[NOTH AMERICA] Environmental group worried about effects of production. Report decries oil sands waste

Refinery expansions in the U.S. focused on processing crude from Canadian oil sands show an entrenched reliance on fossil fuels even as concerns grow about the effects of oil sands production, an environmental group said Wednesday. Such multibillion-dollar investments illustrate a long-term shift in refining toward so-called heavy oil, which requires more energy-intensive production and prompts worries about emissions and waste runoff, the report's authors said.

"The first step is to start with awareness of what it means," said Eric Schaeffer, a former Environmental Protection Agency lawyer who is director of the Washington-based Environmental Integrity Project, an advocacy group that produced the report.

"This is an intensely wasteful way to feed an oil habit," Schaeffer said.

Canada is the biggest exporter of oil to the U.S., sending more crude than Mexico, Venezuela and Saudi Arabia. And with an estimated 173 billion barrels of reserves, Canada's bounty is second only to Saudi Arabia's.

The oil sands now produce 1.3 million barrels a day, which could ramp up to 3 million barrels a day by 2015, according to the Canadian Association of Petroleum Producers.

More and more companies have jumped into the oil sands game as high oil prices have made its costly production economical. The world's five largest oil companies, as well as Canadian producers and some independent explorers and producers, have sands operations or joint ventures.

But as oil sands production has increased, so have concerns about increases in emissions and possible releases of toxic waste into waterways.

Emissions from oil sands production far exceed those from conventional crude production. Waste in some operations sits in so-called "tailing ponds" visible from space, the report said.

In late April, nearly 500 migrating ducks died after landing in a Syncrude Canada tailing pond. Such ponds are required to have noise devices to scare off birds, but Syncrude's devices weren't working in the aftermath of a snowstorm. The Canadian government is investigating.

Schaeffer acknowledged that pushing to cease oil sands production isn't practical.

The report noted that refinery expansions and new construction are long-term investments, indicating that the U.S. intends to receive and refine Canadian crude for many years to come.

So instead of recommending an end to production and refining of oil sand crude, the report calls for the U.S. to reduce oil consumption by improving efficiency standards for vehicles; raise emissions control standards; consider alternatives to oil derived from the sands in Clean Air Act reviews of proposals for refinery expansion and construction; and account for sulfur, nitrogen, and other impurities in heavy oil when issuing construction permits.

Expansions are expected to add 800,000 barrels a day of refining capacity by 2011, according to the American Petroleum Institute.

A new refinery hasn't been built in the U.S. since 1976. A proposal to build one is under consideration in Arizona. Another proposal for a plant was approved this week by voters in Union County in South Dakota.

Bill Holbrook, spokesman for the National Petrochemical & Refiners Association, said 22 expansion projects are ongoing, though not all are related to adding Canadian oil capacity.

Cindy Schild, manager of refinery issues for the American Petroleum Institute, said Canada is stable, friendly and open to outside producers. It stands apart from resource-rich countries like Venezuela or Russia that have squeezed access, or ones in the Middle East and West Africa that are vulnerable to geopolitical tensions or civil violence.

"We view the Canadian oil sands as a reliable source of energy," she said.

She added that refiners have little choice but to revamp plants to handle heavy oil like that produced in Canada and other countries, including Venezuela. Heavy oil contains more impurities than light, sweet crude from the Middle East, and requires more complicated processing to turn it into gasoline and other fuels.

Also, Schild said, if U.S. refineries eschew Canadian oil, China and other energy-hungry emerging countries will take it.

"Do you want it to be processed in a country with standards in place to address environmental impacts maybe more stringently than others? It's going somewhere," she said.

Source: Houston Chronicle|By KRISTEN HAYS

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