This has been posted elsewhere, but the reserve table at the bottom was missing in some, so I re-post here.
Canada oil sands favor Midwest
Illinois, NW Indiana refineries, pipelines gear up for growth
By Robert Manor
Tribune staff reporter
Published March 13, 2005
A swelling tide of petroleum is set to pour out of Canada in coming years, freed from primordial sands for a journey to refineries in Illinois and northwest Indiana.
Illinois is the main refining center and port of entry for oil from Canada, the largest supplier of petroleum to the United States.
Now companies are proposing three new pipelines linking the Chicago area or Wood River, near St. Louis, both major refining and transshipment points, with Alberta oil sands fields more than 1,400 miles away. The estimated cost is nearly $3 billion.
Canadian producers say that after satisfying the five refineries here, they will use Illinois pipelines to serve refiners in Oklahoma and perhaps Louisiana and Texas.
"Illinois is our primary market for Canadian oil," said Greg Stringham, vice president of the Canadian Association of Petroleum Producers. "We may have to push beyond that market into the Gulf Coast. It would route through Chicago."
Oil sands production is set to increase to 3 million barrels a day from 1 million over the next 15 years, with the U.S. likely the primary buyer.
Oil sands--a doughy mix of hydrocarbons, sands and clay--underlie 50,000 square miles of Alberta. With at least 175 billion barrels of recoverable petroleum, it is quite likely the world's largest oil deposit.
Strip mined or heated by steam and extracted by wells, oil sands yield an oil component called bitumen that can be made into synthetic petroleum.
The oil sands in Alberta yielded $10 billion in taxes and royalties to the provincial government last year, a figure certain to rise. The province's economy is growing faster than any other in the country, in part from high oil prices.
But there is a downside to the oil sands boom.
At best, oil sands extraction laces the earth with roads, pipes, drilling pads and storage tanks that remain in place for decades. At worst, extraction means obliteration of forests and deep excavation, gashing the earth over many square miles.
Provincial law requires oil companies to restore areas they strip mine, and they have tried to put the land back into place.
"But they are not restoring forests," said Helen Walsh, arboreal campaign director for the Canadian Parks and Wilderness Society chapter in Edmonton. "They are restoring grasslands. Ecologically speaking, it's going to be very difficult to put it back into forest."
There is a theory that the oil sands of Alberta were once deposits of conventional petroleum. Bacteria consumed the lighter components of the crude, leaving behind bitumen the color of coffee and the consistency of cold molasses.
Oil sands, sometimes referred to as tar sands in the U.S., are not the energy source of choice.
Extraction is expensive. Strip mining requires huge trucks and power shovels. Deep deposits require steam injection to warm the bitumen, temporarily making it a liquid that can be pumped by a well. And the bitumen must be mixed with lighter oil or processed into synthetic crude to become fluid enough to flow through a pipeline.
Economics more attractive now
Exploitation of the oil sands fields began 30 years ago, but cheaper oil from elsewhere limited its appeal.
Alan Herbst, an energy consultant with Utilis Energy, said that in recent years the economics of oil sands production have become more seductive. It costs under $20 a barrel to produce a barrel of oil from oil sands.
"With crude oil [selling for] over $50 a barrel, it's definitely a winning deal," he said.
And there's also something else appealing about synthetic crude from Canadian oil sands: It comes from a stable country that welcomes U.S. investment.
American petroleum companies are excluded from Mexico or Saudi Arabia. And output from Nigeria and Venezuela, essential to the U.S., is precarious because of political and social unrest in those countries.
So, refineries here have added capacity and equipment needed to handle Alberta oil.
David Sykuta, executive director of the Illinois Petroleum Council, said the state's four refineries have invested heavily, as has another refinery in nearby Whiting, Ind.
"We spent hundreds of millions of dollars on [facilities] to use this," Sykuta said of the oil sands petroleum. "You have to have a very sophisticated refinery."
In 2003, for example, the ConocoPhillips refinery at Wood River bought part of an adjoining, closed refinery.
"The integration of these assets into the Wood River Refinery help it process the heavy crude from Alberta," said John McLemore, a spokesman for ConocoPhillips.
So much new crude from Alberta oil sands is expected in coming years that Illinois may export it.
A subsidiary of Exxon Mobil Corp. owns a pipeline that brings crude oil from Beaumont, Texas, to refiners here.
"The flow has typically gone from south to north," said Brian Dunphy, a spokesman for the subsidiary, Exxon Mobil Pipeline Co. "What we are examining is reversing the line."
Plans are already under way to move Alberta oil from Wood River to Oklahoma refineries.
Abundance, at a price
The oil won't run out anytime soon. Energy analysts say Alberta can produce 3 million barrels a day for at least 165 years.
But the environmental cost can be huge. Much of the production comes from strip mining forested land in a region about the size of Florida.
To prepare the site, workers clear-cut stands of spruce, jack pine and aspen. Then earthmovers scalp the soil, sometimes removing 100 feet or more of earth to reach the oil sands.
The industry refers to such land as "disturbed." In Alberta, a typical mine disturbs about 65 square miles, whether by strip mines or a network of steam injection and extraction wells.
So far 162 square miles have been disturbed. Eventually that will rise to 682 square miles, or about three times the land area of the City of Chicago.
"These operations are so immense," said Dan Woynillowicz, a policy analyst with the liberally oriented Pembina Institute.
He said the land to be mined is ecologically significant.
"There are a lot of wetlands--bogs and fens," Woynillowicz said. "It is habitat for moose and the threatened woodland caribou. It is quite lush. We may cause irreversible ecological harm to wildlife, to fish, to water."
The law requires oil companies to eventually restore the strip-mined land, with final approval by the provincial government. So far none has been approved, though the oil industry says there is no question the land will be reclaimed.
Tim Morrison, spokesman for Alberta Department of Environment, said his agency mandates that disturbed land be restored so it can support uses similar, but not necessarily equal, to those before it was strip mined.
"Companies tend to reclaim as they mine," Morrison said. "In 2003, there were 127 square miles disturbed. Twenty-two square miles were reclaimed."
Walsh, of the Canadian Parks and Wilderness Society, said there are efforts under way to mitigate the damage done in the production of oil sands, but no effort to halt the mining.
She said increased strip mining seems inevitable.
"The markets are driving the petroleum industry to this horrible exploitation," Walsh said. "It's mostly demand from the U.S.
"The petroleum industry has so much power and it means so much money to the Alberta economy," she said.
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Fuel frontier
Western Canada's wealth of untapped oil is a major source for the U.S. More than 40 percent of Canadian crude oil--mostly from oil sands in Alberta--is sent to Illinois. Other major markets in the U.S. and Canada also are indicated in the map below.
FLOW OF CRUDE OIL
In thousands of barrels per day for 2004; arrow widths represent relative oil distribution
OIL SANDS PRODUCTION IN CANADA
Number of barrels per day
1996 444,000
2003 778,000
CRUDE OIL RESERVES BY COUNTRY
In billions of barrels for 2004
Saudi Arabia 259
Canada 179 (Oil sands reserves: 175 billion barrels)
Iran 126
Iraq 115
Kuwait 99
Abu Dhabi 92
Venezuela 77
Russia 60
Libya 39
Nigeria 35
U.S. 22
Van Tsui and Marty Bach/Chicago Tribune
Sources: Canadian Association of Petroleum Producers; Oil & Gas Journal, Dec. 2004
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