Pipeline Project CNRL Canadian Natural Resources Limited AHSTF Alberta Heritage Savings Trust Fund CO2 Carbon Dioxide AIF Alberta Ingenuity Fund CPV Concentrating Photovoltaic ANY Athabasca Northern Railway COSI Centre for Oil Sands Innovation AOSP Alberta Oil Sands Project CP Canadian Pacific Railway AOSTRA Alberta Oil Sand Technology and Research Authority CSS Cyclic Steam Stimulation (Huff ’n Puff) APG Aboriginal Pipeline Group DDT Dichloro-Diphenyl-Trichloroethane (insecticide) APMC Alberta Petroleum Marketing Board EIA Energy Information Agency ARC Alberta Research Council EOR Enhanced Oil Recovery ASRA Alberta Scientific and Research Authority EPA Environmental Protection Act AUC Alberta Utilities Commission (formerly AEUB) ERCB Energy Resources Conservation Board BTU British Thermal Unit EU European Union CAPP Canadian Association of Petroleum Producers EUB Energy and Utilities Board (now ERCB) CBM Coal Bed Methane FERC Federal Energy Regulatory Commission (U.S.) CCS Carbon Capture and Sequestration FIFO Fly-In, Fly-Out CDO Collateralized Debt Obligations FMGC Fort McMurray Group of Companies CEAA Canadian Environmental Assessment Act GCOS Great Canadian Oil Sands CEMA Cumulative Environmental Management As- sociation GDP Gross Domestic Product CERI Canadian Energy Research Institute GHG Greenhouse Gases CFC Chlorofluorocarbon GSC Geological Survey of Canada vii

H2 Hydrogen (gas) NWMP North West Mounted Police (now RCMP) HBC Hudson’s Bay Company NWT Northwest Territories HBS Harvard Business School OPEC Oil Producing and Exporting Countries HDI Human Development Index (UN) OSLO Other Six Lease Owners HSTF Heritage Savings Trust Fund OSUM Oil Sands Underground Mining IEA International Energy Agency PADD Petroleum Administration for Defence District IRAP Industrial Research Assistance Program PCP Progressive Cavity Pump JACOS Japan Canada Oil Sands Limited PdVSA Petroleos de Venezuela S.A. LNG Liquid Natural Gas PEM Proton Exchange Membrane LPG Liquid Petroleum Gas PV Solar Photovoltaic LHB Lloydminster Heavy Blend QEII Queen Elizabeth II (Highway) MBA Master of Business Administration R&D Research and Development MFT Mature Fine Tailings RCMP Royal Canadian Mounted Police (Mounties) MGP Mackenzie Gas Project SAGD Steam Assisted Gravity Drainage MSAR Multiphase Superfine Atomized Residue SCO Synthetic Crude Oil MSDC Mistee Seepee Development Corporation SOFC Solid Oxide Fuel Cell N&L Newfoundland and Labrador SOR Steam-oil Ratio NAFTA North American Free Trade Agreement SO2 Sulphur Dioxide NAR Northern Athabasca Railroad SWF Sovereign Wealth Fund NASA National Aeronautics and Space Administration TAP Trans-Alaska Pipeline NDP New Democratic Party TCPL TransCanada Pipelines Limited NEB National Energy Board THAI Toe-Heel-Air-Injection NEP National Energy Program TILMA Trade, Investment Labour Mobility Agreement NIABY Not In Anyone’s Back Yard USGS United States Geological Service NIMBY Not In My Back Yard WCSB Western Canada Sedimentary Basin NSERC National Sciences and Engineering WTI West Texas Intermediate Oil Research Council WWI World War One NT Northern Transportation Limited WWII World War Two viii

