www.cantonrep.com Tuesday, February 18, 2003 By TOM COHEN Associated Press writer

FORT McMURRAY, Alberta — Along the Athabasca River of remote northern Alberta is an engineer’s dream — miles of gigantic projects turning once unrecoverable oil from Alberta’s tar sands into black gold.

Trucks as big as houses rumble on tires 10 feet tall and buckle under 100-ton loads of oil-rich sand dropped in by towering shovels. The brown-black earth is turned into slurry, then travels by pipeline to plants where it ultimately will be refined into crude oil, diesel and other fuels and chemicals.

Such synthetic oil projects — those involving more than conventional drilling — often bear a stigma as high-cost, low-yield investment turkeys. The Alberta oil sands, though, have reached high-level production at a workable cost with reserves that will last decades.

And the global terrorist threat and instability associated with conventional oil sources such as the Middle East have made Canadian oil a crucial component of U.S. hopes for a secure energy supply.

“Sept. 11 was a watershed event for the oil sands,” said Patrick Bryden, a research analyst for FirstEnergy Capital of Calgary who considers the Canadian resource “a strategic asset for North American oil supplies.”

The U.S. domestic supply has matured, while supplies in the Middle East and former Soviet Union are tainted by uncertainty of access, Bryden noted. Political unrest has raised questions about Venezuela, a major U.S. supplier.

“When the going gets tough, the dependable oil is going to come from Canada,” Bryden said.

That means the oil sands and the mega-projects that use surface mining or more technologically advanced steam-driven extraction methods to produce almost 1 million barrels of crude or refined oil each day.

Production is expected to reach 1.8 million barrels a day by 2010, with known recoverable reserves of 315 billion barrels, comparable to Saudi Arabia.

Overall, Canada produces 2.3 million barrels a day and exports 1.4 million, all to the United States, making it one of the top four suppliers of foreign oil with Saudi Arabia, Venezuela and Mexico, according to Greg Stringham, vice president of the Canadian Association of Petroleum Producers, an industry lobby group.

The Canadian oil comprises 15 percent of total U.S. imports, and industry figures expect that to increase. Suncor Energy Chief Executive Rick George said the U.S. market currently buys 30 percent of his company’s production, and that figure eventually will rise above 50 percent.

President Bush mentioned the oil sands when referring to energy policy last year, thrilling industry figures, although he used an outdated phrase.

“Bush came out and called them the tar pits. That’s fine with us, as long as he recognizes the huge size and potential there,” Stringham said.

The tar reference comes from Canadian explorers who saw Indians using the thick, black substance known as bitumen bubbling from the Athabasca River banks to seal their canoes.

Decades of persistent but mostly futile research followed, with initial entrepreneurs trying and failing at conventional drilling in the early 20th century.

Scientists figured out as early as 1920 how to mix the black, sticky oil sand with hot water and caustic soda, then shake it up to separate the components, with the heavier sand sinking to the bottom and the bitumen rising to the top.

It took until 1967, though, for Suncor to develop the first major project, and others including Syncrude, ExxonMobil, Imperial and Shell have since put up money to get huge operations going, with a boost from government incentives that helped write down the investment more quickly.

Stringham said total investment in the oil sands — which include the Athabasca River, Cold Lake and Peace River regions around Fort McMurray, 210 miles northeast of Edmonton — was $11.3 billion from 1996-2001, with another $4.6 billion on new projects under construction and at least $16.6 billion more in potential projects through 2010.

Most production comes from the surface mining by Suncor and Syncrude, but more steam operations are planned because they can get to deeper reserves and hold down production costs.

Environmental groups call such major investment in oil technology shortsighted, prolonging the focus and dependence on an environmentally harmful industry.

Research and development money should go toward technology such as hydrogen-cell power to eliminate combustion engines, said Robert Hornung, policy director of the Pembina Institute, a nonprofit environmental research and advocacy organization.

www.chron.com Feb. 17, 2003, 11:57PM By TOM COHEN Associated Press

FORT McMURRAY, Alberta -- Along the Athabasca River of remote northern Alberta is an engineer's dream: miles of gigantic projects turning once unrecoverable oil from Alberta's tar sands into black gold.

Trucks as big as houses rumble on tires 10 feet tall and shudder under 100-ton loads of oil-rich sand dropped in by towering shovels. The brown-black earth is turned into slurry, then travels by pipeline to plants where it will be refined into crude oil, diesel and other fuels and chemicals.

