07.13.2016
  • Canada

At All Costs

Canada's tar sands are destructive and massively inefficient. But for capitalists, they're the future.

In May a conflagration encompassing two hundred and twenty thousand hectares — an area about a third larger than London — roved through Alberta’s boreal forest for weeks. The giant fire eventually tore through Fort McMurray, formerly a fur trading post and currently a postmodern conurbation nestled next to the world’s richest deposit of bitumen.

Eleven hundred firefighters from several provinces battled the seemingly invincible wildfire as the city’s ninety thousand residents fled. Work camps, home to tens of thousands of itinerant workers flown in from across the country and foreign Gastarbeiter (guest workers), were emptied, and production was shut down at almost all the large mines, wells, and plants. Rain finally brought the blaze under control in early July, though patches of the forest are still burning.

Such blazes are not unprecedented in the Canadian boreal forest, but May’s was the largest fire yet to threaten a city, let alone one as vital to the confederation’s economy.

Canada, the largest exporter of petroleum to the United States, halved shipments during the catastrophe — a painful contraction of its single most valuable export. Every day of closure cost the industry $70 million, and the weeks-long hiatus will cause the national economy to contract next quarter.

The destruction of homes was tragic for many families and escaping Fort McMurray was harrowing. Yet overall the city was remarkably lucky considering the size and power of the fire, which glanced, rather than consumed, Fort McMurray’s housing stock. Even the abandoned bison — some three hundred beasts of propaganda for the Syncrude consortium — survived on their tiny tract of “reclaimed” land, their fleeing handlers having left plenty of fodder and water.

Ironically, the giant mines excavated for fossil fuel served as fire-breaks. Bitumen is not a fuel, but rather a tar-like substance that’s slow to catch fire. It must be “upgraded” into synthetic crude in sprawling plants, but these too were largely immune from the fire’s ravages, as they are often encircled by a wide, treeless no-man’s land.

The only plant to be slightly damaged was Nexen’s facility at Long Lake, and this had already been running at a reduced rate since January after a fatal accident. The Albian Sands project was restarted on May 10 and remaining production came back online a short time later.

Closures at bitumen mines are actually extremely rare. The fire’s interruption of the mines’ schedule of unceasing extraction, upgrading, and transportation provides hints of the unusual arrangement of time, capital, and nature in the tar sands industry.

A Recalcitrant Fuel

Bitumen plants and wells must run constantly due to natural and capital constraints. Situated on the fifty-seventh parallel, Fort McMurray endures cold winters. A plant’s extensive piping could easily be damaged by low temperatures if they are not running, which is why most equipment is duplicated (e.g., having two or more cokers).

Some plants create their own fuel from the waste products of upgrading bitumen, but mini-autarky makes restarting a plant a hassle. If heaters are turned off, ash contaminates water storage pools. For strip mines, constant production helps keeps the mine-face from freezing in winter, easier to claw with giant hydraulic shovels.

Deeply buried bitumen extracted by horizontal wells and fracking (i.e. in situ production) is even more dependent on continuous operation in order to function. If the steam sent down into the deposit condenses, the resulting water may foul the bitumen, and there is a risk that cooled bitumen may no longer be usable when it is heated up again. For the industry, the sooner these facilities returned to operation the better.

Another quirk of geography affecting production is that the tar sands industry is landlocked. Without “tidewater” pipelines few producers garner global prices for their black fruit. The Western Canadian Select index trades at a discount between ten and forty dollars relative to West Texas Intermediate — a difference pocketed by refineries in the United States.

Compared to its peers the tar sands industry bears the highest costs, but garners the lowest price for its product. Now that petroleum’s global price has collapsed, these plants are on the cusp of bankruptcy — but they will keep on producing, even at a loss, because shutting them down is so difficult.

Mines, plants, and upgraders are large and expensive, requiring highly specialized workers and equipment from around the world to be sent to the middle of nowhere. New projects require the global price of petroleum to be eighty dollars per barrel to break even — placing Alberta’s bitumen amongst the world’s most expensive hydrocarbons.

The recently cancelled Voyageur upgrader — a facility entirely unnecessary for conventional petroleum — was designed to turn bitumen into synthetic crude at a rate of two hundred thousand barrels per day (bpd) at a cost of $12 billion. Even “legacy” plants with their capital investment paid off still require thirty-five dollars per barrel to break even.