Preface T here are four reasons for writing this book. The foremost reason is to tell readers that the Alberta and Saskatchewan oil sands are not the envi- ronmental monster some people would have you believe. Contrary to what many activists say, resource companies are not destroying millions of acres of pristine wilderness and blackening western Canada’s skies in pursuit of big- ger profits from “dirty oil” and the “Tar Pits.” The activists love to focus on the “Before” and “During” pictures but never show the “After” pictures where the land has been restored to close to its original natural state and condition. They never show bison roaming the restored land. Development of the oil sands projects are proceeding as planned, in an or- derly manner with significant safeguards by the two provinces for people and the environment. This book includes dozens of pictures, enabling the reader to see how projects are being operated. Major environmental improvements are on the way and future developments will be “clean.” This book tries to tell read- ers that Chicken Little may be mistaken in predicting that the sky is falling. The second reason is to provide the “The sky is falling!” reader with an understanding of the impor- Chicken Little (aka Henny Penny) tance of the oil sands to the economic in a British adaptation of a fairy growth of Canada over the next few decades. tale from Buddhist Indian folklore Given reasonable oil prices and proper di- rection, the oil sands will be generating thousands of new jobs over the coming years and have the potential to buy billions of dollars of new equipment, services and technology. The book suggests it is better to develop the oil sands to keep Cana- dians employed and the economy strong than to shut them down, as suggested by many environmentalists, and import oil from the Middle East. The oil sands can become a major economic driver for Canada. After Black October 2008, this is an important factor for people across Canada who want jobs. The third reason is to present a challenge to the province of Alberta, espe- cially Premier Stelmach, to take the lead in becoming the environmental champi- ons of Canada by using the Heritage Fund to develop clean power sources for the future. Alberta should not only clean up the existing sources of emissions from the oil sands but support expanded research into new mobile power systems. Hydrogen and electricity will become the primary mobile energy sources of the 21st century. Alberta should help fund the research needed to make these technologies commercially viable in Alberta as soon as possible. The province should be at the forefront of new energy technology and not a follower. ix

Alberta will be a source of oil for decades but it should become a leader in other types of energy, especially hydrogen. Because it can take up to 30 years to design, test and replace existing power sources, it becomes important to start the search now. The fourth reason is to supply readers with information on how they can participate in the development of oil sands projects. The oil sands can become a major factor in creating jobs across Canada. The book contains clues for those who would like to work in the oil sands but live in other provinces such as British Columbia, Ontario, the Maritimes and Quebec. It can be done with “Fly-In, Fly-Out” (FIFO) employment. This option gives those who would like to live in other regions the opportunity to make a good living in the oil sands but still spend much of their lives with family and friends at home. It also reas- sures readers that the environmental impact is not as serious as many people sug- gest and that it will be reduced significantly in the future. Canadians rarely brag about the good things they do. We are similar in many ways to our American and British cousins, but have been the young, quiet one who doesn’t get much glory. We did not have a revolution but became a nation in a peaceful, civilized way. Our West was settled peacefully because the Hudson’s Bay Company and the Mounties brought law and order to the region for two centuries before the settlers arrived. How many people know about Vimy Ridge, in WWI, where Canadians captured the hill in three days with 17,000 casualties, while the British and French had lost 200,000 men over two years and not been successful? It was Canadians who stormed Juno Beach on D-Day, one of five beaches in the world’s biggest invasion, but there is not one Canadian featured in the movie The Longest Day. We are the quiet suppliers of wheat, lumber, pork, beef, maple syrup and many other raw materials to the world, as well as some of the best hockey players. It is time we played a more dominant role on the global stage and not let the kibitzers stop us. For some rea- son, we are our own worst critics. The world is changing and Canadians have the opportunity to play a leading role in making things better in the future. The Canadian oil sands are one of the largest oil reserves in the world. They are the largest mining project in the history of man, but few people really know much about them. Much of the information people have heard is wrong be- cause critics are deliberately spreading distorted information. This book is not going to make the reader an expert on the processes being used to get the bi- tumen from the oil sands to market, but it should help clarify the technology and complexity of the process. It is time the real story is told. x

Acknowledgements T here are many people I want to thank for helping me put this work to- gether. The first is obviously my wife, Jane, who has put up with “just an- other few paragraphs” around bedtime. This book is dedicated to her. Special thanks to four long-time friends who helped shape my life. Bill Deeks has been my best friend for much of my life. Marilou Taylor, my former secretary at Arthur D. Little, took the time to critique my rough draft and has always been a loyal friend. Walter Kudryk, my office-mate at Touche, went con- sulting around the world with me for 30 years. Unlike Johnny Cash, we did not get everywhere, but we had a lot of interesting times trying. Andre Nikitine, a classmate from Harvard Business School, died suddenly during our Russian oil venture. I owe many thanks to the four of you. You made my life much richer. I also want to thank many of the people in the industry who took the time and effort to talk to me about their chosen aspect of the oil sands sector. These include Harbir Chhina and Leanne Deighton from EnCana, Janet Annesley from Shell, Paul Spring of Phoenix Heli-Flight, Travis Robertson and Andrew Buzinsky of Weatherford, Syd Dykstra of Opti-Canada, Michael Fournier of Lockerbie & Hole, Brad Anderson at the Construction Owners Association of Alberta, Duane Mather of Nabors Canada, Ron Green of the PTI Group, Brian Harrison of Devon Canada, and Michael Shaw of Atco Global and Pat Klak of the Leduc-Nisku Economic Development Authority. Additional thanks also go to those who helped get the book into print: Dorinda Wong, Maureen Johnson and Charlene Dobmeier. If there are errors in the book, they are mine alone. xi

