Controversial Oil Substitutes Sharply Increase Emissions, Devour Landscapes

Washington,DC – The mounting quest for oil alternatives threatens drastic increases in heat-trapping global warming pollution and severe impacts on popular habitats across the United States and Western Canada unless clear safeguards are adopted quickly, according to a new analysis released today by the Natural Resources Defense Council (NRDC). The warning comes as lawmakers are facing growing pressure to give huge new subsidies and other incentives to companies involved in liquid coal, oil shale and tar sands.

"Industry and political leaders are pushing us blindly down a dangerous and expensive energy path," said NRDC energy analyst and report author Deron Lovaas. "The vast amounts of energy needed to make these fuels means that overall emissions from every gallon could double or even triple. Mining fuels to put in our gas tanks would have devastating impacts on local communities and the landscape. It will suck up valuable water in places where it is already in short supply."

Western Resources Advocates (WRA), a group active on the oil shale issue in the American west, joined NRDC in authoring the report, as did the Pembina Institute, a Canadian energy and climate change research organization based in Alberta. All three groups are calling for a better path forward through increased fuel efficiency, and the use of renewable, cleaner fuels. The report, Driving It Home, is available online.

The report also warns potential investors of looming liabilities and steep financial risks if project developers continue to ignore the prospect of new emission rules and other environmental safeguards.

Every major oil company is pursuing these unconventional oil technologies. High oil prices are making such sources more cost competitive, but vast new spending is still required to develop them. Industry and its supporters are increasingly asking taxpayers to foot the bill. In energy legislation making its way through Congress this week, companies are aggressively seeking a suite of subsidies including 25-year Defense Department contracts, price guarantees, and a variety of special tax treatments.

"There's no question we need to reduce our dependence on oil, but this is the worst possible way to go about it," said Lovaas.

To avoid these risks, the report recommends establishment of a low carbon fuel standard for all new oil alternatives, regardless of what they are made from. And to reduce the need for such measures in the first place, they urge lawmakers to improve fuel economy performance standards for vehicles, and increase use of biofuels like cellulosic ethanol, to achieve a future energy supply that is both clean and sustainable.

Liquid Coal

Liquid coal poses disastrous consequences for global warming and local environments, according to the report. The energy required in the production stage of liquid coal would mean twice as much global warming pollution as ordinary gasoline. Mining would tear through natural habitats and contribute to air pollution. Displacing just 10 percent of our total oil demand with liquid coal would require a doubling in coal mining and the construction of hundreds of costly new production facilities – each with its own emissions issues.

Nevertheless, industry has teamed with the Department of Defense to lobby Congress to implement a plan to use liquid coal for 70 percent of the DOD's aviation fuel by 2025. This would be accomplished by 25-year fixed price contacts to guarantee a market for liquid coal. Wall Street has been wary to provide the massive capital investments necessary for liquid coal development due to the high risks involved.

Tar Sands

Canadian tar sands are estimated to contain 1.7 trillion barrels of crude bitumen. The problem comes in getting it out of the ground. After lagging for years, production has doubled over the past decade. The Alberta government and the government of Canada have laid out an aggressive new package of tax breaks, subsidies and discount royalties to ramp up extraction even more.

To get at tar sands, companies use huge amounts of natural gas – enough to heat 4 million homes last year alone – to generate steam that is pumped deep under ground. In other cases, vast open pit mines are used to dig the material out. Either way, the industrial mix of roads, pipelines, pits and heavy equipment cause irreparable damage across the rare and irreplaceable habitats of Canada's vast Boreal Forest, home to more than 40 percent of North America's waterfowl. Toxic tailings threaten regional water supplies.

From start to finish the process generates three times the global warming emissions of conventional gasoline. Emissions from tar sands production totaled 125 million tons in 2003.

"The irony is that extracting energy from the Alberta tar sands actually requires an input of massive amounts of energy. It's counterproductive, could contribute triple the global warming pollution as conventional oil, and devastates the environment. It just doesn't make sense," said NRDC senior attorney Susan Casey-Lefkowitz.

Oil Shale

Energy companies have spent years eyeing the vast oil shale deposits beneath hundreds of miles of Colorado, Utah and Wyoming wilderness. But until now high costs and technical challenges have kept them largely at bay since Exxon shuttered its failed $5B facility near Rifle, Colorado.

Extracting oil from shale involves heating the stone to 900 degrees F. This used to be done after mining hundreds of tons shale. Now companies are experimenting with heating it in place, creating a horizontal river of boiling oil deep below the ground. A 2005 study by the RAND Corporation estimates it would require a 1200-megawatt power plant just to unlock just 100,000 barrels of shale oil a day (less than 1 percent of our total oil demand). Large enough to serve half a million people, the power plant alone would burn 5 million tons of coal each year and release 10 million tons of global warming pollution.

Moreover, each barrel of shale oil produced by the conventional mining method consumes between 2.1 and 5.2 barrels of water, a commodity already scarce in the region. Runoff from mine tailings – 150,000 tons a day; 55M tons a year – would threaten water supplies used by cities, farms, and wildlife.

"Oil shale development is all talk and no gain. It presents huge risks to both the economic and environmental lifeblood of this state. At a bare minimum we need to do serious testing and evaluation on a pilot basis before we even consider unleashing this technology on a large scale," said Bob Randall, an expert with WRA.

The United States is likely to pass a regulatory framework to cap global warming pollution in the near future. Tar sands, oil shale and liquid coal all result in higher global warming pollution emissions. The already high cost of these fuels would further increase significantly with the need to move in the opposite direction and reduce emissions in a carbon-constrained economy. The authors urge investors to take these financial risks into consideration.

SOURCE: the Natural Resources Defense Council