Oil Sands

Oil and natural gas company investments to develop, transport and refine Canada’s enormous oil sands resources are important to increase supply flexibility and North America’s energy security and reliability, while reducing the risk of supply disruptions. Critical refining investments will increase fuel supplies for key regions like the U.S. Midwest.

The Impacts of Canadian Oil Sands Development on the United States’ Economy
The economic impact of oil sands development in neighboring Canada is a boon for the U.S. economy and is expected to lead to the creation of more than 342,000 new U.S. jobs between 2011 and 2015, a new study by the Canadian Energy Research Institute (CERI) finds. 

 CERI Study: The Impacts of Canadian Oil Sands Development on the United States’ Economy
Size: 631 KB | Date: October 2009 | License: Free

Canadian Oil Sands
Advanced technologies developed over many years are used to produce oil from oil sands. The vast resources of the Canadian oil sands will play a crucial role in enhancing our nation’s energy security, serving as a bridge to a future economy increasingly powered by new energy sources.

 Canadian Oil Sands
Size: 8 MB | Date: October 30, 2009 | License: Free

Myths vs. Facts About Canadian Oil Sands
Many myths surround Canadian Oil Sands. API has assembled this Myths vs. Facts sheet to provide facts regarding topics surrounding land disruption, GHG emissions, water use, and more as they are related to Canadian Oil Sands.

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Size: 64 KB | Date: September 24, 2009 | License: Free

API-AOPL letter on the importance of pipelines and oil sands
A joint API-AOPL letter was sent on July 15, 2009 to Secretary of State Hillary Clinton regarding the importance of Canadian oil sands to the United States’ economy and energy security. The letter also encourages Secretary Clinton to approve permits for pipelines that would supply Midwest refineries with Western Canadian crude oil to cross the US/Canada border.

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Size: 560 KB | Date: July 15, 2009 | License: Free

The Canadian Oil Sands: Energy Security vs. Climate Change
The Council on Foreign Relations’ (CFR) recent report The Canadian Oil Sands: Energy Security vs. Climate Change explores the tensions between energy security and climate change surrounding the Canadian oil sands and provides policy recommendations to address these two interests. The study urges U.S. policymakers to “resist the misuse of other U.S. environmental regulations to constrain oil sands.” It notes that “ill-conceived regulation could undermine U.S. and Canadian climate and security goals.” For more information on this study, see CFR’s overview or download the study here.

Interstate Oil and Gas Compact Commission Resolution
The Interstate Oil and Gas Compact Commission, a multi-state government agency chaired by Governor Brad Henry of Oklahoma, presented a resolution at its May, 2009 Midyear Issues Summit urging the repeal of Section 526 and opposing the prohibition of oil sands derived petroleum products from Canada.

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Size: 30 KB | Date: May 2009 | License: Free

Growth in Canadian Oil Sands: Finding a New Balance
Cambridge Energy Research Associates (CERA’s) new report Growth in Canadian Oil Sands: Finding a New Balance was designed as a balanced study (participants include Canadian government, oil companies and NGOs) to address various aspects associated with oil sands development and processing. For information on this study, see CERA's press release titled, Oil Sands Move from the “Fringe to Center” of Energy Supply.

Canadian oil is a reliable and plentiful strategic resource for meeting our nation’s growing energy demand and making the United States more energy secure.

Our nation needs more supplies of all energy sources, including oil and natural gas, to meet its growing energy demand and provide consumers with reliable supplies of fuel. According to federal government forecasts, oil and natural gas will continue to provide more than half of the energy needs for American consumers even as alternative energy sources like ethanol and other renewable expand. The International Energy Agency projects global demand for oil to increase 24.% above 2007 levels by 2030.

According to EIA, Canada is our number one supplier of imported oil and natural gas. In 2008, Canada shipped nearly one million barrels per day more oil and refined products to the U.S. than did our second largest supplier of imported oil. About half of the Canadian crude oil brought into this country is derived from oil sands. According to a study released in May 2009 by the Cambridge Energy Research Associates, if oil sands development is maximized, the U.S. could potentially double the amount of oil currently imported from Canada by 2035.

