When it comes to future reliable oil supplies, Canadian oil sands will likely account for a larger share of U.S. oil imports. Oil sands account for about 46% of Canada's total oil production, and oil sand production is increasing as conventional oil production declines. Since 2004, when a substantial portion of Canada's oil sands were deemed economic, Canada has been ranked second behind Saudi Arabia in oil reserves. Canadian crude oil exports were about 1.82 million barrels per day in 2006, of which 1.8 mbd or 99% went to the United States. Canadian crude oil accounts for about 18% of U.S. net imports and about 12% of all U.S. crude oil supply. These U.S. pilot projects did not prove to be commercially viable for oil production and have since been abandoned. Oil sands (also called tar sands) are mixtures of organic matter, quartz sand, bitumen, and water that can either be mined or extracted in-situ using thermal recovery techniques. Typically, oil sands contain about 75% inorganic matter, 10% bitumen, 10% silt and clay, and 5% water. Bitumen is a heavy crude that does not flow naturally because of its low API (less than 10 degrees) and high sulfur content. This thick, black, tar-like substance must be upgraded with an injection of hydrogen or by the removal of some of the carbon before it can be processed. Oil sand products are sold in two forms: (1) as a raw bitumen that must be blended with a diluent (becoming a bit-blend) for transport and (2) as a synthetic crude oil (SCO) after being upgraded to constitute a light crude. Major development obstacles to the U.S. oil sands resource base include remote and difficult topography, scattered deposits, and the lack of water for in-situ production (steam recovery and hot water separation) or undeveloped technology to extract oil from U.S. "hydrocarbon-wetted" deposits. Canadian Oil Sands

Canada began producing its oil sands in 1967 after decades of research and development that began in the early 1900s. By 1919, the Scientific and Industrial Research Council of Alberta (SIRCA), predecessor to the Alberta Research Council (ARC), became interested in oil sands development. In 1967, Suncor began to produce oil sands at a rate of 12,000 barrels per day. A number of enhanced SAGD methods are being tested by the Alberta Research Council. Royalties paid on bitumen, which is valued much lower than SCO, would result in less revenue for the government. In light of the environmental and social problems associated with oil sands development, e.g., water requirements, toxic tailings, carbon dioxide emissions, and skilled labor shortages, and given the fact that Canada has 175 billion barrels of reserves and a total of over 300 billion barrels of potentially recoverable oil sands (an attractive investment under current conditions demonstrated by the billions of dollars already committed to Canadian development), the smaller U.S. oil sands base may not be a very attractive investment in the near-term. This expanded capacity will likely lead to even greater investment in Canada. U.S. markets will continue to be a major growth area for oil production from Canadian oil sands.
When it comes to future reliable oil supplies, Canada's oil sands will likely account for a greater share of U.S. oil imports. Oil sands account for about 46% of Canada's total oil production and oil sands production is increasing as conventional oil production declines. Since 2004, when a substantial portion of Canada's oil sands were deemed economic, Canada, with about 175 billion barrels of proved oil sands reserves, has ranked second behind Saudi Arabia in oil reserves. Canadian crude oil exports were about 1.82 million barrels per day (mbd) in 2006, of which 1.8 mbd or 99% went to the United States. Canadian crude oil accounts for about 18% of U.S. net imports and about 12% of all U.S. crude oil supply.
Oil sands, a mixture of sand, bitumen (a heavy crude that does not flow naturally), and water, can be mined or the oil can be extracted in-situ using thermal recovery techniques. Typically, oil sands contain about 75% inorganic matter, 10% bitumen, 10% silt and clay, and 5% water. Oil sand is sold in two forms: (1) as a raw bitumen that must be blended with a diluent for transport and (2) as a synthetic crude oil (SCO) after being upgraded to constitute a light crude. Bitumen is a thick tar-like substance that must be upgraded by adding hydrogen or removing some of the carbon.
Exploitation of oil sands in Canada began in 1967, after decades of research and development that began in the early 1900s. The Alberta Research Council (ARC), established by the provincial government in 1921, supported early research on separating bitumen from the sand and other materials. Demonstration projects continued through the 1940s and 1950s. The Great Canadian Oil Sands company (GCOS), established by U.S.-based Sunoco, later renamed Suncor, began commercial production in 1967 at 12,000 barrels per day.
The U.S. experience with oil sands has been much different. The U.S. government collaborated with several major oil companies as early as the 1930s to demonstrate mining of and in-situ production from U.S. oil sand deposits. However, a number of obstacles, including the remote and difficult topography, scattered deposits, and lack of water, have resulted in an uneconomic oil resource base. Only modest amounts are being produced in Utah and California. U.S. oil sands would likely require significant R&D and capital investment over many years to be commercially viable. An issue for Congress might be the level of R&D investment in oil sands over the long term.
As oil sands production in Canada is predicted to increase to 2.8 million barrels per day by 2015, environmental issues are a cause for concern. Air quality, land use, and water availability are all impacted. Socio-economic issues such as housing, skilled labor, traffic, and aboriginal concerns may also become a constraint on growth. Additionally, a royalty regime favorable to the industry has recently been modified to increase revenue to the Alberta government. However, despite these issues and potential constraints, investment in Canadian oil sands will likely continue to be an energy supply strategy for the major oil companies.