A hundred years later, in 1889, the chronicler of a government expedition to the region remarked prophetically: "That this region is stored with a substance of great economic value is beyond all doubt, and, when the hour of development comes, it will, I believe, prove to be one of the wonders of northern Canada."The point of the article, as far as I can tell, is to inform us that whereas people formely didn't know what to do with tar sands, they're now extracting (low-grade) oil from them (at a staggering cost). Thus does humanity move from barbarism to enlightenment.
The best thing about the article is that it's neutral. You won't find any mention here of the industry's staggering water and natural gas usage, nor of its huge toxic tailings ponds, nor of its massive subsidies, nor of its outsized CO2 emissions, nor of the strain it puts on local infrastructure. Instead, it sticks to the cold hard facts: there's oil, of a sort, in them thar tar sands, and we intend to get at it, especially now that real oil has become so expensive.
In the real world, things aren't quite so straightforward. First off, the dismal credit market seems to be hobbling the industry:
Until recently, banks and other investors have been eagerly pouring their dollars into Alberta's vast oil sands, the world's second-biggest reserves behind Saudi Arabia's trove....At the same time, the costs of extraction are skyrocketing:
"There's a whole mix of projects - some of them candidly wouldn't make it even with a very high oil price," said Peter Tertzakian, chief energy economist at ARC Financial, a Calgary-based private-equity firm. "The cost of capital going up combined with the price of oil going down makes it more likely that already weak supply expectations (for non-Organization of Petroleum Exporting Countries) aren't going to be met. Is this going to be a problem? Yes."
Petro-Canada, the country's second largest refiner, estimated costs to develop its Fort Hills oil- sands project in Alberta, Canada, have increased by 50 percent since a memorandum in June 2007.With that in mind, here's Mark Hoskins, senior partner at investment advisors Holden & Partners, on a new report that attempts to quantify the financial risks of investment in tar sands:
The recent banking crisis has shown how the financial markets can totally misjudge both the risks and values inherent in company balance sheets. Oil companies depend on oil reserves for their market values. BP and Shell are two of our most trusted UK stocks, but it is a shocking fact that 30% of Shell's oil reserves are in tar sands.Obligatory election-related note: Just before she was selected as McCain's running mate, Sarah Palin awarded TransCanada PipeLines Ltd. a license to build a 1,715-mile natural gas pipeline from Alaska to Alberta, along with $500 million in taxpayer-provided seed money (which I'm sure they're happy to get, given their troubles with Lehman Bros.).