Just as BP has finally succeeded in capping the ruptured Macondo well in the Gulf of Mexico, Canadian pipeline giant Enbridge has sprung a leak in the Kalamazoo River in Michigan. 2010 certainly hasn’t been a banner year for the North American oil industry.

The Enbridge leak in Michigan is a poignant reminder of the thousands of miles of pipeline that crisscross North America. The Kalamazoo spill is not the first pipeline to burst on the continent, nor will it be the last; spills are a fact of life in the business. But this one may have broad implications for the future of tar sands production.

The company’s grandiose plan to build the Northern Gateway, a 900,000-barrel-a-day pipeline from the Alberta tar sands to the BC coast for transoceanic shipment to China, is now in jeopardy. Watching cleanup crews scrambling to contain the spill in Michigan probably doesn’t endear Enbridge to British Columbia residents, who are being asked to accept the proposed pipeline in their own backyards. Enbridge’s only consolation is that its spill is likely to be equally damaging to the chances of its competitor TransCanada’s getting approval from US regulators to build its contentious Keystone XL pipeline, which would bring tar sands crude to US markets.

With oil spilling all over the place these days, natural gas should never have looked more appealing. But, as Josh Fox’s recent documentary, Gasland, vividly illustrates, the environmental challenges are no less daunting in that industry. Just as depletion has forced oil companies to take on greater and greater environmental risks, so has it affected North American gas producers. Shale gas, heralded by Boone Pickens and others as the answer to America’s future energy needs, leaves just as heavy an environmental footprint.

Not only does fracturing shale rock require an enormous amount of water (similar in that respect to tar sands), but it uses a toxic cocktail of chemicals to do the job. And those chemicals (as much as 80,000 pounds of them to fracture a well) have a nasty habit of turning up in the local groundwater. As much of 70 per cent of the chemical solution that is injected for shale fracturing stays in the ground.

But, fortunately for shale gas companies, producers can contaminate groundwater with impunity. Hydraulic fracturing, the process of tapping shale gas, was exempted from the Safe Drinking Water Act in 2005 in the interests of promoting American energy independence. Thanks to that exemption, and the environmental practices that it engendered, residents who live on top of the Marcellus Shale formation, for example, can actually light their tap water on fire.

The ability of new technology to unlock previously inaccessible hydrocarbon deposits in deep water, tar sands, or shale rock is beyond dispute. But so, too, is the staggering environmental cost that comes with our ever-increasing dependence on them.

  • Low232

    I saw Gasland when it was first released and it is truly disturbing. It is available on HBO. America will eventually move to an alcohol based energy system but it will take a long time to do it.

  • Denny

    Apparently the need for jobs will trump the consequences of carbon dependency. As gulf coast governors call for an early end to the drilling moratorium, we should expect a similar defense of oil sands projects from Canadian politicians. Meanwhile, there is very little media coverage of the attack of the oil tanker in the Straits of Hormuz. Perhaps with wheat prices soaring, a lid must be kept on bad news that could subvert the Fed's perpetual easing policy.

  • MHarding

    Jeff, I've just finished reading your book – hence the visit to your blog. Thanks for writing it – you sure deserved the Best Business Book Award. As I read, I kept wondering what you might be thinking of this spill and that leak as the cloak of misinformation descended.

    You opened my eyes to the difference between efficiency and conservancy; to the public distraction of studying alternate energy sources while ramping up the infrastructure to support more oil production and shipping. The fact that while the OECD nations are attempting shifts, the BRIC nations are running with impunity and offsetting those achievements. And as you point out there are no boundaries on the air – or water.

    As you say our technology is indisputably able to perpetuate the oil trade in more remote and risky locations, but can we even quantify the risks? Experts seem to be losing their edge against the power of Mother Nature.

    While the effects of spills are mammoth, the problem of discovering and shifting to alternate energy sources is gargantuan, the grip of corporate and government agendas is fierce, you point out, it is not beyond our individual influence.

    Your book has left me with one compelling truth: I am the cause and I am the solution. How I spend a dollar is a sharper arrow even than how I cast my vote. 'They' won't redirect the power of technology toward a more viable and life supporting solution until each of us exercises our spending power to demand that.

  • Ms6112

    I don't know if I totally agree that the lack of cheap oil will end globalization. What we have started will not and should not end. We live in a world economy that has become an intimate “sharing” of resources and demand for them that is far more complicated than Mr. Rubin's ideals may have you think. Saying globalization will end is like saying the world wide web will someday cease to exist. But at least Mr. Rubin was able to make a lot of money by attempting to have you believe what he is saying will happen. LOL.

  • Radioexec

    Pass the Kool Aid!

    Everything runs on oil. If it becomes too expensive to do so, whats the backlash? Duh. Considering we import more than we export. What you think doesnt outweigh economics.

  • Radioexec

    Nuclear would be a lot faster, cheaper and no CO2.