FORT MCMURRAY, Alberta -- On a chilly December night in Alberta, in the heart of the country's oil boom, cab driver Milan Malusic complains about the gasoline-like odors from oil sands facilities that seep through his car windows on a daily basis.

The 46-year-old says he hates the drives past the massive pit mines and accompanying smokestacks processing the gooey form of petroleum known as bitumen. Canada holds the second-largest oil reserves in the world after Saudi Arabia, and the majority of that is buried underneath sandy earth in an area the size of Florida in this province.

The streams of trucks hauling oil-saturated sand swirl dust in the air, and the industrial complexes leave a constant odor hovering over the highway, he says.

"I think they should shut down the mines. They are dirty," Malusic said during a drive through downtown. "But I don't mind the other thing. It is clean."

Ironically, the "other thing" may not be as clean as the cab driver believes, at least in terms of greenhouse gases. It is known as in situ, an alternative form of oil-sands extraction for bitumen more than 490 feet beneath the earth. The deep bitumen is not mined, but pumped out of the ground after being loosened with hot steam.

It is not yet the primary mode of production in the oil sands, but it will be, considering that 80 percent of the overall reserves are too deep to be extracted through traditional mining.

The leased area for in situ is 16 times greater than the entire mining region, according to the Pembina Institute, an environmental think tank based in Canada.

A technology to win Canada's PR war?

Without the massive trucks, factories and large "tailings" ponds of waste that have caused waterfowl deaths and bad press for the mining sector, in situ may help Canada win a public relations war.

Yet this next generation of oil sands extraction is raising concerns among environmentalists because of climate change. In situ produces more greenhouse gases per barrel of oil than traditional oil-sands mining, which in turn generates more heat-trapping gases than conventional oil drilling, such as that in the Middle East.

In situ may be less of an eyesore than mining, environmentalists say, but it is going to worsen the oil sands' carbon footprint when the country can least afford it. It also has the potential to destroy more swaths of the country's boreal forest than mining because of the sheer number of planned in situ facilities.

"Canada won't be able to meet their targets under the Kyoto Protocol largely because of their ever-increasing emissions from oil sands. More in situ development won't help that," said Danielle Droitsch of the Pembina Institute.

Her comments come as Canada is under scrutiny for lowering greenhouse gas reduction targets for 2020 to tie its policies to the United States'. At international climate negotiations this month, Canada said it would not support commitments past 2012 under the Kyoto Protocol as long as other large emitters like the United States fail to ratify the treaty.

A planned pipeline called Keystone XL that would double the amount of oil sands crude coming into the United States is the subject of an advertising battle on both sides of the global warming debate. Secretary of State Hillary Rodham Clinton is expected to make a final decision on the pipeline next year.

The industry and its supporters say the oil sands are being unfairly targeted. They are quick to point out that Canada emits 2 percent of greenhouse gas emissions worldwide, and that 95 percent of that number is not from the oil sands.

Driven by the U.S. oil addiction

Even with the industry's projected growth, the oil sands will still constitute less than 10 percent of Canada's emissions by 2015, according to the Canadian Association of Petroleum Producers, or CAPP.

That means that any strict ceiling on oil sands emissions would deprive the United States of its top source of oil at a time when the United States is not placing strict greenhouse gas limits on its own industries, supporters say. In their view, the United States may just turn to emission-heavy oil from Venezuela or Mexico if Canada's role is diminished.

"The right behavior for us is reduction in greenhouse gas emissions," said Greg Stringham of CAPP at a recent briefing for reporters in Calgary. "It is not shipping them to another jurisdiction."

On a recent tour of oil sands operations in Alberta, the differences between mining and in situ were stark.

At a Suncor mining operation, a canyon-like pit is home to massive shovels dumping dark, bitumen-rich earth into truck after truck, which move on the horizon like ants circulating through an anthill. They deliver their loads to a building where the bitumen gets extracted from clay, sand and water in bubbly caldron-like machines splattering oily liquid.

All around the complex are tailings ponds of waste, which hold small amounts of bitumen mixed with water, clay and sand. Ponds run by other companies have proved toxic to birds, which have died by the hundreds at some locations in the province and subjected the industry to lawsuits.

Mining companies agree to clean up their mess

Amid public outcry and government regulations, companies are spending millions to clean up the ponds and reclaim the land. This month, seven companies announced they would collaborate on research to reduce tailings waste.

No such obstacles plague an in situ plant two hours down the road, operated by Cenovus on a site called Christina Lake. There, the main above-ground visual is a surgical pipeline network in the snow mixed with patches of buildings and roads. There are no tailings ponds, shovels, trucks or pit mines.

"This is basically what you're going to see for the next few decades as far as in situ disturbance," explained Drew Zieglgansberger, a senior vice president at Cenovus, pointing at forest sprinkled with occasional wells and white pipes.

There are two main in situ methods, but the one being used by companies like Cenovus -- steam-assisted gravity drainage -- is the one projected to grow the most. It involves using natural gas to heat steam, which is then injected underground via a well.

The steam loosens the bitumen underneath the earth, where gravity drains it into a second well below the steam-filled pipe. Water and bitumen are then pumped to the surface, where they are separated before being piped to a refinery.

With in situ, there is no need to break up bitumen from clay or other materials, since the oil comes to the surface relatively pure.

Partially because in situ technology is newer to Alberta than mining, it makes up a lower percentage of oil sands production, standing around 45 percent. It will become the majority mode of production by 2015, according to Alberta's Energy Conservation Resources Board, or ERCB.

The higher greenhouse gas emissions over mining come mainly from in situ's reliance on natural gas. "We're burning a cleaner fossil fuel to get a dirtier fuel," explained Zieglgansberger.

