The oil shale resources in the United States are comparable in scope and in kind to the bituminous sands (or tar sands) found in Alberta, Canada. The deposits in Alberta contain about 85% of the world's bitumen reserves, and it is estimated that they hold 173 billion barrels of recoverable oil.
Bitumen products currently make up nearly half of Canadian oil production; As a result o the development of this industry, today, Canada is the largest supplier of crude oil and refined products to the United States. However, the development of the industry was only possible because of the Canadian government's commitment to its creation.
Through a series of government actions, legal steps and a variety of incentives, the Canadian authorities helped "kick-start" the tar sands industry, by providing a supportive environment that would make this industry attractive to investors.
These steps, included:
- price guarantees,
- tax incentives,
- supporting R&D,
- enabling license holders to deduct capex and r&d investments from royalties due upon commercial conversion,
- creating a clear regulatory path and reducing risks associated with uncertainties regarding regulations,
- environmental standards etc.
Processing unconventional oils is a capital-intensive process, and so oil sands and heavy oil come under development only after the more accessible, less resource-intensive sources begin to diminish.
However, because of the vast resources available in the Alberta oil sand deposits, the area has been looked to for development for almost as long as Canada has been drilling for conventional oil.
Beginning in the 1940s, a series of companies were given permission to attempt extraction from the tar sands, but with only limited success, first because technologies were not yet available to make use of the resources, then later, in the 1960s, because the Canadian government kept prices on unconventional oils artificially low.
However, by 1973, the world was in an energy crisis. Syncrude, the largest plant in the area, was hit hard by inflation and unable to meet costs-- as a result, investors withdrew, leaving the plant incapacitated.
In 1975 the Alberta government stepped in and invited the Canadian government, as well as the governments of other provinces, to participate as investors in creating a viable oil sands industry.
The federal and provincial governments together took over 30% of Syncrude, and Alberta took over ownership of the pipeline and electrical utility for the plant. The plant went into operation three years later, and now supplies 14% of Canada's oil production.
Heavy government investment provided the high level of capital needed to succeed in a project of such scope. A similar commitment will be important if the oil shale indutrys in the United States is to ever be fully developed.