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International Energy Agency links Keystone XL decision to significant tar sands expansion

Anthony Swift

Posted November 13, 2013

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The International Energy Agency (IEA) joined Wall Street in affirming the strong connection between proposed tar sands pipelines like Keystone XL and expanded tar sands production. IEA's conclusion undercuts industry's claims that the massive tar sands pipeline will have no material impact on its expansion plans. In its World Energy Outlook (WEO), the IEA forecast that tar sands production would double to reach 4.3 million bpd by 2035 if large pipeline projects through the United State and British Columbia were approved. Moreover, the IEA went on to note that if proposed pipelines were approved more rapidly than it expected, tar sands production could easily expand one million bpd above their forecast. IEA’s analysis joins mounting evidence that the Keystone XL tar sands pipeline is a linchpin for expanded tar sands production and the significant carbon emissions associated with it. The State Department’s flawed draft environmental review of the project has been rebutted by Wall Street analysis, the tar sands industry in its communications with the Canadian government, the rail industry, and the sources it relied on it back its flawed conclusions. The proposed Keystone XL tar sands pipeline clearly fails the climate test the President set as a threshold for the project’s approval and should be rejected.

The IEA’s forecast of tar sands expansion assumes the approval of large, controversial tar sands pipelines. As Elana Schor of E&E News reported:

“Although rail ‘has increased dramatically,’ IEA wrote, pushing oil sands production to 4.3 million barrels per day (bpd) by 2035 ‘is contingent on’ large pipelines that would increase exports to the United States and Asia.

Moreover, the IEA noted that if the controversy surrounding these tar sands pipelines is resolved and they are rapidly permitted, tar sands expansion will occur at a significantly accelerated pace.  According to the IEA:

“In Canada, if the controversies over the Keystone XL pipeline and the pipelines from Alberta to the British Columbia coast were to be resolved quickly, oil sands production could easily grow 1 Mbd (million barrels per day) higher than we project.”

IEA’s assessment demonstrates how vulnerable the tar sands industry’s expansion plans are. In fact, as the following figure demonstrates, all of the major pipeline expansions currently proposed do not provide sufficient pipeline capacity to enable industry’s plans to triple tar sands production by 2030.

Without the approval of major tar sands pipelines like Keystone XL, industry will be forced to rethink over 6 million bpd in proposed tar sands expansion projects. Many of these projects are already economically marginal according to the Canadian Association of Petroleum Producers – so marginal, in fact, that regulations increasing costs by less than a dollar are likely to reduce production and investment levels. Significantly greater costs and logistical challenges associated with transportation alternatives such as rail are likely to constrain expansion significantly further than Alberta’s proposed oil and gas regulations.

The argument that the proposed Keystone XL tar sands pipeline will have no significant impact on production and associated carbon emissions was always deeply flawed. Now it is becoming indefensible.  

IEA OCI Infographic.png

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Paul BurkeNov 13 2013 12:29 PM

I believe that California for a brief time had a trial Methanol program.

At one point Methanol was the fuel of choice in the Indy 500.

By brewing and producing Methanol, America would have a safe and sane alternative to blowing up mountains and tearing out tress to burn as fuel along with fracking and so on.

Michael BerndtsonNov 13 2013 12:44 PM

If anyone cares: use the search words "heavy crude" rather than dilbit bitumen, oil sands or tar sands when trying to figure out production and consumption information on Alberta tar sands. Anyway...

Cool stuff. It seems like transport of tar sands will flow by hook or by crook regardless of conveyance means. US heavy crude refining is almost maxed out , but more refineries upgrades are to be completed in 2014/2015. Here's an interesting take on rail from Canada's financial post. Alberta will have about 550,000 barrel per day rail capacity by the end of 2014. It's interesting to note that rail transport currently takes on 70 percent bitumen and 30 percent diluent. Apparently in the future, transport will be by heated tank cars carrying bitumen only. This may change the cost dynamics given the cost of diluent use.

At this point enough Alberta heavy crude is being pumped to Illinois and Indiana refineries for midwest markets with existing pipelines.

Looking at production numbers for summer 2013, tar sands is being produced as follows (this figures are in barrels per day and "about"): 1,000,000 surface mined, 850,000 in situ, and 250,000 in situ primary. So at this point in situ extraction has overtaken surface mining. My guess is that the fate of tar sands production and transportation is in the efficacy of in situ extraction, which is currently all over the place and kind of a mess.

I guess my point is the progress of Alberta tar sands may be controlled by production as much as transportation going forward. Production by surface mining has been flat since 2010 and is going to start declining. In situ has double since 2009. The optimistic production numbers assumes in situ extraction almost exclusively for 2025 or so and beyond. Economically speaking, surface mining is kind of subsidizing in situ at this point.

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