Hoosier Economy Sen. Tallian reflects on northern Canada trip, importance of trade partnership

Sen. Tallian reflects on northern Canada trip, importance of trade partnership

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It is 6 a.m., and we are standing on the tarmac at a small commuter airport in the city of Edmonton, Canada.  We are drinking coffee and trying to stay warm.  As we board the small twin-engine plane, we are handed a box with breakfast.  I climb aboard the 20-passenger aircraft, joining legislators from several Midwestern states including Michigan, Minnesota, North and South Dakota, and Indiana.  We have been invited by the government of the Province of Alberta to visit the Alberta oil sands project.

The pleasing patchwork of farm fields in different colors of alfalfa, wheat, canola, barley and other unknown crops soon disappears and the landscape just below us is replaced by pine forest and peat-slough, dotted with little lakes.  We are headed north. By comparison, the length of I-65 down to the Ohio River is about 270 miles.  From the south end of Alberta to the north is more than 800 miles. Given the vast distance, it is no wonder small airlines are the favored method of travel.

The Athabasca oil fields, located in northern Alberta and edging over north into the Yukon Territory and east into Manitoba, comprise, we are told, the third largest oil deposits in the world, after Saudi Arabia and Venezuela.  But this particular oil does not come bubbling up from the ground a ’la Jed Clampett.  Rather, it is a mixture of bitumen, clay and sand that at normal ground temperature is as hard as a Canadian hockey puck. Fully 80 percent of it lies more than 1,000 feet under all those pine trees that we are looking at.

As our group passes water bottles and juice boxes down the narrow aisle, we struggle to balance our breakfast on our laps (no tray tables). We are amazed at the vast scale of the northern woods. It goes on unbroken for miles and miles, with only the occasional road cut through.

At a briefing the previous day, it is explained that the oil deposits have been known for more than a century, when the occasional breakthrough along the Athabasca River heats up on a summer day, and oil flows.  For decades, attempts were made to figure out how to separate the bitumen from the clay and sand, and do it at a cost that would be competitive. As the price of oil went up over the years and science improved, collection became feasible. The oil is now collected in two different ways, either by surface mine or by steam extraction. We were there to see and understand both processes.

Our first two-hour plane ride landed us at Fort McMurray, Fort Mac for short. Seemingly out of nowhere, this former trading post for the Hudson Bay Company has grown to a town of 50,000 or so, surrounded by boreal forest. Everything must be shipped in, and the cost of living is very high. A small two-bedroom home that might cost $200,000 in Northwest Indiana goes for well over half a million dollars here and it is almost impossible to build new. Wages too, are high.

Our first visit is to a huge surface mine operation similar to Thornton Quarry over the border in eastern Illinois. For more than 20 years, mining operations like this one have been taking the oil and sand mix out of the ground. The material is dug up with huge cranes, and placed into trucks the size of two-bedroom homes. Those trucks, by the way, are made by Caterpillar, with U.S. steel and equipped with Indiana-built Cummins engines. All of us gathered around one of these monsters to take the requisite photo next to the tires, which were 12 feet tall.

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We drove around the facility, and then exited the bus for a tour of the control rooms where we were struck by the display of technology. Multiple screens facilitated the observation of every phase of the operation. We watched onscreen while the trucks dumped loads of material into a giant steel grate. Big sections of load then went through a giant maw, which ground the material into bite-sized chunks. Those chunks proceeded down a conveyor to giant containers and were then treated with hot water. The heat caused the bitumen to break away from the sand and clay, rise to the top, and the heavy oil was then siphoned off. Clean sand – cleaner than most beaches – is a by-product.

Some of this heavy oil product is then refined at a small refinery on site.  Most of it, however, is diluted to flow easier and shipped away via pipeline.  Some of the oil product will be shipped to Indiana’s BP plant for refining. There are other pipeline runs going to eastern Canada and plant operators are hoping that some of this product will potentially be shipped to the United States via an extension of the Keystone Pipeline.

The consortium of companies that are conducting surface mining were also happy to show us a reclamation project. After 20 years of mining, they reversed the process and filled the area back in with what had been removed: clay, sand, rock “overburden”, and finally, the 20 foot deep section of peat, which had been set aside and preserved when the area was first opened. They were clearly proud of the project.  The land had been graded for appropriate hillocks and small indentations for water reserve. Wildflowers and grasses had been planted, along with more than 300,000 pine trees. Wildlife was returning, including raptors, for whom dead trees had been “planted” for interim perch.