In contrast, Kuwait’s production costs are only nine dollars per barrel. Before the tar sands industry became the motor of economic growth within the Dominion of Canada in the late 1990s, the energy sector (nuclear, coal, conventional petroleum and methane, and hydro) had a capital-labor ratio of $200,000 per job.

Presently the capital-labor ratio in the tar sands is $1.4 million per job. A tiny number of workers is employed in an industry predicated on a sixth of Canada’s capital stock and a fifth of annual investment.

Operating the industry’s expensive infrastructure requires strict discipline because of high costs. Indeed, operating costs in 2013 for the industry as a whole were $24 billion, not much less than total capital investment of thirty-one billion in the same year.

Planning a partial shutdown for maintenance, necessary every four to five years, begins a year and a half ahead of time and lasts two months. The need for expensive contractors and the opportunity cost of lost production means even an extra day of shutdown could significantly overextend a firm’s operating budget.

Another significant capital and natural cost is the industry’s need for enormous quantities of energy. Conventional petroleum requires the equivalent of one barrel of oil to produce twenty-five, but the tar sands’ return is only three.

Although touted as environmentally friendlier than mining, in situ wells require yet more energy: methane is needed to cook subterranean bitumen with steam before pushing it to the surface. An Albertan minister once described this as the alchemy of turning “gold into lead.”

During the stoppages caused by the wildfire, Albertan consumption of methane fell by twenty-five million cubic meters; the tar sands industry alone burns half of the total used in the province.

The twin fetters of massive capital investment and a truculent climate contrasts to the surprising flexibility of the tar sands’ main rival in non-conventional petroleum production: US shale oil. During the downturn since the summer of 2014, firms have been able to significantly reduce their rig count to cut costs.

North Dakota, the heart of the “fracking” boom, has witnessed a drop in the number of rigs deployed from a peak of 218 in 2012 to only 29 today, yet production has only fallen 9 percent to the current rate of 1.1 million bpd.

Fifty fracking firms have gone bankrupt since the bubble burst two years ago, but they collectively produced only 1 percent of output. The varying flexibility of shale oil and bitumen can be explained by differences in capital investments and natural properties. Shale oil does not require extensive and expensive upgrading because it is already petroleum.

Turnover is much higher; fracked wells decline by approximately 70 percent after the first year because they lose pressure quickly. New wells have to be drilled constantly to maintain production, but costs can be cut simply by focusing on the most productive. Indeed, production per well doubled between 2013 and 2015.

Bitumen extraction is much more temporally inflexible. “De-watering,” the drainage of the water table above a bitumen deposit to prepare an open-pit mine, takes three years. Even in situ requires months to warm up a deposit before extraction can begin. Bitumen mines have a lifespan of up to fifty years, and some in situ projects are still running thirty years later. There are also relatively few projects, only a couple dozen in total.

A Non-Conventional Future

So why bother with such a recalcitrant fuel? Because given today’s prices and technologies, some 170 billion barrels are recoverable from Canada — a reserve rivaling the patrimony of the Saud family — strewn in deposits the size of England.

It is the last large reserve that can be fully owned by private investors. This is because about four-fifths of the world’s petroleum is controlled by national corporations (e.g., Pemex or Saudi Aramco), the legacy of a slew of expropriations in the 1970s. Of the remaining fifth available, half lies in Alberta.

The need to keep up reserves to maintain stock prices has lured much of Big Oil to this isolated abode of pseudo-petroleum. Moreover, the Dominion is also the only large producer and consumer of hydrocarbons to lack a state corporation within the industry, leaving a wide berth to foreign firms. Between 1999 and 2015, a quarter of a trillion dollars were invested in developing the tar sands, making it the largest single industrial project ever.

What is perhaps most salient about the tar sands is its unusual ordering of capital, time, and space. A trenchant thinker of the relationship between capitalism and fossil fuels is the young geographer Andreas Malm.

Building upon the insights of Moishe Postone and Henri Lefebvre, Malm traces capital’s drive to separate workers and nature from “concrete” time and space. “Concrete” is synonymous with specific, peculiar, unique, irregular. Concrete time often follows natural rhythms, such as the seasonal flow of a river, while concrete space would be the position of the river itself.