1 Ch ap t er On e Rising to the Challenge I t is the end of April 2009 as this book goes to print. The Canadian fed- eral election is over. The coalition failed to surface after Hon. Michael Ig- natieff took over leadership of the Liberal Party, and Jack Layton is still hungry for a Cabinet seat. The Dion Green Shift seems to have been relegated to the trash can, as has Mr. Dion. The Democrats won the U.S. election and President Barack Obama is in power. His party will control both the House and Senate. The crash of the global economy and stock markets has created major new concerns for the coming years. The Stelmach government has just issued a 20-year policy statement for the oil sands. President Obama has made his first quick trip to Ottawa. Before things can change again, this book is going to print. It is difficult to write about a moving target. Black October 2008, combined with oil prices of US$140/b over the past year, have created a serious recession in the global economy that will last for at least 12 to 18 months, but the world economy should recover. Countries around the world are going through the worst financial crisis in 80 years, but the au- thor expects they will recover because most of them are pumping huge amounts of cash back into the system to get it working again. The biggest question is timing. Canada is in good shape financially but will be hurt by the slowdown in key markets. Although the next few years will be tough, Alberta and Saskatchewan could become leaders in helping Canada remain strong. The Harper Conservative Government has brought down a budget that promises deficits of $64 billion over the next two years in order to stimulate the economy. This book outlines how the oil sands and Alberta might help Canada come through this crisis better and faster than most other nations. This book was originally aimed at telling people about the oil sands and how Alberta could take a major role in being the economic driver for Canada 1

The Oil Sands in a prosperous economy. It also made recommendations on how to improve the process. Nine months ago, the major problem was that the western Canadian economy was over-heated, but Black October changed things very quickly. The Saskatchewan economy is still strong but both Alberta and British Columbia are slowing down. The rapid collapse of world markets and oil prices suggest Prime Minister Harper and the premiers are going to have to work hard over the next few years to keep the Canadian economy healthy. This book puts forward ideas of how the oil sands can help Canada become a stronger economic driver. There are many who are suggesting that the oil sands have hit a plateau and that the boom days are gone as project after project is delayed or cancelled. There is also concern for their impact on the environment. This book suggests that the slowdown is good because it gives time for future projects to evaluate how they can be improved to reduce capital and operating costs through more efficient planning and the use of improved technology. It also assures readers that the environmental impact is not as serious as many people suggest and that it will be reduced significantly in the future. The Path to Clean Energy? Early readers have asked how the oil sands can possibly be the path to clean energy in Canada. Right from the start it is important to be aware of the main points of the book. These are: • Alberta can develop the oil sands in a “clean” manner and will do so. • The world is likely to experience “Peak Oil” between 2015 and 2020. • Alberta should invest in research of “clean” fuels for the future. Canada has the capability to be one of the leading nations of the world in the 21st century and both Alberta and Saskatchewan can help lead the way. This book suggests Alberta should become a leading supplier of both “clean” oil and renewable energy power to North America in 2020 and beyond. Saskatchewan is a world supplier of uranium. For those not familiar with the terminology, “clean” energy does not emit excessive greenhouse gases (GHG), or sequesters them; while alternative energy sources, once in place, emit hardly any GHG. How can the oil sands become the supplier of “clean” energy? The answer is through technology. If Canadians can take bitumen and heavy oil and turn it into gasoline and fuels, they can take the process further and do it “cleanly”. It must be remembered that emitting GHG has only become a target for environmentalists since 2000 when they came to the conclusion that these gases were causing global climate change. The oil sands and heavy oil projects were designed and built two and three decades ago and conformed with the laws existing at that time. 2