After our walk through this prairie, we were back on the bus, headed for the airport for the second leg of the trip.

Another hour’s flight and we landed in a small airfield. Now this one was really in the middle of nowhere. There was no town here, nothing except pine trees, peat bogs and tiny lakes. We were all searching for bears. The tiny airfield was filled with a lot of expensive small planes and multiple helicopters. There was scant other mode of transportation.

We were met by a group of 20 or 30 men who were headed in the opposite direction – out. These men had just finished 7 days of 12-hour shifts working at the facility, and living in the “camp” (think Holiday Inn Express). They would now fly out, to home or where ever, for 7 days off.  These flights, at company expense, took off for Edmonton, Calgary, Saskatoon, and other hubs.

This time, the tour took us to a deep well injection facility. These well heads, laying on perhaps 20 or 30 acres of clear cut forest, are built to extract oil from deep underneath hundreds of acres of forest, without disturbing the top. While 20 percent of the oil reserves can be retrieved by traditional surface mining, approximately 80 percent of the Athabasca deposits can only be accessed by deep well.

There is little earth-moving here. Instead, pipes are drilled down 1,000 feet or more, and then drilled horizontally. The top pipe uses underground water sources (pockets of salt water from ancient times when this area was sea) to create steam.  After a couple of months of pumping steam into the ground, the oil begins to flow.  It is then sucked up by a second pipe, like a giant straw. This technology is relatively new, and is being updated all the time. It is not the same as hydraulic fracturing or “fracking”, which involves pumping water plus other chemicals into the earth to actually break up shale deposits.

Again, the heavy oil is pumped to the top, separated from the remaining sand and clay mix, diluted and sent south by pipeline.  Again, we visited the control rooms, a quiet but massive center that monitors every phase of the operation and every well head.

Our flight back that day found some of us napping, but many were subject to overload after all of the information that we had been subject to over the past 24 hours. The next morning, we made one final stop before departing Edmonton for home.  At the CANMET Energy Center for Energy Research, we were given a tour and spoke to scientists working on the cutting edge of oil and gas research. This is a partnership effort between the Alberta Provincial government and many of the big companies undertaking oil projects. We had a unique opportunity to ask them questions on every related topic, from technological how-to’s, to their vision of future developments.

Why this trip?

The largest trade partner of the United States is not China, as many might expect, nor European countries; it’s Canada.  By a large margin. The published trade figures indicate that Canada is Indiana’s number one export market, with over $5.4 billion in transportation goods, mostly vehicle parts and other automotive goods.  The figures list another $3.5 billion in “minerals and metals trade”. Canada buys 34 percent of Indiana’s exports.  And although Indiana does not share a land border, Indiana and Canada do much direct trade through the Port of Indiana on Lake Michigan. Thousands of Hoosier jobs are directly and indirectly linked to the industry and to our Canadian trade partnership. Canada is also by far the largest oil supplier to the U.S., exporting 2.7 million barrels per day.

For these reasons, the Conference of State Governments (CSG), Midwest Region, has a United States Canada Relations Committee, and gives legislators a chance to meet and discuss common problems and trade issues. CSG Midwest includes 8 Midwest states, and several Canadian Provinces. I have been on that Committee for several years, along with Indiana Senator Ed Charbonneau, who also was invited on the trip.

The trip was by invitation from the Province of Alberta, who are heavily invested not only in regulating all of the oil projects, but also in supporting technological research to the entire industry. It was, more than anything, a public relations presentation, designed to assure state legislators that the Provincial government is doing everything it can to achieve sustainability while preserving the environment.

They cite, for example, that while Canada’s boreal forest covers nearly 3.1 million sq. km, after 40 years of oil sands development, only 700 sq. km. of forest have been disturbed. We had a presentation on the structure of their regulatory authority, which is remarkably similar to the structure that Indiana put in place about a year ago. Everything is recycled, and people do it as a matter of course.  Even at the standard airport café, different trash stations directed people to separate paper, plastic, cans, glass, and other “wet garbage”.  From there, we were assured, even the “wet garbage” was further separated and used; food stuffs were composted, and the resultant dirt was bagged and sold for gardens.

The trip was a unique opportunity to learn about an extremely complicated subject. It was an excellent opportunity to investigate all sides of an issue, ask questions from multiple perspectives, and to get answers. Going forward, I plan to use this firsthand experience to help guide policy decisions, encourage trade between our state and Canada, and create additional high paying jobs for Hoosiers.