US oil industry rep to pitch Canadian oil

February 25, 2011
| By Pete Daly |
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The World Affairs Council of Western Michigan’s timing couldn’t be better.

As world petroleum prices shot up last week, the Council announced that its March 7 speaker will be Rayola Dougher, senior economic advisor, media relations, at the American Petroleum Institute in Washington, D.C. The API represents all aspects of the U.S. petroleum and natural gas industry.

Dougher told the Business Journal that she will “focus on choices we have in the U.S. in terms of energy policy, and especially now as we see a lot of this instability in the Middle East. What are our options moving forward?”

A key issue is a proposed pipeline — held up by the U.S. government — that would bring petroleum extracted from vast expanses of oil sands in western Canada down to U.S. refineries on the Gulf Coast that are particularly suited to processing “heavy” crude.

“We hear an awful lot about getting off oil, but let’s look at what our two options really are,” she said. She is referring to further development of the Canadian oil sands and development of oil reserves in the U.S. that have been off-limits.

“There’s a lot of misinformation out there,” said Dougher (pronounced “dewer”). “We are trying to counter it with some facts about pipelines and about what the oil sands are.”

“We have 116 billion barrels (of reserves in the U.S.) that are off limits to development. Let’s rethink this a little bit,” she said.

A representative of the Canadian government told the Business Journal that Canada supports construction of the pipeline and increased extraction of oil from the sands of northern Alberta Province for use by the U.S.

“Canada is our number one (foreign) provider of fuel, and they can be a very significant source moving forward,” said Dougher.

The U.S. produces about 37 percent of oil consumed here; the rest is imported. Canada provides 13 percent, Saudi Arabia 5 percent, Venezuela 6 percent, Mexico 7 percent, and lesser percentages from many other countries.

Due to depletion of reserves, oil from Mexico and Venezuela to the U.S. is declining, said Dougher.

She said Canada could be providing more than 25 percent of the oil needed by the U.S. by 2030.

Much of what Dougher told the Business Journal was repeated in a separate interview by Roy Norton, counsel general of Canada to Michigan, Ohio, Indiana and Kentucky.

Norton said Canadian oil exports to the U.S. are now approaching 2 million barrels a day, and “almost all of that from the oil sands.” Private investors now have “massive development” underway in Canada to increase oil sands production in western Canada by an additional 1 million barrels a day by 2015, said Norton, and, eventually, perhaps reaching a total of 5 million barrels a day.

“In addition to supplying oil to the U.S., it generates an awful lot of jobs” in extracting, moving and processing the oil, said Norton.

“Our calculation is that” the oil sands development “during that period of time will create — in the U.S. alone — something in the order of 345,000 jobs, and more than 10,000 of those are in Michigan,” in the production of heavy equipment for use in the oil sands, according to Norton.

“It will happen if there’s a market, and it won’t happen if there isn’t a market,” said Norton.

He said the proposed Keystone XL pipeline from western Canada to Port Arthur, Texas, on the U.S. Gulf Coast is an issue.

Dougher said the U.S. Department of State is scheduled to decide soon whether to approve a permit for the pipeline. The department previously halted the permit process.

“As the time approaches for the State Department to make its decision, you will no doubt hear a lot of arguments, pro and con, regarding this issue,” said Dougher. “There is too much misinformation being disseminated by those who, for whatever reason, insist that all use of oil by Americans halt immediately.”

Dougher said saying no to increased use of Canadian oil will not stop the development of Canadian oil sands, “because Canada will develop its oil sands resources. There are plenty of energy-hungry countries such as China eager to buy that oil.”

Norton said the reserves of the Canadian oil sands “are 275 billion barrels, the second largest proven reserves in the world, only after Saudi Arabia.”

By 2030, Canadian oil would be sufficient to meet the needs of all 15 Midwestern states, he said, and he pointed out that today, “half of the gasoline sold in Chicago derives from (Canadian) oil sands.”

The Canadians, he said, will argue that “close proximity” and “security of supply in a troubled world” should be welcome by the U.S.

He noted that development of the Canadian oil sands, which began in the 1970s, is “private sector,” and the reserves and facilities are not owned by the government. “As a matter of government policy, it can’t be turned on or off in order to leverage certain behavior by the U.S. government,” he said.

Extraction of oil from oil sands (called tar sands in the U.S.) has been controversial, involving large amounts of water use, major impact on the landscape, and higher greenhouse gas emissions from the type of oil. However, Dougher said oil sands oil is comparable to other crude oils refined in the U.S., including crude oil from California.

Transfer of oil via pipeline is “the safest mode,” she said.

“We really do think (environmental issues) can be managed and that they are being addressed, and we’d like to see this project move forward,” said Dougher.

Norton said the technology of oil sands production “is changing rapidly.” Most of it still comes from “mining” the sand, which is processed with steam at “upgrade plants” to separate the oil, with the spent water going into tailings ponds. The latest technology involves injection of steam into the sand, then pumping up the separated oil with the sand remaining in place.

Norton, who visited the oil sands production sites in October, said that compared to the mining method, “you wouldn’t be able to tell anything was going on there.” The new process “uses much less water and doesn’t involve creation of tailings ponds. The land is unscarred” compared to the mining method.

Dougher’s presentation at the World Affairs Council “is so timely,” noted Council executive director Dixie Anderson.

“This past week, when gasoline jumped at the pump, I thought of what Tom Friedman said when we hosted him here a year and a half ago,” said Anderson. “He said we need to immediately raise the taxes on a gallon of gas a dollar. Everyone gasped. Then he said, well, do you want to have that extra tax go to the U.S. for alternative energy resources or do you want to give it to the Saudis? Because you’re going to pay it one way or the other.”

In his syndicated column last week, Friedman repeated that same proposal to help protect the U.S. from future oil price volatility originating in the turbulence of the Middle East.

Dougher’s appearance is part of the WACWM’s Great Decisions series. She will speak at 6 p.m. at the Performing Arts Center at Aquinas College. Admission is $5 for members of the Council and students; $10 for nonmembers.

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