The costs present operational obstacles--and highlight that the oilsands are both an energy and a money pit. Hughes estimates that recovering 175 billion barrels over a 60-year period would require capital infrastructure costs of more than $400 billion, based on the current cost of extracting a barrel of oil from the sands. Such a gargantuan venture would yield an average of less than eight million barrels a day. (The United States consumed 20 million barrels a day in 2003, and the world is heading toward 82 million barrels a day in 2004, according to recent estimates.) Citizens might want to see that $400 billion go elsewhere. The Rocky Mountain Institute, a Colorado non-profit agency devoted to market-based solutions for resource conservation, recently calculated that the United States could end foreign oil imports with a number of measures--including buying up gas-guzzling vehicles--that would cost about US$180 billion over 10 years.

Another brick wall for the oilsands remains natural gas. Today, the oilsands consume nearly 5% of Canada's natural gas supply. It is being burned to extract bitumen, a tarlike mixture of hydrocarbons that is cooked into synthetic crude. By 2025, given a four-to-fivefold expansion in production, that gas addiction could account for 20% of national consumption. By then, the oilsands will burn nearly two billion cubic feet of gas a day--the entire predicted output of the Mackenzie Valley pipeline. "You could just direct that pipeline into Fort McMurray," says Hughes, referring to Alberta's oilsands capital, "unless alternative fuels such as petroleum coke are substituted for gas." Just a year ago, Thomas Driscoll, an analyst with Lehman Brothers Inc. in New York, issued the same warning.

Most analysts regard the burning of gas to make oil a process akin to turning gold into lead. The highest-value uses for natural gas are home-heating, fertilizer production and petrochemical manufacturing. Given that nearly 80% of Canadians use natural gas in their furnaces, politicians may have to decide whether the resource will be used to keep Canadians warm, exported for electrical generation to keep Americans cool or burned to cook up bitumen. No Canadian politician has sounded this alarm but, fortunately, Alan Greenspan, chairman of the U.S. Federal Reserve Board, has taken up the cause. In June 2003, he told Congress that Canada "has little capacity to significantly expand its exports [to the U.S.], in part because of the role that Canadian gas plays in supporting growing oil production from [its] tar sands."

n addition to tight gas supplies, the oilsands face critical shortages of water and condensate, a thinner derived from processing natural gas used to dilute the bitumen. It takes on average between one and two barrels of makeup water to produce a barrel of oil and, at forecast production growth, University of Alberta water ecologist David Schindler estimates the Athabasca River could be seriously compromised by 2020. As well, the National Energy Board predicts shortages of condensate needed to liquefy bitumen for pipeline transport as early as this year.

The National Energy Board's happiest scenario at the moment concludes that the oilsands could mine three million barrels of oil a day by 2025. "If this happens, Canada will produce a little more than 4% of forecast 2025 world demand," says Hughes. "It's no big thing in the world's scheme of things." But that resource will keep Canadian cars running.

The world has lots of natural gas

That's true. "The bad news is that most of it is not in North America," says Hughes. Places like the Middle East, Russia and Venezuela hold close to three-quarters of the world's remaining gas reserves and will soon become the new gas czars. North America consumes nearly one-third of the world's production (thanks in large part to industrial use, residential heating and electricity production), but the continent holds only 4% of reserves.

Canada, which boasts just 1% of global reserves, boosted production by 127% between 1986 and 2003 to feed domestic consumption growth and the expanding U.S. appetite for gas, and became the world's No. 2 gas exporter by the late 1990s, after Russia. Yet no federal or provincial government ever stopped to question the logic of rapidly disposing of a declining non-renewable resource at mostly rock-bottom prices.

Now production throughout the Western Canadian Sedimentary Basin is in a freefall (some say gas production peaked in 2001), while costly offshore drilling has come up dry. Canadian exports to the United States fell by 21% between 2001 and 2003. As a consequence, at current production rates Canada has less than a nine-year supply of discovered gas left. (Nearly 80% of Canada's estimated conventional gas endowment has yet to be discovered, according to the National Energy Board.) True, one-quarter of the world's drilling rigs are in Canada. Yet despite record drilling in 2003 (or what one analyst calls "brute force"--there were close to 14,000 successful gas wells drilled), production dropped by 3.6%. In 1997, the initial production of a typical new gas well was about 700 thousand cubic feet per day. Today, the average initial production of a new gas well is about 350 thousand cubic feet a day. That means many more wells must be drilled to offset natural production declines, which in Canada now total 21% a year. "What happens if that trend continues?" asks Hughes. "How many wells will we have to drill to keep production flat?" Rising gas prices in the United States have already shut down one-fifth of its nitrogen fertilizer industry.

The gravity of the natural gas crisis is just beginning to hit the public radar. At a recent National Energy Board conference, even ever-optimistic industry types noted "the gas supply situation is unsettling" and "we have crossed the Rubicon." Julian Darley, the author of High Noon for Natural Gas, says the situation is so serious "that it is too late to panic. It is time to plan." If Canadian politicians were sensible, they would recognize that this is a cold country, says Darley. "They would cut production and exports and work out depletion rates." Yet Canada has had no debate about the crisis. Replacing low-cost conventional gas with high-cost unconventional sources will be "an extreme challenge," according to Hughes.

If current production declines continue and growth in demand forecast by the U.S. Energy Information Administration is realized, a continental shortfall equivalent to 13 trillion cubic feet per year (about 42% of demand) could occur by 2025. Hughes predicts the crunch will arrive much sooner than that, unless as-yet-unproven windfalls result from unconventional gas sources. Banking on such things as gas hydrates or liquefied natural gas to offset declines in conventional production, says Hughes, "is akin to planning your finances on the assumption you will win the lotto in 12 or 15 years' time."