Such synthetic oil projects -- those involving more than conventional drilling -- often bear a stigma as high-cost, low-yield investment turkeys. The Alberta oil sands, though, have reached high-level production at a workable cost with reserves that will last decades.

And the global terrorist threat and instability associated with conventional oil sources such as the Middle East have made Canadian oil a crucial component of U.S. hopes for a secure energy supply.

"Sept. 11 was a watershed event for the oil sands," said Patrick Bryden, a research analyst for FirstEnergy Capital of Calgary who considers the Canadian resource "a strategic asset for North American oil supplies."

The U.S. domestic supply has matured, while supplies in the Middle East and former Soviet Union are tainted by uncertainty of access, Bryden noted. Political unrest has raised questions about Venezuela, a major U.S. supplier.

"When the going gets tough, the dependable oil is going to come from Canada," Bryden said.

That means the oil sands and the mega-projects that use surface mining or more technologically advanced steam-driven extraction methods to produce almost 1 million barrels of crude or refined oil each day.

Production is expected to reach 1.8 million barrels a day by 2010, with known recoverable reserves of 315 billion barrels, comparable to Saudi Arabia.

Overall, Canada produces 2.3 million barrels a day and exports 1.4 million, all to the United States, making it one of the top four suppliers of foreign oil with Saudi Arabia, Venezuela and Mexico, according to Greg Stringham, vice president of the Canadian Association of Petroleum Producers, an industry lobby group.

The Canadian oil provides 15 percent of total U.S. imports, and industry figures expect that to increase. Suncor Energy Chief Executive Rick George said the U.S. market buys 30 percent of his company's production, and that figure eventually will rise above 50 percent.

President Bush mentioned the oil sands when referring to energy policy last year, thrilling industry leaders, although he used an outdated phrase.

"Bush came out and called them the tar pits," Stringham said.

"That's fine with us, as long as he recognizes the huge size and potential there."

The tar reference comes from Canadian explorers who saw Indians sealing their canoes with the thick, black substance known as bitumen bubbling from the Athabasca River banks.

Decades of persistent but mostly futile research followed, with initial entrepreneurs trying and failing at conventional drilling in the early 20th century.

Scientists figured out as early as 1920 how to mix the black, sticky oil sand with hot water and caustic soda, then shake it up to separate the components, with the heavier sand sinking to the bottom and the bitumen rising to the top.

It took until 1967, though, for Suncor to develop the first major project, and others, including Syncrude, Exxon Mobil, Imperial and Shell, have since put up money to get huge operations going, with a boost from government incentives that helped write down the investment more quickly.

Stringham said total investment in the oil sands, which include the Athabasca River, Cold Lake and Peace River regions around Fort McMurray, 210 miles northeast of Edmonton, was $11.3 billion from 1996-2001, with another $4.6 billion on new projects under construction and at least $16.6 billion more in potential projects through 2010.

Such figures are appropriate for the oil sands, where gigantic mining and refining complexes sprawl across the formerly barren landscape, spewing plumes of steam and smoke.

To industry figures, the known reserves of the oil sands put the emphasis on technology to lower the cost of getting the oil out, rather than the exploration necessary for conventional drilling operations.

Production costs range from $7 to $11 a barrel, depending on the project, with the current oil price up above $30 a barrel.

Most production comes from the surface mining by Suncor and Syncrude, but more steam operations are planned because they can get to deeper reserves and hold down production costs.

Environmental groups call such major investment in oil technology shortsighted, prolonging the focus and dependence on an environmentally harmful industry.

Research and development money should go toward technology such as hydrogen-cell power to eliminate combustion engines, said Robert Hornung, policy director of the Pembina Institute, a nonprofit environmental research and advocacy organization.

Then there is the Kyoto Protocol, ratified by Canada in December, which restricts greenhouse gas emissions blamed for global warming.

With oil sands projects expected to emit up to 20 percent of Canada's total greenhouse gases by decade's end, the Kyoto limits could mean significant costs for producers, Hornung said.

Stringham of the petroleum producers lobby group noted some planned projects are on hold because of rising costs and the Kyoto factor, including a $2.3 billion open-pit mining operation by TrueNorth Energy, a subsidiary of Koch Industries.