Rising to the Challenge The energy industry in both provinces has made a firm commitment to develop their oil and energy resources in an environmentally benign manner, but it takes time and money to change direction and technology. The oil sands sector is firmly committed to making the oil sands a clean source of energy in the future and will achieve that goal within a few years. It has the money, the resources and the technology to make it happen. This book outlines how it can succeed. This is primarily a book about Alberta because most of the oil sands are in that province, but it also includes Saskatchewan because some of the oil sands cross the border and most of the heavy oil is in it. The two provinces are major exporters of energy to the world. Saskatchewan is the largest uranium exporter on the planet and the energy that it exports in yellowcake annually exceeds the energy in Alberta’s oil and gas. At the same time, the book looks at the need for new mobile sources of en- ergy for the future. Energy research, sponsored by Alberta, should be expanded and taken to the next level to develop cleaner, more efficient fuels of the future. Alberta has been successful with this approach in the past. In 1974, Premier Lougheed set up the Alberta Oil Sands Technology and Research Authority (AOSTRA) to develop oil sands technology. He recognized that Alberta’s con- ventional oil was running out. In order to continue being a supplier of energy to Canada for the next 80+ years, it was necessary to invest in the oil sands. AOSTRA was a research organization that invested $670 million in oil sands research from 1974 to 1999 that turned bitumen into an economically usable fuel. This was not government research, but private sector research par- tially funded by the province. This was the best investment the province ever made. It resulted in $120 billion of capital investment over the past 20 years and could result in another $200 billion in the coming decades. Alberta needs to make a similar investment in research now in order to generate the business opportunities for 30 years from now. Future mobile energy will revolve around hydrogen and batteries and it is essential that Canada become a leader in these technologies. This approach is described in greater detail in the final chapter. Where Is Oil Going? It is time to recognize that oil is running out on a global basis and that new al- ternative sources of “clean” transportation energy will have to be used over the next 20 to 30 years. There are many sources of renewable energy—solar, wind, nuclear and electricity—that can provide GHG-free power but they cannot be used for transportation. A windmill is no good when your car’s gas tank is dry. It is going to take time to develop new power sources that can reduce depend- ence on diesel oil, jet fuel and gasoline. Alberta should become a leader in one or more of these renewable energy 3

The Oil Sands technologies if it wants to continue to be a supplier of energy to Canada. Alberta will continue to have lots of oil, but it should also be able to supply alternative energy and power. It is time for Alberta to invest in research across Canada in order to develop the clean transportation fuels needed for the future. Electric- ity, batteries and hydrogen power will be the key to energy success by 2040. Al- berta should focus its efforts in these areas, along with the associated technology. Canada is the largest per capita user of hydrogen in the world, so we should aim to become leaders in that technology. It will not be easy, but Canada has the capability to become the leader in these sources if we start now, work together and are committed. Above all, it requires leadership. The objective is to get enough infrastructure and technology into place as soon as possible to create, test and improve the power generation equip- ment needed to replace oil. The world is in a race to see whether oil runs out first or whether the new power sources make it obsolete. Alberta should aim to be in the enviable position of being able to supply both oil and alternative sources of energy. Big Oil says there are oil supplies for 40 years but the latest International Energy Agency (IEA) report says the world will be 15 Mb/d (15 million barrels a day) short of oil by 2015 unless new oil fields are found. That is 2.4 Mm3/d (2.4 million m3 a day) for those who think in metric terms. This prediction is a se- rious shortfall that is almost 17% of demand. A recent survey of the top 800 fields in the world shows volumes are declining at rates faster than expected. No one knows for sure when Peak Oil might happen but this book suggests it will likely first occur between 2015 and 2020. It will not be caused by a shortage of oil to be found but by an industry that has too many “cooks” with different agendas. The industry could fail to develop enough supplies to meet rising de- mand. Low prices in 2008 and 2009 will have an impact. Between restrictions on drilling, NIMBYs, environmental controls and National Oil Companies (NOCs) owning the best prospects there could be delays that will prevent enough new oil supplies being brought on stream to meet demand. Oil will still continue to flow when Peak Oil hits. There just won’t be enough to meet the demand. Half of the world’s oil will still be available, but there will be a shortage until new supplies can be brought on production. The first Peak Oil crisis will likely be short but could be followed by more serious crises, depending on whether the world is willing to let the oil industry find and produce more oil in the following years. This book suggests that Peak Oil is closer than people in the oil industry are willing to concede. Big Oil assures us that this will not happen until 2040 or be- yond. (What else can they say?) The reality is that the world is consuming some 31 Bb/yr (31 billion barrels of oil annually or 1,000 barrels per second) but the oil in- 4

