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Factoring Sustainability Into Alberta's Tar Sands Project
Mindy Lubber, 24 Aug 07
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There's much talk these days of capitalism and sustainability being increasingly interrelated -- that environmental and social impacts need to be included along with quarterly sales projections in corporate strategies and the financial bottom line. But why is this still more a concept than a reality, especially when it comes to a sustainability crisis like global warming?

Much of the problem is our reliance on outdated accounting systems. Since the Industrial Revolution, our economy has used accounting systems that were precise in measuring capital goods and gross national product, but weak in measuring natural and human resource impacts. This narrowly-defined accounting system meant that companies were long able to "externalize" natural resource costs. In other words, they could pollute for free without paying for environmental damage and cleanups. Society and taxpayers shouldered these costs instead.

Society has gotten better at pushing these "external" costs back at business. In one example, different types of air pollutants are now being regulated and capped by government, which is forcing companies to "internalize" these costs and improve their pollution control technologies. We have already seen the huge health and environmental benefits of having companies and industry tackle smog and acid rain pollution in the 1980's and 1990's.

We're now seeing the capital markets begin to incorporate the external costs of global warming, especially in Europe, where government-supported trading systems and pricing mechanisms (a price per ton of carbon dioxide) have fostered a burgeoning $30 billion-a-year carbon emissions trading program.

But we still have a long way to go to achieve fully sustainable accounting, especially here in North America. Among the biggest challenges is an enormous oil-extraction project underway in Alberta, Canada. Fueled by rising oil prices and declining global oil reserves, US and Canadian oil producers are impacting millions of acres of Alberta's pristine boreal forest to produce oil from a sticky mud-like substance known as tar sands. Tar sands oil production has doubled over the past 10 years, to 1.1 million barrels a day; future growth is expected to quadruple as oil companies pour well over $100 billion into new production and refining capacity on both sides of the border.

If ever there was a project where sustainable accounting is needed, Alberta tar sands oil extraction is it. Greenhouse gas emissions associated with tar sands development are nearly three times higher than traditional oil extraction and refining. The mining and processing also requires huge amounts of water, much of it pumped from the Athabasca River, which flows 765 miles through Aboriginal land and small communities and supports fish and other wildlife.

There has been some progress in reducing the project's environmental footprint: Canadian oil company Suncor reduced the amount of water it uses to produce a barrel of oil from tar sands by half between 2002 and 2006. Still, University of Alberta ecologist David Schindler projects that future tar sands growth, combined with climate change, could cut the Athabasca River's low winter flows 50 percent or more by mid-century. "What they want to withdraw is an unsustainable amount," Schindler told the Los Angeles Times in July 2007.

Stay tuned. Balancing sustainability and capitalism in the Alberta tar sands will be a long-running issue -- and hugely important -- as we try to achieve a sustainable society.

Mindy S. Lubber is president of Ceres, a leading coalition of investors, environmental groups and other public interest organizations working with companies to address sustainability challenges.

Image: Photo by Lindsay Telfer, via Sierra Club Canada Atmosphere and Energy Program

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Mindy...Your article makes some interesting points and raises even more interesting questions. I make my living as a private investor and come at this from a slightly different perspective than some who probably read this site. The tar sands of all projects that rely on certain public goods...need to pay the going freight for what they use and abuse. Water is far more precious than oil and (potable water in any case)...far more scarce. The same for air and landscape damage (which must be taking place on property other than that directly owned or leased by oil companies).
Those issues aside, tar sands and oil shale are poor investments. Costs have not responded to economies of scale and when natural gas catches up with rock oil's gains my belief is that most of these "projects" will be slowly abandoned. Perhaps it will occur about the same time corn ethanol is discovered to be one of the stupider energy ideas of the decade and we'll have hit the trifecta of investment losers.
Maybe the Australians can by all those monster trucks and use it to mine coal for sale to the whole thing won't be a complete loss.

Posted by: Greg Pinelli on 25 Aug 07

Bob Pojasek has been studying Suncor for quite a few years now and has taught it as a case study for his class at Harvard School of Public Health on sustainability.

Posted by: gmoke on 26 Aug 07



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