"There's several of them that are kind of pausing," he said, "still doing the engineering and spending the hundred million dollars, but not ready to pull the trigger on the billions needed to launch the project."

boston.com By Tom Cohen, Associated Press, 2/17/2003 12:26

FORT MCMURRAY, Alberta (AP) Along the Athabasca River of remote northern Alberta is an engineer's dream miles of gigantic projects turning once unrecoverable oil from Alberta's tar sands into black gold.

Trucks as big as houses rumble on tires 10 feet tall and buckle under 100-ton loads of oil-rich sand dropped in by towering shovels. The brown-black earth is turned into slurry, then travels by pipeline to plants where it ultimately will be refined into crude oil, diesel and other fuels and chemicals.

Such synthetic oil projects those involving more than conventional drilling often bear a stigma as high-cost, low-yield investment turkeys. The Alberta oil sands, though, have reached high-level production at a workable cost with reserves that will last decades.

And the global terrorist threat and instability associated with conventional oil sources such as the Middle East have made Canadian oil a crucial component of U.S. hopes for a secure energy supply.

''Sept. 11 was a watershed event for the oil sands,'' said Patrick Bryden, a research analyst for FirstEnergy Capital of Calgary who considers the Canadian resource ''a strategic asset for North American oil supplies.''

The U.S. domestic supply has matured, while supplies in the Middle East and former Soviet Union are tainted by uncertainty of access, Bryden noted. Political unrest has raised questions about Venezuela, a major U.S. supplier.

''When the going gets tough, the dependable oil is going to come from Canada,'' Bryden said.

That means the oil sands and the mega-projects that use surface mining or more technologically advanced steam-driven extraction methods to produce almost 1 million barrels of crude or refined oil each day.

Production is expected to reach 1.8 million barrels a day by 2010, with known recoverable reserves of 315 billion barrels, comparable to Saudi Arabia.

Overall, Canada produces 2.3 million barrels a day and exports 1.4 million, all to the United States, making it one of the top four suppliers of foreign oil with Saudi Arabia, Venezuela and Mexico, according to Greg Stringham, vice president of the Canadian Association of Petroleum Producers, an industry lobby group.

The Canadian oil comprises 15 percent of total U.S. imports, and industry figures expect that to increase. Suncor Energy chief executive Rick George said the U.S. market currently buys 30 percent of his company's production, and that figure eventually will rise above 50 percent.

President Bush mentioned the oil sands when referring to energy policy last year, thrilling industry figures although he used an outdated phrase.

''Bush came out and called them the tar pits. That's fine with us, as long as he recognizes the huge size and potential there,'' Stringham said.

The tar reference comes from Canadian explorers who saw Indians using the thick, black substance known as bitumen bubbling from the Athabasca River banks to seal their canoes.

Decades of persistent but mostly futile research followed, with initial entrepreneurs trying and failing at conventional drilling in the early 20th century.

Scientists figured out as early as 1920 how to mix the black, sticky oil sand with hot water and caustic soda, then shake it up to separate the components, with the heavier sand sinking to the bottom and the bitumen rising to the top.

It took until 1967, though, for Suncor to develop the first major project, and others including Syncrude, ExxonMobil, Imperial and Shell have since put up money to get huge operations going, with a boost from government incentives that helped write down the investment more quickly.

Stringham said total investment in the oil sands which include the Athabasca River, Cold Lake and Peace River regions around Fort McMurray, 210 miles northeast of Edmonton was $11.3 billion from 1996-2001, with another $4.6 billion on new projects under construction and at least $16.6 billion more in potential projects through 2010.

Such figures are appropriate for the oil sands, where gigantic mining and refining complexes sprawl across the formerly barren landscape, spewing plumes of steam and smoke that cloud the sky.

At Suncor's Athabasca operation, some of the world's biggest trucks able to haul 360 tons collect oil sand from electric shovels so huge they need tractors just to haul around the power cables.

A road sign warning of high voltage power lines reads: ''Maximum vehicle height 15 meters (50 feet).''

''I never thought I'd see a day when I'd consider a 100-ton truck a smaller truck,'' said Len Hale, the Suncor general manager of mine operations.

To industry figures, the known reserves of the oil sands put the emphasis on technology to lower the cost of getting the oil out, rather than the exploration necessary for conventional drilling operations.

