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.

The oil industry is no stranger to controversy, yet 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 only recently become economical- ly
viable, but 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 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'.
However, oil sands development also has its legions of supporters, especially in Canada
where most commercial extraction takes place. Rather than being branded a dirty oil, the
Canadian Environment Minister has argued that the oil sands should in fact be seen as an
'ethical' source of energy. Since it generates enormous economic benefits for many, and is
from a country that upholds democracy, human rights, and environmental protection, so
goes the argument, output from the oil sands should really be recognized as 'ethical oil'.

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 also the most commer- cially
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 in the region who
used the bitumen to seal seams on their canoes. European explorers provided the first
written accounts of the oil sands in the eighteenth century, and the first patent for
commercial separation processes to extract crude oil was awarded as early as the 1920s.
However, commercial operations only began seriously in the late 1960s with the estab-
lishment 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 initial slow pace of development was mainly due to the high cost involved in extracting
crude oil from the oil sands, which coupled with low oil prices and relatively abundant
supply from other sources, made the oil sands unattractive economically. With the spike in
oil prices that began around the turn of the century, and the rush to secure greater energy
independence in the face of an unsettled middle east and dwindling sup- plies elsewhere,
investment flowed into the Albertan oil sands. More than $100 billion has been invested in
oil sands development since the turn of the century, with current investment levels running
into something like $20 billion every year. From just over half a million barrels of bitumen a
day in 1997, the oil sands industry in 2014 produced almost 2 million barrels of bitumen
every day. By 2022, production is projected to reach 3.8 million barrels per day and the
Canadian Association of Petroleum Producers expects the industry will surpass 5 million
barrels a day by the end of 2030.

Most major companies now have operations in the oil sands, with over 50 energy com-
panies having some kind of stake in mining and production facilities in the region. This
includes Canadian companies such as Suncor Energy, which opened the first mine site some
45 years ago, and Syncrude, the second company to establish operations in the area, both of
which now operate some of the largest oil sands mining operations. They have been joined
by a swathe of global players such as Shell, Chevron, Total, Statoil, Exxon, and
ConocoPhillips. Increasingly, Asian energy companies have also made investments in the oil
sands, including the Korean National Oil Company and CNOOC, China's larg- est producer of
offshore crude.

The oil sands development has catapulted Canada up the table of countries with prov- en
reserves of crude oil. Even just counting the 9% of total oil sands volume that is cur- rently
recoverable using existing technology, Canada now has the third-largest proven oil reserves
after Saudi Arabia and Venezuela. This constitutes some 11% of total global oil reserves,
prompting Canadian Prime Minister Stephen Harper to claim that the country is an 'energy
superpower'.

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 devel-
opment through the stimulating impact it has on job creation and economic growth. Some of
the headline impacts promoted by oil sands supporters include:

Employment in Canada as a result of new oil sands investments is expected to grow from
75,000 jobs in 2010 to 905,000 jobs in 2035.

The energy sector (oil and gas extraction/mining) accounted for 11% of jobs in Alberta and
over 22% of Alberta's GDP in 2012.

New oil sands development is expected to contribute over $2.1 trillion to the Canadian
economy and $521 billion to the US economy over the 25-year period from 2010 to 2035.

The oil sands industry will pay an estimated $783 billion in provincial and federal taxes and
royalties between 2010 and 2035.

Oil sands development creates thousands of jobs for First Nations communities-there were
more than 1,700 Aboriginal employees in permanent operations jobs in the oil sands
industry in 2010 (10% of the total workforce).

Oil sands companies regularly contract more than $1 billion of business with Aborig- inal-
owned businesses every year. This was as much as $1.8 billion in 2012. Oil sands companies
have also provided anywhere from $5 million to $12 million a year to sup- port Aboriginal
community programmes between 2010 and 2012.

On the other hand, many critics have highlighted the significant environmental prob- lems
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:

Average greenhouse gas emissions for oil sands production (extraction and upgrading) is
3.2 to 4.5 times more per barrel than for conventional crude oil production. Overall,
emissions per barrel have been increasing since 2006.
Oil sands emissions accounted for 7% of Canada's greenhouse gas emissions in 2010 and
are forecasted to be 14% in 2020. Canada is now among the top ten greenhouse gas
producers on an absolute and per capita basis.

Water monitoring being conducted by the Regional Aquatic Monitoring Program, a joint
industry-government environment body, appears to be inadequate. For example, a 2010
academic study found that levels of pollutants cadmium, copper, lead, mercury, nickel,
silver, and zinc in areas around the oil sands exceeded federal and provincial guidelines.

