Canadian Oil Sands and America: Part 2

Yesterday we covered surface mining extraction of oil sands as practiced by Suncor in Alberta. But as noted, only roughly 1/5 of the deposits are close enough to the surface to reach through conventional methods. Necessity being the mother of invention, the energy industry was forced to develop new technologies to reach the rest of it. Today we’ll look at one way this is being done, as well as a bit of the cultural and economic impact these operations have on the community.

What is SAGD?

I had the opportunity to tour the Surmont facility, operated by ConocoPhillips in partnership with Total, where they are producing oil using a cutting edge engineering procedure. The company has pioneered a process known as steam-assisted gravity drainage (or SAGD.) Because the bitumen is too thick to flow through a pipeline in its native state, a pair of horizontal pipelines are run through the reserve, one above the other. Super-heated steam is pumped into the upper pipe, melting the oil sands and creating a slowly expanding steam chamber. The liquified bitumen flows down into the lower pipe where it is pumped to the surface.

When the oil reaches the plant it is mixed with lighter, less viscous fuel (also extracted locally) to produce a form of synthetic crude suitable for sale and delivery in the pipeline. The mixing is required because, left in its original form, the bitumen solidifies into something with the consistency of a hockey puck. We were shown an example of the congealed bitumen during a presentation at the end of the tour.

Controlling water usage to minimize environmental impact is a key priority in the SAGD process, just as with surface mining. ConocoPhillips’ water reclamation rate is over 90%, with the returning steam being captured, cooled, cleansed of impurities and returned for continuous loops through the cycle.

VIDEO: In this short video, a ConocoPhillips lab technician provides a brief demonstration of how the water used in the system is recovered and purified for reuse.

This method of “in-situ” resource extraction also has the salutary effect of vastly reducing the plant’s footprint on the land. A rather compact processing plant generates the steam, sending it along pipelines to small drilling pads miles away where it is injected into the ground. A matching line brings the liquified fuel back to the plant for processing. Since the drilling is done horizontally after reaching the depth of the oil sand, multiple pairs of pipelines can spread out from a single pad covering a wide area without requiring multiple, individual insertion points. And just like the Suncor operation, any surface area which is disturbed during the construction process is replanted with indigenous trees and ground cover.

VIDEO: The following brief report from Energy Tomorrow provides an excellent overview of the entire SAGD process, as well as an aerial tour of the facility.

Growing Pains

Though these companies and others have been engaged in energy exploration in Alberta since the 1960s, the past decade has seen a serious expansion of operations along with a corresponding growth in population. No endeavor on this scale can take place without a few growing pains. I had the opportunity to conduct interviews with a number of employees and contractors from several of the companies operating here during my stay, providing a glimpse into what life is like in a modern day boom town.

There are jobs aplenty to be had, and the energy companies are pretty much always hiring. These are good paying jobs, too. I spoke with one young lady who worked in the “tool crib” handing out and collecting tools, who said, “Where else could I get a job paying thirty dollars an hour to do this?” Specialized workers in both construction and oil production can earn significantly higher wages than that.

That’s good news for the workers and the local economy, but it’s also resulted in something of a real estate explosion. Because of the complicated process for allocating lands – either for resource development or private ownership – space is a prime commodity. I was told of the in-laws of one worker who recently purchased what he described as a, “not very large four bedroom bungalow on a pretty small parcel of land” which sold for more than $700,000. (And given the current exchange rate, that works out to pretty much the same cost in US dollars.)

Many of the workers are not permanent residents of the area, traveling in and out on work cycles ranging from seven to twenty-eight days, most putting in twelve hour shifts. Some full time employees have housing provided for them on site at little to no cost, which is a very convenient arrangement. Some other contractors I spoke with found themselves staying in what are known as “open camps.” These are sets of temporary trailers set up by people fortunate enough to own some property, where they provide the workers with a small living space, meals whenever they are not on site, and bus transportation to and from the job. It can come at a price, though, with one welder telling me he paid $200 per night to stay in such a camp.

In fact, everything seems to be fairly expensive around there. Some of the employees noted with rather grim humor that the cost of gasoline is well above the national average for the United States – a fact one man found quite ironic, noting that the fuel, “comes out of the ground about a mile from here.”

Such is the price of success, I suppose. Tomorrow we will conclude our series with a look at relations between the oil companies and the local population, including the indigenous tribes. We’ll also discuss why these new technologies are important to us in the USA, even though we don’t have much in the way of oil sands in the lower forty-eight, and how employment opportunities stemming from this industry may be able to provide an even greater boost to America’s struggling economy.

DISCLOSURE: Costs for travel and accommodations for this tour were provided by the American Petroleum Institute. No other financial remuneration was offered or accepted. The author was under no obligation to publish any content relating to the tour and neither API nor any of the companies mentioned in this series had any editorial control or input regarding published material beyond fact checking for accuracy.

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