To regulate or not to regulate: Alberta's oil sands boom at a crossroads

Edmonton Sun: Klein wants oil sands processed in Alberta

Globe and Mail: Alberta warned not to change oil sands rules

Growing scarcity has breathed life into oil sands development; extraction in the Canadian province of Alberta has grown exponentially in the last decade. Oil sand patches in Alberta have been seen by some as a viable alternative for the United States in weaning itself off its current dependence on Middle Eastern oil.

With the potential prosperity for Alberta promised by oil sands comes a set of concerns that are causing some degree of alarm in the oil and gas industry. Specifically, the bitumen extracted from oil sands is often being upgraded to much more valuable crude in the United States. Additionally, there are plans for building a pipeline to send bitumen to China for processing.

Canadian political officials have voiced concerns over this trend and have begun to call for regulations requiring that a substantial portion of processing – between 80 and 100 percent – take place in Alberta. The oil and gas industry opposes such regulation, warning that it would violate trade agreements and could escalate into a cross-border dispute between Canada and the U.S.

No regulation has yet been proposed, but Alberta Premier Ralph Klein has asked his energy minister to investigate the matter. There are already plans in Alberta for considerable expansion of refining capacity. However, even if the bulk of processing is done in Alberta, concerns remain regarding the continuing environmental and economic sustainability of oil sands development.

The bitumen extraction process requires significant quantities of fresh water and natural gas. This is troubling given the growing global scarcity of water together with Alberta’s typically arid climate (see posting on water scarcity and U.S.-Canada trade below) and the ever-increasing price of natural gas.

Question:

Continued development of Alberta’s oil sand patches is threatened by its dependence on scarce resources – specifically, water and natural gas. On the other hand, some nations, notably the United States, have an interest in access to “secure and dependable” sources of oil.

How should these interests be balanced?

Must one “win out” over the other?

What role could/should international bodies and trade agreements play in deciding these issues?

Background:

Alberta Oil Sands Discovery Centre: The Oil Sands Story

Petroleum News: “A Sticky Time for Alberta Oil Sands”

National Public Radio: “Canada Digs Oil Out of Ground for U.S.”