Canada's oil sands: 'most destructive

project on Earth' or 'ethical oil'?

This case outlines the ethical controversies surrounding the development of the
Canadian oil sands. It sets out the pros and cons of the oil sands and examines the
role that these factors play in broader political decisions in the US and Europe about
supporting imports from the Canadian oil industry.

Despite the oil industry being no stranger to controversy, Canada’s oil sands have become
probably the most hotly contested development in decades. Extracting oil from the heavy,
extremely viscous mixture of sand, clay, water, and bitumen has become economically
viable within recent years. However, critics argue that the social and environmental costs
are excessively high. Tar sands extraction requires much greater quantities of water than for
conventional oil, it imposes a far higher burden of carbon emissions, and it has been
associated with a range of other pollutants, including mercury contamination. According to
the Sierra Club, the largest environmental NGO in the US, the oil sands produce ‘the most
toxic fossil fuel on the planet’.

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Nevertheless, oil sands development also has its legions of supporters, especially in
Canada, where most commercial extraction takes place. As exemplified by the publication
of ‘Ethical Oil: The Case for Canada’s Oil Sands’ by Canadian lawyer and lobbyist Ezra
Levant, the Canadian oil sands have been argued by proponents to be a source of ‘ethical
oil’. This is justified by Levant and other supporters by the enormous economic benefits of
the oil sands; for instance, they have been proven to be the third largest oil reserves in the
world, with an almost doubling of production forecasted between 2017 and 2038 to 5.5
million barrels by 2038. Moreover, this argument has been compounded by the fact that
Canada, when compared to many of the other largest oil-producing countries, has a strong
track record of upholding democracy, human rights, and environmental protection.

Canada's oil sands industry

Oil sand is a naturally occurring substance that can be found in several locations around
the globe, including Kazakhstan, Russia, and Venezuela. However, the deposits in the
western Canadian province of Alberta are, so far, the largest and most commercially
developed source in the world. Alberta’s oil sands are located in an area of around 140,000
square kilometres in the north of the province, with Fort McMurray being the main urban
hub for the industry and supporting services.

The Albertan oil sands have long been known to the local First Nations who used the
bitumen to seal seams on their canoes. European explorers provided the first written
accounts of the oil sands in the 18th century and the first patent for commercial separation
processes to extract crude oil was awarded as early as the 1920s. Commercial operations
only began seriously in the late 1960s with the establishment of the first oil sands mine.
Development initially occurred relatively slowly, with the second and third mines only
opening in the late 1970s and early 2000s respectively.

The initially slow pace of development was mainly due to the high cost involved in
extracting crude oil from the oil sands; this, coupled with low oil prices and relatively
abundant supply from other sources, made the oil sands economically unattractive. With
the spike in oil prices that began around the turn of the century, the rush to secure greater
energy independence in the face of an unsettled Middle East, and dwindling supplies
elsewhere, investment flowed into the Albertan oil sands in the early 2000s. A swathe of
foreign energy companies, including Shell, Chevron, Total, Statoil, Exxon, and
ConocoPhillips, as well as the Korean National Oil Company, and CNOOC, China’s largest
producer of offshore crude oil, joined Canadian companies Suncro Energy and Syncrude to
boost annual investment in oil sands extraction to just over $30 billion by 2012. From just
over half a million barrels of bitumen a day in 1997, the oil sands industry in 2017 produced
almost 2.77 million.

However, despite production increasing year on year, the oil market downturn in 2014 saw
investment in new oil sands projects decline by up to 2/3, falling to around $10 billion
dollars a year in 2018. Difficulties in bringing new pipelines online, escalating carbon taxes,
and a cap on greenhouse emissions from the oil sands have dampened many investors’
interest in the Canadian oil sands.

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The pros and cons of the oil sands

The rapid expansion of the oil sands has brought a host of economic benefits to the local
Albertan economy and to Canada as a whole. According to the Canadian Energy Research
Institute (CERI), almost every community in Canada has been touched by oil sands
development through the stimulating impact it has had on job creation and economic
growth. Some of the headline impacts promoted by oil sands supporters include:

• Employment in Canada’s oil sands industry as a result of its expansion is expected to

grow from 206,000 jobs in 2017 to 461,000 jobs in 2027.

•   Between 2014 and 2015, 3,400 Canadian companies outside of Alberta supplied the oil
sands industry with goods and services.

