Economic, Environmental Concerns Threaten Future Of Oil Sands Alberta, Canada, has the third largest oil reserves in the world, but the potentially lucrative oil sands business faces serious economic challenges.
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Economic, Environmental Concerns Threaten Future Of Oil Sands

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Economic, Environmental Concerns Threaten Future Of Oil Sands

Economic, Environmental Concerns Threaten Future Of Oil Sands

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Canada's oil sands are worth hundreds of billions of dollars. That's if they can be exploited and the crude oil is sold on the world market. Oil prices have plummeted over the last year. And there were environmental concerns about oil sands, concerns deep enough for many to leave that energy in the ground. Here's NPR's Jeff Brady on the challenges facing Canada's oils sands.

JEFF BRADY, BYLINE: Because of climate change, there's a growing consensus that up to a third of the world's fossil fuel reserves will have to be left in the ground. The big question is which ones and who will lose out on the riches they could bring.

PHILIP VERLEGER: And so essentially, there's a rush now on to get my oil out of the ground before we have to stop producing.

BRADY: Energy economist Philip Verleger believes Canada and its oil sands business will be one of the losers. Here's why. In Alberta, it costs a company about $25 a barrel to pull oil out of the ground.

VERLEGER: And if I have three-dollar costs or two-dollar costs, as they do in the Middle East, that oil's going to flood the market and essentially make it impossible to make money in Fort McMurray.

BRADY: Many analysts believe that's why OPEC recently declined to cut production and boost prices. Big exporters like Saudi Arabia are forcing higher cost competitors to either go out of business or wait to sell their oil when prices go back up. But then they're more at risk of being the ones forced to leave their oil in the ground. Up north of Fort McMurray, in Alberta, oil sands companies are doing what they can to cut costs by limiting overtime, cutting back on contractors and, in one case, closing a company subsidized coffee and doughnut shop.

DONNA KETT: It's probably the hardest decision we had to make.

(LAUGHTER)

KETT: And the one we've got the most feedback on, in all fairness.

BRADY: Donna Kett is the finance manager for Shell's oil sands business. She says costs have been trimmed up to 30 percent. That's good for the company but tough on the local economy.

KRISTIN MARCEAU: Five years ago when I moved here, this town was booming. You couldn't go anywhere without waiting in line.

BRADY: Kristin Marceau is a student at Keyano College in downtown Fort McMurray. Back then, she says, you'd have to wait an hour or sometimes more for a restaurant table. But now they're available right away. Allison Frenette is an environmental technology student. She may go to work in the oil sands business, and like many here, she maintains an optimistic tone about its future.

ALLISON FRENETTE: The oil sands always bounce back. Like, they do this all the time, up and down. And so I feel like this is just another one of those downs. It's going to bounce right back. It always does.

BRADY: So far, Alberta's oil production has remained stable at about 2.3 million barrels a day. But the business is not growing as projected. In October, Shell was the latest to stop work on a big new oil sands project that would've brought more crude online. Melissa Blake is the mayor of the regional municipality that includes Fort McMurray. She says the oil sands business is vital to the region.

MELISSA BLAKE: This has done wonders for my family. This is doing wonders for so many other families. And so that's the story that gets missed.

BRADY: No matter what, Alberta will still have one of the largest oil reserves in the world. But it's starting to look like a lot of that oil is going to stay in the ground. Jeff Brady, NPR News.

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