Rising to the Challenge dustry has not been finding replacement volumes of that magnitude for decades. The world is relying on about 25 declining supergiant oil fields for much of its supply. The graph in Exhibit 1 shows that in order to maintain the total energy needs of the world, new power sources will be needed in the future to replace oil. 1. Past and Future Sources of Power These new sources are labelled as Hydrogen and Alternative sources. Alter- native includes such power sources as solar, wind, batteries, biofuel, microhydro, tidal, geothermal, etc. Nuclear and coal power will continue to grow. Solar and wind power have been growing rapidly but are still small and highly inefficient. Batteries are expected to start making a major blip in 2009 with their use in cars. As an energy source, the term “battery” is incorrect as batteries store electricity generated elsewhere, and belong in a separate category. Hydrogen, including fuel cells, is just beginning to have an impact but will prove important as technology improves and the infrastructure grows. Canada should be a leader in that growth. If the world is running out of oil, it makes the oil sands more valuable and development of alternative power sources especially critical. The world is facing a situation where there might not be enough available alternative power sources, especially for mobile power, in time to replace oil. If Big Oil is wrong and does not find enough oil to meet future demand to 2040, there is no other energy source to replace it. The world will be in a terrible mess. The world relies on oil, 5

The Oil Sands especially for transportation. If we develop new sources of power before oil runs out, there will be no harm done. There is security in having alternative sources ready. Alberta (and Canada) should aim to be the supplier of two kinds of “clean” energy as soon as possible. The advent of Peak Oil before 2020 brings with it the potential for high oil prices in the early years of the coming decade, as shown in Exhibit 2. The slow- down in the world economy has dropped oil prices below US$40/b in early 2009. This low price will be temporary and oil should rise to US$50/b to $60/b later in 2009. By 2010, the price of oil is expected to fluctuate somewhere be- tween US$60/b and US$70/b. While OPEC is not a strong cartel, it is expected to be able to keep the global price within the US$60/b to $100/b range after 2010, but the price will continue to rise over the longer term. Oil will likely hit US$150/b within the decade unless massive supplies of new oil are found. 2. Price of Brent Crude Oil price is very important because oil sands projects in Alberta are depend- ent on the global price of oil. Fortunately, start up of new projects is not based solely on the price of oil at the time when the decision to proceed is made. Most SAGD projects, for example, can be profitable at US$60/b if they have good sands, use the latest technology and are built and operated with tight cost controls. Because the oil flow lasts for 10 years or more, the important factor is the average price during the production period. Oil sands construction may slow down during 2009 but the province will still be kept busy with other projects. Construction activity will be stronger in future years as North America will still need oil and Alberta is a reliable source. It will be even more valuable if it is considered “clean” oil. 6

Rising to the Challenge Keeping the Oil Sands Viable The economic future of Alberta is closely linked with the oil sands. This sug- gests it is very important to the Alberta government to keep them economi- cally and environmentally viable. In February 2009, the Stelmach government made that commitment. This means getting costs down and curbing environ- mental impacts. The province is already supporting several programs but few people outside of Alberta are aware of them. This book explains them. Climate Change In the minds of most people across the globe, the world is definitely warming up. The majority of people believe climate change is being caused by GHG and are prepared to support efforts to control them. The IPCC (Intergovernmental Panel on Climate Change) is leading efforts to see that GHG sources are forced to curb emissions. Alberta has recognized the politics of the situation and has commit- ted itself to sequestering provincial GHG emissions, is developing other clean sources of energy and has a moderate carbon tax in place. This is good policy. It is important for the province and oil industry to correct the problems of “dirty oil” and be the suppliers of clean technology to the world rather than to continue being a target for activists. Alberta is a responsible province and should be known globally for more than tailings ponds and dead ducks. Al- berta is already pushing industry to find the answer to the tailings ponds within two years and is leading the charge to become the leader in the sequestering of GHG. It is also urging the oil sands industry to use new technology to reduce the environmental impact of the oil sands. This book says it will be successful. Building Infrastructure The province has been lagging in the construction of highway and rail links that could help the oil sands projects reduce their capital costs. Specific prob- lems include the need for a four-lane divided highway to Fort McMurray, a heavy-load rail link to the oil sands and a high-speed commuter train along the Edmonton-to-Calgary corridor. The slowdown of the economy will allow the four-lane road (under construction) into Fort McMurray to be completed. CN Rail is proposing to move bitumen by tank car from the oil sands so im- provements on the rail line must be going ahead. There is still a need for im- proved commuter rail transport in the province, especially into Fort McMurray. Infrastructure is important to reduce the capital costs of oil sands projects and the province is closing the gap. 7