•   Between 2014 and 2015, 371 companies in Quebec earned CAD$1.2 billion in business
contracts related to the oil sands industry.

•     The oil sands industry is expected to contribute CAD$1.6 trillion to the Canadian
economy between 2017 and 2027 and CAS$521 billion to the US economy over the 25-
year period from 2010 to 2035.

•     The oil sands industry will pay an estimated CAD$139 billion in federal taxes and
CAD$98 billion in provincial taxes between 2017 and 2027.

•     In the US, the oil sands industry is expected to contribute $16 billion to gross state
product and create or sustain 145,000 jobs between 2017 and 2027.

•   In 2015 and 2016, 399 indigenous companies, representing 65 communities from across
Alberta, had direct business with oil sands operators, valued at CAD$3.3 billion.

On the other hand, many critics have highlighted the significant environmental problems
caused by oil sands development. Although all oil sands developments must meet
Canada’s environmental protection regulations, since production began ramping up in
earnest after the turn of the century, environmentalists and other critics have pointed to a
litany of negative environmental impacts. For example, some of the studies conducted by
researchers and environmental groups conclude that:

•     Research suggests that oil sands-based petroleum production releases 20% more
greenhouse gases than conventional petroleum production.

•   Oil sands emissions accounted for 10% of Canada’s greenhouse gas emissions in 2017
and 0.14% of global greenhouse gas emissions. Canada is now among the top ten
greenhouse gas producers on an absolute basis.

•     Planned expansion of oil sands production is predicted to increase global carbon

emissions by between 50 and 150 million tonnes annually by 2030. Such an increase

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 would impede Canada’s ability to meet emissions targets as a result of the 2015 Paris
Climate Accord.

•   As of 2017, ponds of toxic sludge produced by the Canadian oil sands industry covered
220 square kilometres, containing 1 trillion litres of chemical and hydrocarbons which
have been found to leak into the local environment.

•    As of 2017, an area of boreal forest and muskeg habitat the size of New York City has
been destroyed.

•     Studies suggest that oil sands development pollutes lakes in the Alberta region with
toxic carcinogens. Furthermore, emissions from oil sands production contain neurotoxins,
a number of which are carcinogenic, which have led to numerous reports of local
residents with health problems, such as elevated levels of cancer.

•   In 2011, the oil sands industry used 170 million cubic metres of water, equivalent to the
residential water use of 1.7 million Canadians; by 2030 this figure is estimated to climb by
almost 170%.

•     Since commercial activities started in the 1960s, by 2016 only 11% of active mining
footprint has been or is in the process of being reclaimed—much of the peatlands and
old growth forests that have been destroyed will never return to their natural state.

These and many other environmental criticisms have continued to plague oil sands
companies, despite some companies investing considerable resources into environmental
enhancements of various kinds, including better water efficiency at mine sites and new
technologies such as carbon capture and storage (whereby waste carbon dioxide is
captured and stored to prevent it being released into the atmosphere).

Most environmental groups remain unconvinced that these improvements are making a
tangible difference, given the speed and scale of development in northern Alberta. Many
have taken a strong position against any further development, with groups like the
Canadian NGO Environmental Defence labelling the oil sands ‘the most destructive project
on Earth’, while Greenpeace is ‘calling on oil companies and the Canadian government to
stop the tar sands’. Some more moderate voices, such as the Pembina Institute, have a
goal to advance what they call ‘responsible oil sands development’, which involves a cap
on environmental impacts and a reduced environmental footprint per barrel of oil produced.
Even the terminology of the oil sands remains contentious, with critics typically labelling it
the ‘tar sands’ while industry and the Canadian government prefer the more benign-
sounding ‘oil sands’.

The ‘ethical oil’ makeover

In the face of such challenges to the reputation of the oil sands, one particularly
controversial approach to restoring its tarnished image has been to focus on the country of
origin of competing sources of crude. That is, in addition to all of the supposed economic
benefits of oil sands development, some also highlight that buying oil from Canada is more

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responsible than buying from many other oil-producing countries. The basic point here is
that because the oil sands are in Canada, they are properly and democratically regulated;
they do not fall foul of the corruption and abuses common in oil-rich countries and the
proceeds do not go into funding terrorism.

