Northern Alberta, Canada, contains the world's largest proven reserve of oil in the "Tar Sands". Unfortunately, this oil is generally not of the quality found in conventional oil deposits such as those in Saudi Arabia. The tar sand often doesn't appear to have much oil in it at all and the oil present is bound to sand grains. Still, the world has an insatiable appetite for oil now which is in abundance in the tar sand deposits.

These tar sands, (or oil sands as some call them), hold great quantities of oil but it can't be extracted in the usual manner. Drilling oil wells doesn't work as the oil and sand mix cannot be pumped. Instead, the tar sands must be mined and processed to free the oil. Alternatively, steam can be injected into the deposit which frees the oil for collection in a special type of oil well. Companies have been experimenting with oil extraction from the tar sands for more than 40 years.

At first, oil extraction from tar sands was very inefficient. The material was heated which broke the oil free of the sand. The oil could be collected and then refined into gasoline and other petroleum products. The heat required by the process was costly compared to the value of the oil obtained. In fact, it is not profitable to process oil sands at all if the price of a barrel of oil is under $60 or so. The oil produced is also of lower quality so it usually is worth less than the posted market price of oil. For many years, the production of oil from the tar sands was mostly a learning experience. It was not profitable when the price of oil was $10, $20 or $30 through the 1970's, 1980's and 1990's. After the price crash in 2008 when oil dropped from the July high of $145 to the December $30 low, oil sand production was in crisis. Many projects were halted or canceled. Those facilities that continued to operate were barely making enough to cover operating costs, if that. 2009 and 2010 have seen the price of oil climb again to the point where tar sands might again be profitable. The price uncertainty has cause financial trouble for many of the tar sand extraction companies, however. Money for equipment must be borrowed against the future value of the created oil. With the oil price no longer guaranteed to rise forever, risk has increased in the oil business. This risk translates into higher loan interest costs. Simultaneously, the world has experienced the credit crisis. This also increases interest rates and reduces the amount of money available to the tar sand extraction companies.

As the oil spill disaster in the Gulf of Mexico has shown, much of the oil production process is dangerous to the environment. This is as true in northern Alberta as it is in the Gulf. As a small benefit, however, the tar sands are isolated to a remote area with no exposure to the world's oceans. This allows for containment of oil leaks to the production area. Particular attention must be paid to the streams and aquifers there, but an epic disaster like that in the Gulf is practically impossible. Companies must not be allowed to be complacent with regard to pollution resulting from tar sand operations. Due to public pressure and the attention given to the Gulf of Mexico oil spill, Alberta oil production companies have increased their focus on environment protection. A series of television ads has been produced that highlights the efforts made to restore sites and to minimize environmental damage. While much of the site repair is mandatory after a facility shuts down, the companies should be applauded for their work protecting the environment at operating plants. As noted in the television ads, the companies are continually monitoring the effects their operations have and they are actively protecting the environment when they see opportunities to do so.

The production of oil from the tar sands requires a large amount of water. Unfortunately, many of the facilities must create large settling ponds for the water that is discarded from the refineries. These ponds are quite polluted with residual oil byproducts. They can attract migratory birds which can be fatal for them. As with an oil spill, birds landing on the settling pond will become fouled with the oil. This causes feathers to lose effectiveness as insulators for the birds. As well, birds that ingest floating oil may become violently ill and may die. This has happened to several thousand birds over the years. The companies devote a lot of resources to the protection of birds. Warning cannons, nets and other techniques are used to deter the birds from the oil production areas.
Energy is never created or destroyed, just changed. To get energy from tar sand oil, you must use energy. The amount you get must be higher than what you put in or it isn't viable to do it. The tar sands have long been below this point and may be there again. As the conventional oil deposits in Saudi Arabia decline and regulation (hopefully) restricts offshore oil production, the tar sands will gain in economic importance in the future.