The flawed argument that tar sands development is inevitable with or without the dangerous Keystone XL pipeline took another hit last week, as Statoil, a major Norwegian oil company, announced that it was putting a large planned tar sands project named Corner on hold. Along with other canceled oil projects, Total SA and Suncor Energy’s Joslyn mine project and Royal Dutch Shell’s Pierre River mine, that makes three major cancelled projects this year. Together, the three projects would have produced 400,000 barrels per day of the world’s dirtiest oil. In each case, the developer cited rising costs, shrinking profits, and limited market access in their reasoning for abandoning these projects. If projects like these keep getting mothballed, put on hold, or cancelled, there’s a good chance that the tar sands time bomb will never be lit.
For some time, outside investors have been concerned about the effects of falling North American oil prices on the output and profitability of tar sands projects. In 2013, a group of investors including Boston Common Asset Management (BCAM) and Norwegian investment giant Storebrand penned a letter to Statoil arguing, “even on a standalone basis, the economics of many oil sands projects are questionable given project execution risks, transportation bottlenecks, and uncertainty about future oil prices.” Now, it seems, Statoil has begun to take these concerns seriously.
What is somewhat surprising about this announcement is the type of project put on hold. Corner would have used a technique called steam-assisted gravity drainage, where steam injected into the ground melts the bitumen, a heavy, viscous oil, underground so that it can be pumped to the surface in liquid-ish form. The previously-cancelled projects would have required truck-and-shovel strip mining, where the sand is extracted and later melted down in a special facility. It’s only practical for oil from mining developments like Joslyn and Pierre River to be priced at more than $90-$100 per barrel, plus transportation costs. As of now, crude oil in the United States market has fallen to $87 per barrel. Steam-assisted gravity drainage was supposed to be much cheaper to start, costing $65-$70 per barrel. But the actual cost of the oil depends on transporting it to a buyer. Rail hasn’t proved to be an effective alternative for getting tar sands to market, as Statoil’s Canadian Unit President Stale Tungevisk essentially conceded nearly two years ago. Between the challenges in production and the multiple dangers associated with either pipelines or rail, it’s clear that tar sands development will never be the financial boon oil companies once thought it would be. This is fantastic news for the climate.
This fight began more than six years ago, but those working to keep tar sands oil in the ground have never been more energized. Today, farmers and landowners are standing up in Keystone’s path through Nebraska and the Ogallala aquifer. Canada’s First Nations tribes are standing up to stop tar sands from endangering the forests and waters of British Columbia. Concerned citizens in Portland are standing up to block tar sands from flowing to the rocky shores of Maine. As long as they all remain standing, the climate-changing tar stands time bomb will stay locked safely underground.
(Photograph taken by schizoform)