''All the oil sands operators are relentless about trying to drive that cost down,'' said Hart Searle, external relations manager at Imperial Oil Ltd., which has a steam project in the Cold Lake region.

Production costs now range from about $7 to $11 a barrel, depending on the project, with the current oil price up above $30 a barrel.

Most production comes from the surface mining by Suncor and Syncrude, but more steam operations are planned because they can get to deeper reserves and hold down production costs.

Environmental groups call such major investment in oil technology shortsighted, prolonging the focus and dependence on an environmentally harmful industry.

Research and development money should go toward technology such as hydrogen-cell power to eliminate combustion engines, said Robert Hornung, policy director of the Pembina Institute, a nonprofit environmental research and advocacy organization.

Then there is the Kyoto Protocol, ratified by Canada in December, which restricts greenhouse gas emissions blamed for global warming.

With oil sands projects expected to emit up to 20 percent of Canada's total greenhouse gases by the end of the decade, the Kyoto limits could mean significant costs for producers, Hornung said.

Stringham of the petroleum producers lobby group noted some planned projects are on hold due to rising costs and the Kyoto factor, including a $2.3 billion open-pit mining operation by TrueNorth Energy, a subsidiary of Koch Industries Inc.

''There's several of them that are kind of pausing,'' he said, ''still doing the engineering and spending the hundred million dollars, but not ready to pull the trigger on the billions needed to launch the project.''

www.canoe.ca Sunday, February 16, 2003 By TODD NOGIER, BUSINESS EDITOR

 It's looking like a tale of two economies. Soaring oil and natural gas prices have begun to churn up concern in Central Canada about how consumers will get hit in the pocketbook. Gasoline prices are hovering near record highs and home heating bills are increasing. But that's only the beginning. A sustained high oil price could seriously curtail consumer and business spending, economists say. "Most consumers just basically have to swallow the increases," said Douglas Porter, senior economist with BMO Nesbitt Burns. "Effectively what happens is -- no doubt about it -- it hammers confidence and it does tend to crimp spending on other things, places where consumers can cut back, so discretionary spending does feel the pain in the short term," he said. But the opposite is true in Alberta, where oil and gas are the lifeblood of the economy. Rising oil and gas prices boost oilpatch activity and bolster the bottom line of the province's big energy companies. That trickles down to heightened job security of energy workers and rising salaries. Momentum in that sector boosts others such as retail, construction and professional. The result: As other regions of the country watch their economies falter, this one gets a shot in the arm. "I suspect the impact of high oil prices will be negative for Central Canada and positive for Alberta," said Craig Alexander, chief economist of the TD Bank. Oil prices have been steadily rising since last fall and closed at $36.80 US a barrel on Friday, its highest since September 2000. Porter said a one-third increase in energy prices, which is what's expected, would take about two percentage points from the level of consumer spending in Canada. But retail spending in Alberta is forecast to rise, contributing to a boost in GDP growth here to about 4% this year. Economic growth in Canada is forecast to hover under 3%. "Clearly, when you have one full percentage point difference in growth, there really is a dichotomy in how soaring energy prices affect the different regions within Canada," said Alexander. In fact, the dichotomy can even feed upon itself. During the last energy price spike two years ago, Alberta led the nation in growth, contributing a massive increase in the number of job seekers migrating to this province. EXPERTS SPLIT Demand for housing here skyrocketed and that growth put pressure on governments to heighten spending for roads and highways, as well as for schools and other services. Higher royalties gives the Alberta government the financial clout to hike spending to deal with the pressures. That adds to economic growth. The experts are split on whether oil and gas prices will remain as high as they are now. Alexander said if war breaks out in the Mideast, oil prices could jump to $40 or $50 US a barrel, then remain at those levels for a short time before plunging back down to $22. Natural gas, much more dependent on weather, is likely to begin its drop-off within weeks. Other analysts point to the possibility prices could stay high with a slow ramp-up in production from Venezuela after its strike. U.S. inventories are at their lowest levels since 1975. High prices could dampen Canada's economic growth by a bit less than half a percentage point, predicts Alexander. "I don't think we're in danger of slipping into recession, even if these prices stick around."

www.nationalpost.com Robert Remington, with files from Ian Bailey in Vancouver National Post Saturday, February 15, 2003

CALGARY - The cost of driving a vehicle at today's record-high fuel prices has jumped more than 25% in a year, with the price of gassing up some behemoth sport-utility vehicles now exceeding $100 a tank of gas.

