By Georg Mascolo

The Canadian province of Alberta contains massive amounts of oil sands. But extracting the petroleum contained in them is costly and harmful to the environment. Still, the sands are a temptation oil companies can't resist. They're investing billions in order to secure the abundant source of energy.

You would have to be a firm believer that a boom is coming to stick around for long in Fort McMurray, high up in the wilderness of northern Canada. On bad days you'll wait 45 minutes for your coffee at Starbucks, and foul-smelling smog clouds begin darkening the sky every afternoon, long before sunset. On the better days you can at least find a place to sleep. But if you want to live here, it's a different story: A couch in the basement will set you back at least 500 Canadian dollars a month.

Fort McMurray is hailing itself as the new Klondike, the capital of the late-19th century gold rush. The city's inhabitants proudly proclaim themselves to be solving the world's energy problems. And despite the inhospitable living conditions close to the Arctic circle, the statistics show that the city's population -- currently at 61,000 -- rises by 100 newcomers every week. Many of the soldiers of fortune who arrive here are attracted by high wages, but it's mainly oil workers who are drawn to Fort McMurray. The draw? The lands surrounding this former Hudson Bay Company trading post contain oil -- and lots of it.

It may not be the cheap, easily extracted stuff found in Saudi Arabia -- but geologists claim that the Canadian province of Alberta could well match the Middle Eastern oil exporter as far as quantity is concerned. Experts believe the accessible oil reserves here could total as much as a whopping 174.5 billion barrels -- a volume greater than supplies in Iran and Libya combined. If the calculation is accurate, then Canada is number two in the global ranking for oil reserves.

The dreams currently associated with Fort McMurray were triggered by massive oil sands -- a thick, sticky mass that looks like waste oil dumped in a sandpit. During the brief Canadian summer, the oil has the consistency of syrup. In the winter it's hard as concrete. The oil fields are the size of Greece.

Oil fields the size of Greece

The bold plan to use this sediment to prolong the age of petroleum by several decades isn't new. Companies up here have been struggling to extract petroleum from the oil sands for 40 years. The undertaking hasn't been particularly profitable for these oil pioneers -- the production costs for a barrel of oil are higher in Alberta than anywhere else in the world. It costs $30 to transform the bitumen into usable energy.

But that hasn't stopped almost every major oil corporation from announcing its entry into the oil sands business. With the barrel price at over $72, investing in Fort McMurray has become a worthwhile endeavor. Exxon Mobil, Shell, Chevron and Total have arrived here, and two of the largest Chinese oil corporations have also entered the business. Small-scale local businesses that secured the extraction rights for themselves early on are being flooded with irresistable takeover and merger offers.

The oil giants want to invest $70 billion in these oil fields during the next 10 years. Interest in so-called "nontraditional sources" -- such as oil sands -- has risen dramatically. "A lot of people are realizing how important these reserves are," says oil expert Daniel Yergin, the author of a standard work on the history of oil extraction.

There are political reasons for the run on the oil sands too. The Canadian government is fond of reminding people that this oil is located on the territory of one of the stablest democracies in the world and is not in the hands of petrocrats like Tehran, Caracas or Moscow. The greasy mélange from Fort McMurray will "change the geopolitical situation," the Ministry of Finance in Ottawa proclaims proudly. The United States -- the world's main consumer of petroleum -- is, of course, also fascinated by the idea of having a friendly oil provider right next door.

What money smells like

The US Senate has already sent a group of delegates to the area where the oil sands are located, and the US Treasury Secretary has also stopped by. The plan is for the oil sands to comprise of one-fourth of North America's petroleum production by 2015. "We will depend on our friends for energy security, not necessarily dictators and sheiks and rats from around the world," cheered Montana Governor Brian Schweitzer following a recent visit to Fort McMurray.

If there is still any need to prove the hypothesis that the era of easily extracted oil is nearing its end, then that evidence can be found in Fort McMurray. Huge excavators with a capacity of 100 tons scrape the tar sediment from the ground and deposit it onto giant trucks. When they rumble off to one of the processing facilities, the trucks weigh as much as a jumbo jet.

There the oil sands are heated with hot water and natron brine until foamy bitumen forms on their surface and can be removed. The amount of chemicals required is so massive that Fort McMurray is often plagued by the biting stench of cat's urine. The oil companies dismiss the inevitable complaints by pointing out that "that's what money smells like."

The bitumen content of the black earth can be as high as 18 percent. On average, two tons of sand yield one barrel of oil. The processing rate has now been raised to the point where a million barrels are produced every day, with plans afoot to triple this output during the next 10 years.

But the largest reserves lie deep underground -- they can't be accessed using straightforward open pit techniques. To extract the deep reserves, hot steam is forced into the strata of oil sands. This liquefies the bitumen to the point where it can be suctioned off. Currently, companies are developing technologies that would enable them to lower huge radiators into the ground in order to heat up the bitumen and make it easier to extract.

But even the present ecological side effects of this latter-day alchemy are controversial. For every barrel of oil produced, up to five barrels of water are consumed. The toxic broth swashes about in giant lakes. Cannons constantly fire into the sky to scare migratory birds away from the poisonous mix.

Farewell to the Kyoto Protocol

But what is most worrying is that the Canadian government is no longer able to meet the targets for emissions reductions it set when it signed the Kyoto Protocol. Experts have calculated that emissions in areas with oil sands will continue to rise. By 2015, the area around Fort McMurray is expected to produce as much carbon dioxide as all of Denmark. But Charles Ruigrok -- the head of Syncrude, one of the veterans of the oil sands industry -- shrugs off the problem: "I believe technology will fix it."

Even if that prediction doesn't come true, it's unlikely Canada will curb petroleum extraction for ecological reasons. The economic boom in the north has spread to the entire province of Alberta. The province that used to be Canada's problem child is now experiencing a change in fortunes. White truffles and Mercedes cabriolets have become popular purchases in Edmonton, the provincial capital. Alberta is debt-free and doesn't even impose value-added (sales) tax on its residents.

Just to make sure the new wealth doesn't go unnoticed, Alberta Permier Ralph Klein, has opened up the public treasury to the province's citizens. In January, residents received "rebate" checks for $400 that people here have endearingly dubbed "Ralph bucks."

CANADA'S BLACK GOLD-Debt Free Thanks to Oil Sands

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