At a time when saying anything good about fossil fuels is like declaring war on the environment, it may seem like wishful thinking to press for an expansion of U.S. oil refining capacity.
Yet it is precisely this sort of thinking that is necessary if we are to make use of a vast, secure and reliable supply of fuel from Canada's oil sands.
The tar sands hold an estimated 174 billion barrels of crude oil, making Canada's oil-sands deposits second only to Saudi Arabia in global reserves. The U.S. currently obtains 1 million barrels a day from Canada's tar sands, but with planned investments the daily supply could exceed 3 million barrels by 2015.
But extracting heavy oil from tar sands and transporting it by pipeline for refining is a difficult and costly process. Producers are developing new drilling techniques to reduce the large volumes of natural gas and water needed to separate the oil from sand. And the oil companies, which have pledged to reduce greenhouse emissions in their operations, are making the needed investments to meet environmental regulations.
Yet the greenhouse-gas issue overshadows all other considerations. The challenge is how to produce and refine enough oil to meet rising energy demand, while mitigating carbon dioxide emissions. Refiners have set a goal to improve energy efficiency 10% over the next decade, and one way they are making progress is capturing excess heat from their operations to produce additional electricity.
An indication of change is the way oil companies now see unconventional sources of oil such as tar sands. Refineries throughout the Midwest and Gulf Coast are being retrofitted to accommodate the heavier oil. And companies are investing larger sums than ever in developing new technologies to reduce airborne and water emissions.
Even though the companies are confident they can meet environmental requirements, opponents are determined to block the necessary permits. If our refineries can't take advantage of this secure source of oil from tar sands, other countries -- notably China -- will move in.
We need no reminders of what this could mean -- given the economic beating we took when oil supplies were scarce in the 1970s. Today, oil imports from overseas cost U.S. consumers more than $200 billion a year, and are responsible for a large share of our trade deficit.
Given these facts, you'd think our political leaders would insist on a long-term commitment to shore up oil production and refining in North America. But that hasn't happened.
Although President Bush has publicly welcomed production of Canadian tar sands oil, Congress last year passed legislation that prohibits the government from using alternative fuels that have a larger carbon footprint than conventional oil.
As a result, the Defense Department is unable to use jet fuel made from tar sands oil even though greenhouse gas emissions per barrel of tar sands oil have fallen 32% since 1990.
Now California is moving to disallow the use of tar sands oil under a recently approved low carbon fuels standard sought by environmental groups, and Illinois is among a dozen states also considering such a standard. Advocacy group Environment Illinois has vowed to challenge any refinery expansion or modification permits that would facilitate greater use of tar sands oil, and has asked the Great Lakes state governors to impose such a ban.
The irony is that countries with fast-growing economies such as those in China, Brazil and India are accelerating energy resource development, while resource-rich North America is becoming captive to environmental extremism and continues to restrict access to oil supplies.
This situation points to an inescapable imperative: Congress needs to address the matter, and it should take action to ensure the civilian and military use of Canadian tar sands oil. Our economic and national security depend on it.
Perry is a professor of finance and economics at the Flint campus of the University of Michigan.
Source: Investor's Business Daily