The Oil Sands Encouraging Better Technology Oil sands technology is constantly improving. Many processes have already been implemented but others such as sequestration and the elimination of the tailings ponds are still a year or two away. The rate of bitumen recovery is in- creasing while impact on the land has been reduced. Other technologies can re- duce the need for water, natural gas and land use and should be encouraged. This reduces the cost of future oil sands projects and improves the quality of the product. These technologies are discussed in greater detail in the book and should reduce both the costs and the environmental impact over the years. Scheduling the Oil Sands Oil sands projects have recently experienced a series of delays and cancella- tions. The slower approach in 2009 could be beneficial in reducing costs. Dur- ing this slow period, the province should encourage a more orderly process for scheduling new oil sands projects. At the same time, there is a need to find more resources from across Canada. New projects will continue to be devel- oped for most of the coming century so there is no reason why they cannot be properly scheduled. The reserves are known, as is the demand for them. The industry should work out a means of building projects in sequence to meet that demand at the lowest cost. The planning tools are available; the province should ensure they are used. The Alberta government has indicated it is com- mitted to orderly development of the oil sands. One way or another, it must achieve that objective. Spreading the Oil Sands Benefits Alberta and Saskatchewan are already working to find additional people and re- sources from across Canada and other countries to help the industry reduce costs. The province has been a strong supporter of the program to attract more workers on a Fly-In, Fly-Out (FIFO) basis and finding new suppliers globally to provide the modules needed by oil sands projects. While this is largely a pri- vate sector program, the support of the province and other provinces is im- portant for wider credibility. Alberta should push harder to reduce provincial trade barriers and encourage more participation by the other provinces to be- come suppliers of labour and equipment to the oil sands, especially during the coming “tough” times. 8

Rising to the Challenge Keeping the Oil Sands Profitable The province has seen a serious drop in oil sands royalties in 2009 because of the lower profits of the oil sands projects from low oil prices. It may be neces- sary to adjust oil sands royalties in 2010 and 2011 to encourage expansions and new projects if oil prices remain low. The economic benefits to Canada of new projects are too important. The Generic Royalty had many benefits, especially the Accelerated Capital Cost Allowance (ACCA), which could be brought back, in cooperation with the federal government, to ensure new projects continue to be built. The federal government has an equal interest in keeping the oil sands economy strong because of the employment and taxes that are gener- ated. Oil prices should rise over the next few years, but both governments know they need to keep the oil sands sector financially healthy to generate revenues. Funding Alternative Energy Research Canada has the potential to become a global leader in many areas over the com- ing decades, but especially in the alternative energy field. Canada is the lead- ing per capita user of energy in the world (ignoring small refining countries). We used 3,516 kg of oil equivalent per capita in 2007 compared to the U.S. at 2,862 kg. Canada has experienced suppliers in most areas of oil, gas, nuclear, hydro, wind, tidal and alternative energy sources. We lag in solar because of the short winter days. Canada is the largest per capita user of hydrogen in the world, with Al- berta being the leader in this country. The country has talented energy research capability all across the country, but there is a need to provide more focus, pump in more money and create a sense of urgency to become world leaders in non-polluting energy, especially in the transportation area. The world is nearing a major turning point in energy and Alberta should fund research across Canada to become a leader in renewable power sources. Most Canadi- ans would likely agree that this is the field of endeavour where we should excel. This suggests an opportunity for Alberta. Putting surplus funds from the semi-dormant Alberta Heritage Savings Trust Fund (AHSTF) into research is the best way to invest it for future generations. The Heritage Fund was meant to be an investment for the future not a “rainy day” fund. A rainy day fund will not be necessary if oil prices are rising, but being a leader in other energies will be essential 30 years from now. The money should be invested creatively so that it will create jobs for both present and future generations of young people. If invested as wisely as the AOSTRA funds, it will provide many times its value in the future rather than sitting in a semi-dormant fund. AOSTRA proved the 9

