Oil from sand a booming commodity

FORT McMURRAY, ALBERTA -- A mud-caked dump truck taller than a two-story house rumbled into a vast mining pit and stopped next to an excavator so large that it could deposit a load in the seats above Fenway Park's Green Monster. Four shuddering drops from the excavator's shovel filled the truck's bed with 400 tons of tarry sands before it crept back up the hill to pour the sticky material into a crusher that fed a water-filled pipe.

From there, the slurry flowed into a maze of bigger pipes and catwalks more than 3 miles away, where hot water and chemical reactions turned 2 tons of the substance, known as oil sands, into a single barrel of crude oil. Twenty-four hours a day, seven days a week, the operation goes on at Syncrude Canada Ltd.'s north mine. Skyrocketing prices for crude have started an oil rush that has made these sands staggeringly profitable and turned this former fur-trading post into a rollicking boomtown.

''You're standing on money," said Dana Hiscock, 30, an equipment operator at Syncrude, the region's largest producer of oil from the sands, as he softly kicked a pile with the toe of his boot.

Now, US officials are turning their attention to northern Alberta's vast beds of oil sands. Vice President Dick Cheney had planned to visit Canada's sands last month until Hurricane Katrina forced him to postpone the trip. The recently passed energy bill calls for research and the start of a commercial leasing program on federal lands to hasten the nation's own development of oil shale reserves in Colorado, Utah, and Wyoming, in part by tapping into Alberta's expertise. Oil shale is similar to oil sands, but the process of extracting crude is more difficult.

The United States has between 500 billion and 1.1 trillion recoverable barrels of oil from the shale reserves, according to a report sponsored by the US Department of Energy. Eight hundred billion barrels, the estimate's midpoint, is enough oil to meet 25 percent of the nation's current demand for the next 400 years, the report says.

But as popularity of oil sands grows in Canada, so do concerns over environmental damage from mining and processing the material. Enormous amounts of natural gas and water are used to extract and upgrade the crude, greenhouse gas emissions are high, and in mining operations, environmentalists worry that the land -- which companies are required to restore -- may never quite bounce back. The process also turns vast amounts of water into a mixture too toxic to return to bodies of water, forcing companies to create large lake-like impoundments.

''We're dealing with a form of oil extraction where the intensity of environmental impacts is at an order of magnitude greater than any other form of oil extraction we have seen on the planet," said Dan Woynillowicz, an environmental policy analyst with the Pembina Institute for Appropriate Development, a nonprofit group.

Companies that mine oil sands say that while production is, by necessity, intensive, they have had some success in lowering the amount of natural gas and water used to produce a barrel of oil, and officials say they are seeking further reductions.

A barrel of oil sands crude can be refined to produce gasoline and diesel fuel. At Syncrude, which spent $15 million on restoration of former mining land last year, a 10-year-old reclamation project at a former mining site shows the beginnings of a viable ecosystem, with tree saplings, sedges, and wildflowers growing, but it will take years to know if it will truly be sustainable.

''The oil sands industry has focused on three major environmental areas -- air, water, and land," says Greg Stringham, vice president of the Canadian Association of Petroleum Producers. ''One of the key [ways] is increasing efficiency" -- which he said will continue to reduce emissions and use less water and gas.

Oil explorers have long searched for unconventional, financially competitive sources to help the United States move away from dependence on Middle East oil and to offset forecasts that traditional global oil production would soon peak. After the late 1970s energy crunch, investors poured money into these efforts -- including attempts to extract oil from domestic sand and shale deposits. But most were abandoned after Middle East oil prices fell.

In Canada, explorers for decades have said the sands buried under northern Alberta would be the future of oil. Industry analysts, though, were often quick to add that the prediction would probably remain a wistful dream. Squeezing useable oil out of the sticky substance that indigenous people once used to caulk their canoes was far too expensive to seriously compete with the inexpensive crude from the Middle East.

But the run-up in oil prices, combined with better oil sands technology, have made Canada -- always a major source of crude oil to the United States -- the largest foreign supplier. With the sands, Canada has the second largest reserves of crude in the world behind Saudi Arabia, and investors have pledged more than $70 billion to triple output to 3 million barrels a day by 2020.

Riverbanks near Fort McMurray seep with what locals call black gold -- a tar-like muck called bitumen. Demand for it has increased this frontier city's population by nearly 75 percent in the last decade, to 60,000, and has some oil sands companies looking as far away as Venezuela for skilled help.

Mud-caked boots and jeans with streaks of oily-smelling sands are a de facto dress code. A local hockey team is called the oil barons. In Fort McMurray's tiny airport, a video explains oil sand extraction to travelers, and tours bus visitors to the mines to show off the world's biggest trucks.

As workers arrive from Japan to South Africa, housing prices are soaring. Lines for everything from coffee to burgers are growing long. And as the service industry struggles to find workers, even doubling pay for counter help to $10 an hour in the last 18 months hasn't eased the crunch at the downtown Tim Horton's coffee and doughnut shop.

There is no sign of the boom abating. Because of technology improvements, oil sands companies have been producing oil for as little as $24 a barrel -- making for a huge profit for companies when oil prices hit $70 a barrel, as they did briefly in recent months.

Beth Daley can be reached at bdaley@globe.com.