The price of regular gasoline reached a record 80.7 cents a litre this week, according to M.J. Ervin & Associates, a Calgary-based energy consultancy. But that national average, which is compiled every Tuesday, does not include a Wednesday increase in Vancouver of four cents per litre at some stations, or recent increases in Calgary, which is generally the last city in the country to see price hikes.

Factoring in the B.C. and Calgary increases, the average price of a litre of regular gasoline in 15 major cities now stands at 82 cents.

Supply disruptions caused by civil unrest in Venezuela and looming war with Iraq have contributed to the record prices, analysts say.

Gasoline has not cost anywhere near this much since the previous record high of 80.4 cents in May, 2001. And it's running almost 41% higher than last year's low of 58.3 cents.

Michael Ervin, president of M.J. Ervin & Associates, said the worst is likely over, because Venezuelan supplies are returning to normal and OPEC is promising stable supplies in the event of an Iraq war.

That's little consolation, however, to drivers in British Columbia, who will face another increase of 3.5 cents per litre on March 1 as a result of a fuel tax announced this week by Gordon Campbell, the B.C. Premier.

The fuel tax is expected to bring in extra revenue of $200-million annually, which is needed to improve transportation services, Mr. Campbell said. Most of that will be spent to improve rural roads.

The fuel tax has B.C. motorists fuming at the pumps and on open line shows, but Mr. Campbell defended his actions.

"There are many choices that people can make around transportation," Mr. Campbell said. "They can choose to drive in very expensive and gas-consuming cars. They can choose to drive in smaller cars. They can choose to use public transit."

The 3.5-cent increase means Vancouver-area residents will pay the highest fuel taxes in Canada at 20.5 cents per litre, according to The Canadian Federation of Independent Business. The B.C. average will rise to 14.5 cents a litre. Albertans pay the lowest provincial fuel taxes in Canada at nine cents a litre, while Greater Montreal residents and Newfoundlanders pay more than 16 cents per litre in fuel taxes.

M.J. Ervin's current survey of regular unleaded gas prices as of Tuesday range from a low of 67.7 cents in Calgary to a high of 94.9 cents in Yellowknife. (Calgary prices today are actually about 78.9).

Toronto's price is listed as 81.9, Ottawa's 83.2, and 89.5 in St. John.

At 82 cents a litre for regular, it costs $102.50 to fill the 125-litre tank of a GMC Yukon and $136.12 to fill the 166-litre tank of a Ford Excursion. A Ford Expedition's 106-litre tank would cost $86.92 to fill. A full tank of gas for a Toyota Corolla is $41, while a BMW 320i will cost $51.66.

Using manufacturer's fuel economy ratings, it will cost $15.99 to drive 100 km in a Ford Expedition in city conditions, while the same trip in a Honda Civic will cost $6.15 at today's prices.

The Canadian Taxpayers Federation said in a statement it is "alarmed" at the impact of the Campbell government's tax hike, noting it has recently urged the B.C. government to cut the 1.25 cent per litre gas tax collected to subsidize B.C. ferries.

"Instead of hiking gas taxes, the B.C. Liberals should lock arms with other provincial governments to press Ottawa for a share of the federal government's gas tax revenues.

"Ottawa is a deadbeat tax collector that spends only a fraction -- 2.4% -- of its $5-billion in annual gas tax revenues on roads, 99% of which is spent east of the Ontario border," said Victor Vrsnik, the B.C. director for the federation, in a statement.

GETTING YOUR FILL COSTS MORE THAN LAST YEAR:

Cost to fill today at 15-city national average of 82 cents/litre:

SUV

GMC Yukon $102.50

Ford Expedition $86.92

MID-SIZE

BMW 320i $51.66

COMPACT

Toyota Corolla $41.00

Cost to fill at lowest national average price in 2002 (58.3 cents/litre):

SUV

GMC Yukon $72.88

Ford Expedition $61.80

MID-SIZE

BMW 320i $36.73

COMPACT

Toyota Corolla $29.15

Cost to drive 100 km at today's 15-city national average:

Expedition

City: $15.99

Hwy.: $10.82

BMW 320i

City: $7.38

Hwy.: $5.33

Corolla

City: $5.82

Hwy.: $4.35

bremington@nationalpost.com