Exponents of this argument need only point to the countries with the largest current
reserves of oil to make their point (see Table 3.9). Apart from Canada, most other states in
the top ten have relatively poor records of democracy and upholding human rights. The
Canadian-based NGO Ethicaloil.org, which is the most vociferous promoter of this
argument, argues that oil-producing countries should, therefore, be divided into those
producing ‘ethical oil’ and those producing ‘conflict oil’: ‘Countries that produce Ethical Oil
uphold human rights and have high environmental standards. They ensure economic justice
and promote peace. By contrast, Conflict Oil countries oppress their citizens and operate in
secret with no accountability to voters, the press, or independent judiciaries.’

Top ten countries by proven oil reserves as of 2017

Rank Country Reserves (billions of

barrels)
1 Venezuela 301

2 Saudi Arabia 267

3 Canada 170

4 Iran 158

5 Iraq 143

6 Kuwait 102

7 United Arab Emirates 98

8 Russia 80

9 Libya 48

10 Nigeria 37

The book that popularized the idea, Ethical Oil: The Case for Canada’s Oil Sands, written by
Ezra Levant, became a best-seller in Canada and ended up winning the National Business
Book Award. Levant went on to set up Ethicaloil.org, which is widely believed to benefit
from oil industry funding and support—or, as one Greenpeace spokesperson put it, it is ‘a
front group for Big Oil’. This sentiment was echoed by the then climate sceptic Prime
Minister, Stephen Harper, who, when referring to petroleum production, noted that ‘Canada
is a very ethical society and a safe source for the United States in comparison to other
sources of energy’.

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The ‘ethical oil’ debate quickly ignited controversy in Canada, not least because it looked to
many like an attempt to airbrush out the problematic aspects of the oil sands. John
Bennett, executive director of the Sierra Club of Canada, explained that ‘the fact that the
Saudis or Nigerians or others  are worse in human rights and environment is not relevant.
We can’t do anything about that; we can deal with our oil sands and we are not.’ Others,
such as the renowned Canadian environmentalist David Suzuki, remarked simply that ‘in
today’s world, all fossil fuels are unethical. There is no such thing as ethical oil.’

The politics of the oil sands

Yet the discourse regarding the ethics of the Canadian oil sands constantly evolves,
particularly influenced by the relationship between Canada and the US and the stance each
of the country’s leaders takes towards climate change.The majority of oil sands crude is
sold to Canadian and US refineries; for instance, in 2017, 99% of Canada’s oil exports went
to the United States. Nevertheless, despite an increasing share of US imports, it looked for
a while like the oil sands would be vulnerable to US efforts to green its energy mix. US
environmental groups had long fought restrictions on US imports of ‘dirty’ oil sands oil,
while President Barack Obama made fighting climate change a key plank of his inaugural
address back in 2013.

The issue of the US’s relationship with the oil sands crystallized in the long-running debate
about the Keystone XL pipeline extension, which was designed to bring more oil sands
crude to refiners in the US. The project became mired in controversy during the 2010s due
to its own potential environmental impacts (the risk of spills into ecologically sensitive
terrain) as well as the divisive issue of bringing oil sands crude, and its heavier greenhouse
gas burden, into the US energy mix at a time when the country was looking to reduce rather
than increase its emissions. The issue came to a head during the Obama administration
with the President refusing, on the advice of the Environmental Protection Agency, to give
the executive order required for the pipeline to go ahead, arguing that the project would not
lower petrol prices, create long-term jobs, or affect energy independence. However, weeks
into the Trump administration in early 2017, the President signed an executive order
supporting Keystone XL, sanctioning the construction of the pipeline which could carry up
to 850,000 barrels of oil a day from Canada to the US, a move seen by many as emblematic
of the Trump administration’s disregard for environmental protection, climate change, and
sustainable development.

These issues, and the future of the oil sands, were further confused on the election of Justin
Trudeau as Canadian Prime Minister, as many believed he would reverse his predecessors’
lax attitude towards and policies on climate change, given his vocal support of
environmental protection. However, he subsequently threw his support behind the Keystone
XL project and was quoted at a Texas energy conference in 2017 as saying that ‘no country
would find 173 billion barrels of oil in the ground and leave them there’. Overall, with
increasing pressure for a global reduction in carbon emissions, intense commercial
pressure affecting the oil and gas industry, and changing political winds buffeting discourse
around its ethicality, what the future holds for the Canadian oil sands is far from clear.