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The development of the Canadian oil sands is expected to increase the amount of crude oil produced at the Alberta oil sands from its current level of about 1.6 million barrels/day to as high as 8 million barrels/day by 2020. Current exports to the US amount to about 500,000 barrels a day, and are expected to exceed 1.5 million barrels/day by 2020. A group of environmental groups recently published a report on oil sands development called “Dirty Oil Diplomacy,” taking to task the Canadian government and the oil companies that are developing the Alberta oil sands.

In addition to blasting the current development plans, the report also attacks plans to export the oil by pipeline either to the West Coast, the US Gulf Coast, or the East Coast. In the US, the most well-known of the proposed pipelines is the Keystone XL being proposed by TransCanada Corp. (NYSE: TRP). Kinder Morgan Inc. (NYSE: KMI) has also proposed to reverse the flow of its Trans Mountain pipeline system to transport crude from Edmonton to near Vancouver and Enbridge Inc. (NYSE: ENB) has proposed a new pipeline (the Northern Gateway) that would transport crude to Kitimat, British Columbia. From either destination, crude would be loaded on ships for distribution to buyers.

Enbridge is also proposing to reverse the flow of its Trailbreaker pipeline system to transport Albertan oil that currently arrives at the terminus of the system in Sarnia, Ontario, to Enbridge’s terminal in Portland, Maine, where the crude would be either put on ships for global export.

A report at CNBC.com details some of the objections that the environmental groups have raised related to the proposed pipelines, most thoroughly in a February 2011 report called “Tar Sands Pipelines Safety Risks.” These objections include claims that the crude is more acidic than conventional crude and therefore more corrosive, threatening the integrity of the pipelines. The oil industry disputes these claims, and neither side appears to have the high ground here. The Sierra Club and other authors of the report claim that the 218 spills/10,000 miles of pipeline in Alberta between 2002 and 2010 compare unfavorably with 13.6 spills/10,000 miles of US pipelines and are due to the corrosive nature of crude derived from the oil sands.

The US Department of Transportation is currently conducting a study on transporting Alberta’s crude to try to determine if in fact it is more dangerous to transport than conventional crude. The study was mandated by Congress in January and is due by July 2013. The study is not likely to close the book completely on the safe transportation of Alberta’s crude, but it marks the first time the subject has come under any independent scrutiny.

The “Dirty Oil Diplomacy” report is available here.

The “Tar Sands Pipelines Safety Risks” report is available here.

Paul Ausick