Canadian oil reserves are vast and are second only to Saudi Arabia, using current technology. According to the Canadian Association of Petroleum Producers, oil sands now account for more than half of western Canada’s total oil production. By 2025, production from Canadian oil sands is expected to rise from about 1.3 million barrels per day to about 3.3 million barrels per day.  

Canada is a friendly neighbor with whom the United States has an excellent trading and political relationship. Canada sends more than 99 percent of its oil exports to the United States, the bulk of which goes to Midwestern refineries.

Canadian oil sands will provide greater fuel supply reliability and reduce the risk of supply disruptions to consumers.

Oil companies are investing huge sums to expand and upgrade refineries in the Midwest and elsewhere to make more gasoline and other refined products from the Canadian oil derived from oil sands while subject to strict federal, state and local environmental regulations. Pipeline companies are investing to build new infrastructure to transport the Canadian oil into the United States. The expansion and upgrade projects will create over 10,000 new construction jobs and an additional 500 permanent full-time refinery positions. These refinery expansions bring additional tax revenue and other economic benefits to their localities.

By getting more of their oil from Canada, Midwest refineries would move from being at the back of the crude oil supply line to the front. With these secure, nearby supplies, Midwest refineries should not be as vulnerable to supply disruptions caused by geopolitical upheaval or storms in the Gulf of Mexico.

Canadian and U.S. companies are making the necessary investments to meet stringent environmental and other regulatory requirements to offset the impacts of increased oil sands production and processing.

The oil and natural gas industry remains committed to being a reliable and environmentally-responsible provider of the energy our nation needs to power our economy.

According to the Environmental Protection Agency, U.S. air quality is improving. With measures already in place we can anticipate further progress. The oil and gas industry has invested $58 billion, which is 44% of all low and zero carbon technology investments, in the US between 2000 and 2008. This is more than what the federal government or all other industries combined are investing.

The extraction and processing of oil sands do result in higher greenhouse gas (GHG) emissions on average compared to light, sweet (low-sulfur) crude oil. But so do many of the heavy, high-sulfur crudes that are being produced in the United States and around the world.  On a life cycle (or well-to-wheels) GHG emission basis, oil derived from Canadian oil sands is comparable with other crudes refined in the United States. We believe that greater care in management of emissions from crude derived from oil sands would occur in the United States than if the oil is processed in other regions of the world that have less stringent environmental standards – not to mention the environmental costs of transporting the crude elsewhere.

A recent study by the Council on Foreign Relations urges U.S. policymakers to “resist the misuse of other U.S. environmental regulations to constrain oil sands.” It noted that “ill-conceived regulation could undermine U.S. and Canadian climate and security goals.” The study also underlined the value of close ties with a friendly neighboring country that does a lot of business with the U.S. The study noted that “a greater fraction of money used to buy Canadian oil will likely later be spent directly on U.S. goods and services and hence contribute directly to U.S. growth.”

Using oil sands as a feedstock does not affect the quality of the refined products. In fact, gasoline and other fuels made from oil sands already are being used in the United States. The vast investments refiners and pipeline operators are making to increase capacity and flexibility to process oil sands includes all the necessary equipment to make products that meet all the required specifications. Every project is required to adhere to applicable federal, state and local regulations and permitting conditions.

Since 1990, industry has reduced oil sands CO2 intensity by 27%, according to the Canadian government.     

U.S. and Canadian Pipeline Expansion Plans

Some of the major pipeline projects in the U.S. and Canada, which have been publicly announced, include:

• Enbridge “Spearhead” System Reversal: March 2006 reversal of the Cushing, Oklahoma to Chicago, Ill. (formerly BP) line to extend regular flow of Canadian crude from Chicago area to Cushing (completed)
• ExxonMobil Pegasus Reversal: Spring 2006 reversal so that around 60,000 barrels per day of Canadian crude supplies received in Patoka, Ill. can now flow to U.S. Gulf refineries (completed)
• Flint Hill’s (Koch) MinnCan project to add a second pipeline from northern Minnesota to refineries in the Minneapolis/St. Paul area to increase Canadian crude refined in that area (ongoing)
• TransCanada’s “Keystone” project that creates a new pipeline system from Alberta to Wood River in Patoka, Ill. with a lateral to Cushing (ongoing)
• Enbridge’s Southern Access Program built in stages to increase the capacity of its existing system by 400,000 bpd into Chicago and extend the system from Chicago to Patoka (ongoing)
• Enbridge’s Alberta Clipper project expanding its mainline by 450,000 bpd (ongoing)
• Kinder Morgan Canada is expanding its Trans Mountain pipeline system to transport increasing volumes of crude oil and refined products from Western Canada to British Columbia, Washington State, and via ship to California and offshore markets (ongoing)
• Enbridge’s proposed “Gateway” pipeline to the British Columbia coast and via ship to serve off-shore and California markets (proposed)

There are other projects that have been proposed in recent years but that are not in full development and a number of other feasibility studies underway to extend capacity east of Chicago.  Altogether, these investments in pipeline infrastructure to secure crude supplies to many U.S. refining markets exceed $11 billion dollars in committed and potential investments.

U.S. Refinery Expansion Plans
Significant plans are in place to increase production in Canadian oil sands and to transport it to refineries throughout the Midwest and the Gulf Coast. Several companies are currently considering expansions to process this type of crude supply. To refine oil sands, a refinery typically requires additional coking and vacuum distillation capacity, additional sulphur recovery and hydrogen production. Metallurgy upgrades may be needed if the bitumen is processed on site. Additional upgrades to hydro processing units may also be required. Given the scale of a typical US refinery, these upgrades require significant planning and capital investment. Nevertheless, a conversion from one crude feedstock to another does not impact the quality of the finished products.

Some of the major refinery projects in the U.S., which have been publicly announced, include:

• Motiva Port Arthur Refinery has $7 billion expansion underway that will make it the largest refinery in North America in 2010; 325,000 barrel per day expansion will result in 600,000 BPD total capacity with capability to process Canadian oil sands crude.
• ConocoPhillips formed a partnership with EnCana to increase Canadian production of oil sands and refining capacity at Wood River and Borger.
• BP has a $3.8 billion expansion underway at its Whiting refinery.
• Marathon has a $1.9 billion expansion in process at its Detroit refinery.
• BP formed a partnership with Husky to develop Sunrise oil sands and expand BP’s Toledo refinery to process an additional 110,000 barrels per day of heavy oil sands.
• Hyperion Resources has announced plans for a 400,000 BPD, $8 billion grass roots refinery in South Dakota to process oil sands-derived crude.

The Oil Sands Process
An overview of Steam Assisted Gravity Drainage (SAGD) and oil sands.

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• The extraction and processing of oil sands, like all minerals development, requires energy, which results in greenhouse gas (GHG) emissions. However, in a full lifecycle analysis, GHG emissions from the extraction, processing and use of oil sands oil is comparable to other heavy crude oil, like Venezuelan or Mexican crudes processed in the U.S. (see chart from CERA, 2009 analysis).
• Technological advancements have cut per-barrel GHG emissions from oil sands production by 27 percent compared to 1990 levels, according to the Canadian government.
• Using oil sands as a feedstock does not affect the quality or the tailpipe GHG emissions of the refined products. In fact, gasoline and other fuels made from oil sands already are being used in the United States. The vast investments refiners and pipeline operators are making to increase capacity and flexibility to process oil sands includes all the necessary equipment to make products that meet all the required specifications.

The Canadian oil and gas industry is working in conjunction with the Canadian federal and Albertan provincial governments to reduce GHG emissions through accelerated research and development of carbon capture and storage (CCS) technology and energy efficiency improvements. For more information regarding how the Canadian government and oil and gas industry are addressing environmental issues associated with oil sands development, visit the Canadian Association of Petroleum Producers (CAPP).

Canadian Oil Sands Podcast
Jane Van Ryan speaks with David Collier, president of the Canadian Association of Petroleum Producers, about Canada’s abundant deposits of oil sands and why they are important to the United States.