Most textile mills of the early industrial revolution in England relied on hydropower, a form of energy far cheaper and more powerful than that produced by contemporary steam engines. Hydropower, however, required capital to draw unruly workers to an isolated spot, leaving owners vulnerable to riots, strikes, and employee turnover. When the river’s flow was low, bosses sent workers home, but they were required to work overtime when the current strengthened.

Violent and widespread resistance to these long shifts eventually led to the 1833 Factory Act and then the 1847 Ten Hours Act. These legislative changes broke the back of hydro-powered capitalism because owners could not make up shortfalls when rivers ran low.

Malm argues that fossil fuels were a breakthrough because they could be deployed in ever-greater amounts anywhere at anytime, breaking the fetters of concrete time and space:

Their dense energy permits capital to produce its own abstract spatio-temporality for the production of surplus-value. They are incorporated into capital as its own motive force.

The material basis of what Malm calls “fossil capital,” however, is changing. Conventional petroleum production peaked approximately a decade ago. The ten largest “super-giant” fields are hardly young; the last was discovered in 1968. 79 percent of the largest 330 fields are in decline.

In 2014 Saudi Arabia readied its last “elephant” for production, Manifa, whose nine hundred thousand bpd will merely offset falling production elsewhere. Despite all the talk of Riyadh increasing production, it has not surpassed its peak from the 1970s, and even the current high rate cannot be sustained for long, as a trove of diplomatic cables released by WikiLeaks show.

These files, written between 2007–9, reveal that the former chief geologist of Saudi Aramco warned the US government that Saudi Arabian reserves were overstated by 40 percent and that domestic consumption was taking an increasing share of production, reducing what was available for export.

Moreover, despite the hype, shale oil cannot remedy declining petroleum production. The United States has the largest endowment of shale or “tight” oil, but at thirteen billion barrels, it is too small to fill the gulf between declining production and increasing demand. David Hughes of the Post Carbon Institute reckons that most estimates of tight oil formations are exaggerated and production may peak by 2017.

Yet even excluding these Cassandrian predictions, the most cornucopian optimism would still be insufficient. As Timothy Mitchell, a political theorist of energy, observed:

Facing an annual decline rate of 4 or even 4.5 percent, the world must discover and bring online the equivalent of a new Saudi Arabia — or one could equally say, a new United States, complete with shale boom — every four years, or perhaps every three, in order merely to maintain current rates of production.

The tar sands industry represents the solution to this impasse; it is the industrial avant-garde of a newly emergent capitalist energy system based on non-conventional petroleum.

Coal or petroleum (especially the “light and sweet” variety) takes little labor to render it usable. It comes out of the ground ready or nearly ready for combustion. Bitumen is much more expensive than conventional petroleum, but this is compensated by the vastness of its deposits.

Depending on prices and technology the size of Canada’s reserves could double. This would be three times more potential energy than all the petroleum extracted since Standard Oil was founded in 1870.

Furthermore, firms and technical experts of the tar sands have built links with those developing sister deposits of similarly gargantuan scope in Venezuela’s bituminous Orinoco Belt and Colorado’s kerogen in the Green River formation.

Thus, with enough capital and technology capitalism can effectively create its own fuel to continue “business as usual.” Alberta’s mines are massive, big enough to be seen from space, and altogether compose the largest open-mine complex in the world (approximately a thousand square kilometers).

Only a fifth of the bitumen reserves, however, are close enough to the surface to be strip-mined. The rest of it can only be accessed in situ, but due to its scale, in situ extraction is no less destructive than strip-mining: it is responsible for the chewing up of far more land, contamination of the water table, intensive energy use, deforestation, and fragmenting ecosystems.

The woodland caribou, whose multitudes once populated the Canadian North in the way the innumerable bison herds did in the prairies to the south, are expected to become locally extinct because of the disturbances caused by in situ projects.

Mined ore must be washed with hot water to separate bitumen from sand and this creates toxic waste. Naturally, each grain of sand is surrounded by a water droplet, which is then covered in a thin layer of bitumen. Two to four barrels of water are required to create one barrel of bitumen. This water is drawn from one of the world’s largest undammed rivers, the Athabasca.

The resulting wastewater is full of mercury and heavy metals and cannot be released back into the environment, but must be placed in tailings ponds — but even this precaution is a fiction as eleven million liters leak daily into the groundwater.

