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It also comes at a time when U.S. demand for Canadian oil (already 23 percent of imports) is growing. President Obama’s speech on energy policy last week emphasized the importance of imports from Canada and other stable neighbors as the U.S. tries to wean itself from Middle East oil and imports from other volatile jurisdictions. The Keystone XL project, a proposed $7 billion pipeline that would deliver diluted bitumen from Alberta to an upgrader facility in Texas, is waiting for State Department approval, although it has faced stiff pushback from environmental and community groups.

CIBC’s Andrew Potter estimates that oil sands production will jump from 1.5 million barrels a day in 2010 to five million barrels by 2020. That represents about 37 megatons of greenhouse gases, according to the Pembina Institute. “By 2020, that means a near tripling of emissions,” says Potter.

The fact that the shale gas boom is feeding an oil-sands boom worsens the environmental picture. New techniques for the hydraulic fracturing of shale formations may unlock new sources of natural gas, but it also involves injecting a toxic cocktail of chemicals that can contaminate groundwater. Also, new research from the U.S. Environmental Protection Agency has found that the amount of methane (a potent greenhouse gas) from shale projects that can escape into the atmosphere is 9,000 times higher than previously thought.

Stringham says the oil sands industry knows it must do more to reduce emissions, and that means coming up with methods of bitumen extraction that use less natural gas. Many developers are experimenting with using solvents to separate the bitumen and sand, an approach that reduces the amount of natural gas used to produce steam.

Another method is called in situ combustion, which involves setting fire to some of the bitumen underground to warm up the bitumen surrounding it. Some developers are also heating the bitumen by running electricity through electrodes that are inserted through shallow reservoirs. The industry has even begun investigating the use of small modular nuclear reactors to provide electricity, steam, and hydrogen, but the business case is weak while natural gas prices are so low. “The big driver is not there anymore because of the surplus across North America of shale gas,” adds Stringham.

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