The Oil Sands wisdom of investing in future energy research. Alberta should do it again, only this time with hydrogen and stored power as the objectives. Research into sources of clean power of all types, but especially mobile power, would be a major investment in the future. This would show leadership at the national level and could be the basis of major exports from Canada in fu- ture years. Alberta would be strengthening Canada’s competitive future by pumping research money into universities during slow economic times that will pay off in the future. A united research approach from many provinces to cre- ate new sources of clean power, supported by the Heritage Fund, should be suc- cessful. Canada has very capable universities. It is time they worked together to make this research successful. This is discussed in greater detail later in the book. This research program will need to be significantly larger than the AOSTRA program. A preliminary analysis suggests desired results could be achieved by aiming for 4,000 projects over 15 years at $1 million per project, for a total of about $4 billion. Maximum expenditures in any year would be about $500 mil- lion while the average would be about $250 million. The AHSTF held some $15 billion in assets in 2008, even after the market crash, so this funding level is well within the fund’s ability to handle. The Alberta Energy Research Insti- tute (AERI) has the goals and structure in place to carry out this work. It now needs broader funding and expansion to achieve these objectives. Canada has never been challenged in a single high technology research proj- ect with funding of this magnitude. It would give a major boost to energy research across Canada, especially during tough economic times. Canada needs to support “research-ready” projects for masters and doctoral candidates that will challenge them to create a cleaner world. This approach will direct their environmental zeal towards getting real results, by developing new hydrogen technology and innova- tive concepts in mobile power. The best thing about the AOSTRA research ap- proach is that it had the flexibility to invest in all types of novel ideas. We are racing against other countries that are pouring billions of dollars into research on new technology to reduce their reliance on oil. Much of this is going into coal and nuclear energy, but Canada should focus its efforts on hy- drogen and electricity for mobile power sources. Canada has a greater need for transportation energy than any other nation in the world and should focus on these areas. It also fits better with the needs for future major exports from east- ern Canada (i.e., cars, trucks, planes, trains and new systems). Canada has the capability to rise to the challenge. It may take a few years to get up to full speed but with AHSTF funding, innovations in new sources of energy and power could be in use in Canada within the coming decade. The book outlines how the oil sands are a natural path for Canada in its search for clean energy for the future. 10

2 Ch ap t er Tw o Background and History T he first white man to see bitumen from the largest oil deposit in Canada was Henry Kelsey, manager of the Hudson’s Bay Company (HBC) at York Factory in 1719, when a Cree, Wa-Pa-Su, brought him a sample. In those days, HBC traders didn’t travel far from their forts around the Bay and let the native trappers bring their furs to them. It was not until 1778 that a North West Company trader, Peter Pond, actually saw the deposits when he entered the Athabasca River watershed via the Clearwater River. A picture of the sands is shown in Exhibit 3. Pond described the oil sands de- posits along the river and how the local Natives used the thick gummy mate- rial to waterproof their canoes. He was followed in 1790 by Alexander Mackenzie, another North West Company explorer, who paddled up the Athabasca River past “bituminous fountains” on his way to the Arctic Ocean using the river that would later bear his name: At about 24 miles from the fork (of the Athabasca and Clear- water Rivers) are bituminous fountains in to which a pole of 20 feet long may be inserted without the least resistance. The bitumen is in a fluid state and when mixed with gum, the resinous substance collected from the spruce fir, it serves to gum the Indians’ canoes. In its heated state it emits a smell like that of sea coal. Diary of Alexander Mackenzie, 1790 Sir John Richardson first passed through the area in 1819 on his search for the Northwest Passage, and again in 1848 in a search for Sir John Franklin’s lost expedition. His knowledge of geology allowed him to recognize that the oil 11