The earthen dyke confining the Mildred Lake tailings pond is by far the largest dam in the world if measured by volume of construction material: 540,000,000 cubic meters. In contrast, the Hoover Dam contains only 2,600,000 cubic meters of concrete.

There are many tailings ponds. Every day twenty-five million liters are added to them and by 2013 they occupied 176 square kilometers (a fair bit larger than Lichtenstein). Not a single one has been “reclaimed” because even after forty years of research no one knows how.

The tailings ponds of the tar sands industry are more pernicious than those left behind from coal mining, an industry that is a close relative of the tar sands, linked by decades of transferred expertise. Unlike the End Pit Lakes (EPLs) that have become swimming ponds dotting the Ruhrgebiet, the EPLs of Alberta contain toxic waste.

It is hoped the bottom layer of the lakes (where the toxic waste would be deposited) will not mix with the top layer of clean water, but there is little scientific reason to think this will be the case. This lack of mixing (i.e. meromixis) is dependent on salinity to increase water density, but this depends on a constant source of salt and thus like any other toxic liability, it is unclear how to ensure safety over the very long term.

If tailings ponds are a problem, then land is no easier to reclaim. The tiny bits of land “reclaimed” by industry tend to be unusual environments. The tar sands industry has significantly changed the hydrology of the region by re-routing rivers, draining water-tables, and replacing marshland with a hilly barren “reclaimed” landscape. Hilly because “overburden” (muskeg above bitumen deposits) and sand tailings are piled up and then covered with a thin layer of topsoil. These areas are then seeded with invasive species (e.g., barley because it grows quickly) and rarely able to support trees or shrubs.

Strangely only voles seem to thrive and indeed, some patches have the world’s highest densities of the rodent. Even this tepid post-nature is expensive and rarely realized. Only a hundred hectares over the past half-century of development has been certified by the government as “reclaimed,” a tenth of 1 percent of disturbed land.

There is no way to reclaim marshes, yet they keep the boreal forest from drying out and help make the region the largest terrestrial carbon sink. The agent of its destruction, the tar sands industry, is the largest single source of greenhouse gases in a country that is the world’s worst per capita emitter.

The fire shows how the capitalist process of abstraction does not eradicate concrete time and space, but merely displaces it. The new abstract time and space created by steam power in the nineteenth century allowed its antithesis to emerge: the strike, a weapon of the working class that interrupted the process of abstraction.

Unlike the lower classes before them, coal miners and railway workers could effectively shut down a national economy. This development, Mitchell contends, explains the vigorous political participation of European workers, a new era inaugurated by the Belgian general strike of 1902.

Unlike the striking colliers that posed a threat to the flow of energy in industrial society, the tar sands’ vulnerability is similar to that of riverine factories in that it also requires a great concentration of capital exposed in a hostile isolated environment. The fire makes this manifest. Capital is vulnerable, not the energy system itself.

It is unclear who or what will exploit this vulnerability. Unlike within a coal-based system, labor is unlikely to champion democracy in Alberta’s tar sands. The last large strike on a tar sands facility was thirty years ago and it failed.

Today, Fort McMurray workers are loathe to shut down what is essentially a money printing press for a weak and desperate Canadian proletariat. Moreover, the workers’ party, the New Democrats (NDP), has been repeatedly sundered between its Central Canadian and Albertan wings.

Party members and politicians from Ontario and Quebec critical of the tar sands provoke the ire of their fellow members out West. The NDP wrested control of Alberta’s provincial government from the Tories last year and has been doing whatever it can to support the tar sands, especially by promoting new pipelines.

If labor has not succeeded, then environmentalist and indigenous groups have enjoyed greater success and have already thwarted both the Northern Gateway pipeline to the coast of British Columbia, and the Keystone XL.

Moreover, the bitumen barons will be hard-pressed as environmental instability continues to raise costs. Fires are likely to become more common as the world warms. The Athabasca is drying up — its flow during the winter is already at the minimum needed by industry. Without water, one cannot transmute bitumen into fuel.

The boreal forest fire momentarily humbled the tar sands industry but the Left cannot expect nature to do their revolutionary work for them. Capital has demonstrated it can outlive the depletion of fuels that animated it for two centuries.

The ability to engineer a new source of fuel allows capital to carry on its global quest to commodify all of nature and society, no matter how devastating the consequences may be.