A debate over 'dirtier'
Just how much "dirtier" in situ is on the greenhouse gas front is a matter of debate, however.

A report from IHS Cambridge Energy Research Associates this year, for example, reported that one in situ process produced roughly 23 percent more greenhouse gases than oil sands mining methods. The Pembina Institute estimates that in situ is 152 percent more greenhouse gas-intensive than mining, per barrel.

There are similar discrepancies in the figures on the oil sands overall, with some numbers reporting that the industry spews at least 20 to 40 percent more greenhouse gases than traditional oil drilling, while others state it is more in the range of 6 percent.

The differing numbers result from different ways of calculating the life-cycle emissions of the oil sands, according to Droitsch of Pembina.

Industry tends to calculate the "well to wheels" number for emissions, which includes greenhouse gases emitted when oil-sands oil is burned in a vehicle, along with production emissions. Their argument is that 75 percent of emissions associated with the oil sands comes from a tailpipe, and that transportation should be considered in evaluations of the oil sands.

"With most of the emissions from the oil sands, you're just as much to blame as me," said Zieglgansberger to reporters.

Many environmentalists focus on the "well to tank" number, which accounts for oil sands production only. In their view, the key point in terms of climate change is how extraction and processing of oil sands fuel compares to traditional oil drilling. The inclusion of transportation emissions camouflages the real climate impact, said Droitsch.

There are additional ways to tinker with the estimates, including calculating emissions associated from diluted rather than pure bitumen.

Companies are doing extensive research to decrease greenhouse gas emissions, partially to reduce costs. They also don't know the future of natural gas prices, which need to stay low enough in comparison to oil prices for oil sands processing to be competitive, Zieglgansberger said.

Cenovus, for example, is investigating injecting butane with steam underground to assist with loosening bitumen. In theory, that should lower the amount of natural gas and steam, and thus the emissions and price tag of the process.

Working on carbon capture and cheaper production
Of 50 company research projects, 35 are dedicated to lowering greenhouse gas emissions, said Zieglgansberger. In the next decade, the industry is going to be able to get its "steam to oil" ratio low enough through new technology that emissions will parallel those of conventional oil drilling, he said.

That doesn't change the fact that the emissions from the oil sands could triple from 2008 levels by 2020, according to green groups.

The Albertan government also has invested more than $2 billion on carbon capture and storage technology, although some of that work is focused on coal plants. Carbon capture and storage has yet to be proved at scale.

It is "a small portion of the answer" for oil sands emissions, said Stringham of CAPP. Efficiency is the main way industry will cut greenhouse gases, he said.

In 2007, the Albertan government required facilities emitting more than 100,000 metric tons of greenhouse gases yearly to reduce their emissions intensities by 12 percent from predetermined baselines.

Companies failing to meet that target must pay a carbon price of $15 per metric ton into an Albertan-run fund. The industry says the fund is boosting development of clean energy technologies, while environmentalists criticize the penalty as a weak one that is a financial drop in the bucket for most companies.

However, the ultimate fate of in situ may not rest with arguments about climate change. Albertan government official Andy Ridge said the province will not consider a cap on emissions if the United States is not doing the same.

"Canada needs the rest of North America to move before we can go any further on our own regulatory framework. We can't put our industry at a disadvantage," said Ridge, Alberta's director of the Climate Change Secretariat.

Impacts on water, forests and caribou
In the meantime, challenges to in situ are coming over other issues. Yesterday, a peer reviewed report from the Royal Society of Canada reported that the cumulative impact of in situ on groundwater and surface water, such as lakes and wetlands, needs to "be better understood." In situ uses less water overall than mining, but there are "uncertainties" about groundwater contamination, the Royal Society said.

There are also concerns about the woodland caribou, an endangered species in Canada whose habitat happens to overlap with swaths of the in situ region. The landscape footprint per barrel of oil of in situ is lower than mining, but more forest could be lost overall with in situ because of the number of planned in situ facilities.

"If you want in situ and oil sands development, you will not have caribou at their traditional levels," said Stan Boutin, a biological sciences professor at the University of Alberta who published a peer reviewed paper this year on the species.

The Albertan government is examining the possibility of conservation areas off-limits to development, but the "devil will be in the details" of any proposal, said Boutin.

Dave Ealey, a spokesman for Alberta's Sustainable Resource Development, said he disagreed that in situ had a greater overall impact on forestland than mining. The main issue with in situ is straight "cutlines" through the forest that allow wolves to move easily to attack caribou, he said. They are common with in situ because of the building of pipeline infrastructure.

The government is working with industry to try and reduce the size of the cutlines and reclaim cutline areas, he said. "We are fully aware of the challenges," he said.

At Cenovus, cameras have been erected around the pipelines to monitor the movement of animals such as caribou, although no patterns have been detected yet because the program is in its "infancy," said a company official.

Slowing down development would risk hundreds of jobs and economic growth, other oil sands backers say. The Albertan government collects roughly $3 billion in royalties from oil sands projects in a budget with $34 billion in revenue.

Some of those funds are funneled into local communities in desperate need of money for schools, health clinics and projects. At Cenovus headquarters, Mayor Peter Kirylchuk said in situ development has transformed his county, which is in the heart of in situ country.

The Lac La Biche budget which Kirylchuk oversees jumped from $19 million in 2007 to $44 million this year. The county is about to roll out a new fitness and health center with millions of dollars in donations from companies operating in situ facilities.

"We couldn't have built it without them," said Kirylchuk. "Our corporate sponsors came through in a big way."

Some of Christa Marshall's travel expenses were paid for by the Canadian Consulate General in New York. The government had no say in the content of this article.

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC., 202-628-6500