Another academic study in 2013 found that oil sands development was polluting near- by
Alberta lakes with rising levels of toxic carcinogens, refuting long-standing industry claims
that waterway pollution in the region was largely naturally occurring. Contami- nated water
is a particular problem for local First Nations communities who rely on fishing.

The current water withdrawal management framework prioritizes industry use over
aquatic protection. Water allocations from the nearby Athabasca River have nearly doubled
between 2000 and 2010. In 2011, the oil sands industry used 170 million cubic metres of
water, equivalent to the residential water use of 1.7 million Canadians.

Tailings, the waste by-product from oil sands extraction processes, are toxic and are stored
indefinitely in open lakes that cover an area approximately 50% larger than the city of
Vancouver. These tailings lakes seep, but the exact amount of seepage is either not known
or has not been made public. One estimate suggests approximately 11 million litres of
seepage a day.

Only 0.15% of the area disturbed by oil sands mining is certified as 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 cap-
tured 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 Cana-
dian 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 pro- duced.
Even the terminology of the oil sands remains contentious with critics typically labelling it
the 'tar sands' whilst industry and the Canadian government prefer the more benign
sounding 'oil sands'.

The oil sands export problem

The majority of oil sands crude is sold to Canadian and US refineries. But with such vast
reserves, Canada has increasingly looked to expand its export markets. Between 2002 and
2012 the oil sands increased their share of US oil imports from about 16% of all US imports
in 2002 to an estimated 28% by the end of 2012-albeit at a time when overall US imports
reduced in the face of growing domestic energy production. Despite the increase in its share
of US imports, the oil sands have become increasingly vulnerable to US efforts to green its
energy mix. US environmental groups have long been fighting to restrict US imports of
'dirty' oil sands oil and President Barack Obama made fighting climate change a key plank of
his inaugural address 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. As President Obama said in 2013:

Meanwhile, with exports to the US threatened, Canada's oil sands also found itself fighting
to maintain its reputation in Europe. A proposed EU directive aimed at cutting emissions
from the transport sector threatened to single out oil sands oil as especially dirty compared
with other forms of energy. Not only would this seriously impact exports to Europe by
effectively imposing an import tax on Canadian crude, but oil sands advo- cates were also
concerned that it would set a precedent for discriminating against their product that could
have global repercussions. 'It could stigmatize the oil from Canada and impact on our access
to some markets' the Canadian Natural Resources Minister said in 2013.

The 'ethical oil' makeover

In the face of such challenges to the reputation of the oil sands, one particularly contro-
versial approach to restore 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 ben- efits of
oil sands development, some also highlight that buying oil from Canada is more 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 corruption and abuses common in oil rich countries—and the pro- ceeds do not go
into funding terrorism.

Exponents of this argument need only point to the countries with the largest cur- rent
reserves of oil to make their point (see Table C3.1). 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.'

The book Ethical Oil: The Case for Canada's Oil Sands written by Ezra Levant, a Canadian
lawyer and talk-show host that popularized the idea, became a best-seller in Canada and
ended up winning the National Business Book Award. Levant went on to set up Ethica-
loil.org, which is widely believed to benefit from oil industry funding and support-or as one
Greenpeace spokesperson put it, is 'a front group for Big Oil'. The Canadian govern- ment
was also quick to throw its support behind the idea in order to support its case to potential
importers, especially the US. As the Canadian Prime Minister, Stephen Harper said, 'the
reality for the United States, which is the biggest consumer of our petroleum products, is
that Canada is a very ethical society and a safe source for the United States in comparison to
other sources of energy'.

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 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.'

Questions :

1. Which actors have a stake in deciding whether the oil sands are an ethical source of oil
and why do you think they differ so much in their assessments?

2. How would you go about conducting a utilitarian analysis of the oil sands for the purpose
of deciding whether it is an ethical source of oil? Provide a provisional assessment based on
the data in the case and outline what other data you would need to make a full assessment.

3. How would this assessment differ if you focused primarily on non-consequentialist ethics
(duties, rights and justice)? What issues take precedence now and do they give a reasonable
perspective on the problem?

4. How would you compare oil sands oil to other sources of oil from an ethical perspective?

5. Consider the case for saying that all oil is unethical. What theory or principle might
support such an assertion? Is it a useful position to take, and if so, for who?