The Oil Sands sands overlaid the older Devonian limestone and that they covered large areas of the region. It would be years before many white people came to the region again. The world needed to find a use for oil first. Canada was one of the earliest users of petroleum with the development of oil wells dug by hand near Petrolia, Ontario, in 1856, a year before Colonel Drake drilled the first oil well in Penn- sylvania in 1857. The Petrolia oil fields dominated the oil indus- try in Canada for many years and led to the establishment and growth of one of Canada’s large refining and petrochemi- cal complexes at Sarnia. The oil fields’ location in Lambton County, only 27 km (16 mi) east of the St. Clair River, made Sar- nia a logical location for build- ing the refining facilities that 3. Handful of Oil Sands needed large amounts of water. One of the companies that start- ed in Ontario in 1880 was Imperial Oil Limited, a firm that has been a leader in the oil industry in Canada ever since. Between 1860 and 1900, a major share of Canadian petroleum needs was supplied from the Ontario oil fields. The Sarnia refineries continue in that role to the present day. More important, this was the training ground for many of the people and companies who were to build Canada’s petroleum industry. The Petrolia oil fields are a historical site now and worth a visit. Early History In 1867, the Dominion of Canada came into being and the British Crown bought back the Hudson’s Bay Company grant lands before turning them over to the Canadian government in Ottawa. By 1870, the Hudson’s Bay Company had merged with the North West Company and the expanded HBC built a fort at the junction of the Clearwater and Athabasca rivers to trade furs. They called it Fort McMurray after their chief factor in the region. In 1875, the Geological Survey of Canada (GSC) sent botanist John Macoun through the area. He reported on the sands and the interesting observation that water would wash the oil out of the sand. In 1882, the GSC sent Dr. Robert Bell to further define the discovery, followed the next year by G. C. Hoffman, who 12

Background and History also reported that the bitumen could be separated from the sand using water. By the end of the 19th century, the Ontario oil fields were declining and the Canadian oil industry was searching for new sources of petroleum. The oil de- posits in the northern Alberta forests attracted attention from a variety of people. In 1905, the provinces of Alberta and Saskatchewan came into existence, but the federal government specifically did not transfer the mineral rights to them in the belief that natural resources could be better developed by the federal government. Initially it was believed that the oil in the oil sands came from large pools underground that could be tapped by drilling wells. In 1906, Alfred von Ham- merstein earned his place in history for being the first to drill six wells in the area, but he found salt instead of oil. Others tried, with no useful results. Heavy oil was found in small fields in Saskatchewan in 1911, but it was never devel- oped to any degree because the heavy oil was too difficult to refine at that time. During WWI, there was a renewed interest by the federal government in trying to develop the oil sands. In 1913, the Mines Branch sent Sydney Ells, an engineer, to carry out a more detailed survey of the oil sands. His maps are the first comprehensive assessment of the resource. He felt the asphalt had poten- tial for road building and found a California refinery that could process the material. In 1915, Ells was able to access funding and did some road building in Edmonton with the bitumen, but little else happened in this respect during the war. In 1925 and 1926, Ells carried out more core drilling to further define the size and depths of the deposits. For over 40 years, Ells was active on behalf of the federal government in trying to develop the oil sands, and was an hon- oured guest when the first oil sands plant opened in 1967. He is remembered today by a river bearing his name near the Bi- tumont site. The locations of these early sites are shown in Exhibit 4. In 1920, Alberta started to take more interest in developing its natural resources. It hired Dr. Karl Clark, who had worked with Ells, and set up the Scientific and Industrial Research Coun- cil of Alberta the following year. In 1930, its name was changed to Alberta Research Council 4. Past Place Names (ARC). Over the next 30 years, 13

The Oil Sands there was a strong rivalry between Ells and Clark and the federal and provincial governments over the oil sands. This brief outline cannot begin to cover all of the people and companies who tried to develop the oil sands and failed, but there were many. The magnitude of the oil deposits that were found in the “tar sands,” as they were called in those days, was well known and attracted dozens of peo- ple who hoped they might make their fortunes developing this source of ener- gy. This book only tracks a few of the more prominent participants. Two of the more successful people were Dr. Karl Clark and Sydney Blair, who developed a process using hot water to separate the bitumen from the sand. In 1924, they built a small separation unit at the University of Alberta and followed this up the next year with a larger model at the Dunvegan rail yards on the outskirts of Edmonton. They brought in oil sands by hopper car from the Fort McMurray area for their tests. Contrary to expectations, they found that the major problem was not separating the bitumen from the quartz sand and water,

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