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Myth Buster

Myth: Oil sands is “dirty oil”

Independent research corroborates what industry has been saying for years: the oil sands has dramatically improved its environmental footprint.

Many environmental activist groups continue to use the term “dirty oil” when referring to oil sands production. These groups contend the oil sands contribute disproportionately to global warming, use vast quantities of fresh water, release contaminated water from leaky tailings ponds, and ignore local Indigenous groups. Such statements undermine the tremendous work the oil sands industry has been undertaking for more than a decade to improve environmental, social and governance performance, and reduce impacts.

Cleaner than you think

The Canadian Association of Petroleum Producers (CAPP) and its members have long asserted that the oil sands industry has made tremendous strides to reduce emissions intensity, recycle and reduce the volumes of water needed for various processes, and continually improve overall environmental performance. Companies are committed to lowering GHG emissions while minimizing other environmental impacts, in line with corporate goals of cost control, operating efficiently and being sustainable community partners.

It’s partly driven by a strong awareness in Canada that environment, social and governance (ESG) practices are becoming increasingly important to energy consumers, investors, governments and others.

Imperial’s Kearl oil sands mine employs innovative technologies to produce oil at the same level of carbon intensity as the average barrel refined in North America today. Photo: Courtesy Imperial.

But don’t take CAPP’s word for it. Independent research supports this view of ever-improving environmental performance in the oil sands.

California Environmental Protection Agency study

As far back as 2014, researchers in California evaluated the carbon intensity of various crude oil blends being refined in California, including diluted bitumen and upgraded synthetic crude oil from the oil sands. That analysis revealed:

  • The “dirtiest oil in North America” is not produced in Canada, but just outside Los Angeles, where the Placerita oil field generates about twice the level of upstream emissions as Canadian oil sands production.
  • The world’s dirtiest oil is the Brass crude blend from Nigeria, where uncontrolled release of methane during the oil extraction process generates upstream GHG emissions more than four times higher than Canadian diluted bitumen.
  • Thirteen oil fields in California, plus crude oil blends originating in at least six other countries, generate higher levels of upstream GHG emissions than Canadian blends.
  • Crude oil from Alaska’s North Slope, which at that time made up about 12 per cent of California’s total crude slate, is “dirtier” than Canadian diluted bitumen.

The California study confirmed the U.S. State Department’s previous analysis that foreign crudes that would feed Gulf Coast refineries in the absence of Canadian bitumen generate comparable (and in some cases higher) carbon emissions. 

Since the release of the California study, oil sands producers have continued to improve environmental performance through innovative technologies and process efficiencies. And other researchers are taking note.

IHS Markit report shows substantial emissions intensity decrease

Since 2009, IHS Markit has completed five public studies on the GHG emission intensity of oil sands crude, and how the intensity compares with the average crude oil refined in the U.S. The 2018 report, Greenhouse Gas Intensity of Oil Sands Production Today and in the Future, highlights some remarkable findings, including:

The average emissions intensity of oil sands extraction has fallen 21 per cent since 2009. Oil sands life-cycle emissions are nearing North American average values.

By 2030, new technologies and efficiencies deployed in the oil sands could result in a reduction of up to 27 per cent in the GHG intensity of steam-assisted gravity drainage operations and up to 20 per cent for oil sands mining operations.

Looking forward to 2030, IHS Markit points out that production growth influences both absolute and industry emission intensity. The greater the level of growth, the higher absolute emissions are likely to be — but at lower intensity. This is because newer projects tend to benefit more from the latest technology, so the greater the share of new production, the greater the impact on the overall average industry performance.

In other words, emerging innovation and technology have significant potential to further decrease oil sands’ emissions intensity.

Average emissions intensity of oil sands extraction has fallen 21 per cent since 2009.

Similar findings in BMO Capital Markets report

In February 2019, BMO Capital Markets released a report titled ESG, Yeah You Know Me: Innovation and the search for ‘friendly oil.’ The report makes extensive use of third-party data from credible sources (Yale Environmental Performance Index, Social Progress Imperative’s Social Progress Index, and World Bank’s Worldwide Governance Indicators Benchmark) to examine ESG issues relating to the oil sands industry. The conclusion? “Dirty oil” is so yesterday.

The report states, “Canada is a relatively small GHG emitter, but its intensity rate is high, making it a focus of global climate change pressure. Oil sands face the brunt of that pressure, despite making up just nine per cent of Canadian and 0.1 per cent of global output. [However] our work reveals that Canadian oil sands have a leading edge in ESG performance within the global industry.”

The bottom line:

Oil sands’ performance has shown meaningful improvement over the past decade and is set for further improvement due to extensive research and development investment. The BMO report concludes, “Contrary to common belief, oil sands appear to be a leading force behind the ESG movement, in line with European majors” and “The ‘ESG Footprint’ of oil sands is also set to improve on the back of heavy R&D investment and rising FCF [free cash flow], and therefore should be on the radar of socially conscious investors.”