How can a country call itself a "global energy superpower," when its bitumen producers spend almost nothing on energy research? The Danish wind company Vestas, for example, spends more money on research and development than Total, Nexen, Suncor or Shell. U.S. oil analyst Philip Verleger notes that the oil companies profit "not through ingenuity, but through commodity price increases."

Canadian industry, dominated by commodity exports, shows little entrepreneurial flair, too. Concluded one 2009 report: "The innovation performance of Canadian business, taken as a whole, is significantly weaker than the innovation performance of the U.S. business sector, and in fact weaker than that of many of Canada's peers among OECD countries."

The oil sands mirrors this "innovation crisis" in spades. (The term was ironically coined by former Harper advisor, Bruce Carson, a convicted thief and oil sands lobbyist. He's now under investigation for illegal lobbying.) After the federal and provincial governments spent billions on publicly funded research in the 1980s, the oil sands industry sat on its thumbs. As a consequence, bitumen producers are now running on 20- or 30-year-old technology that is inefficient, carbon intensive and extremely wasteful.

Steam Assisted Gravity Drainage (SAGD) makes a dismal case in point. Industry says that steam plants, which now produce nearly 40 per cent of all bitumen production, represent the new and clean face for the oil sands. Yet the process boils vast amounts of groundwater with extreme volumes of natural gas in order to pipe steam into deep formations and thereby melt bitumen. None of these deposits are homogeneous and controlling steam in deep formations has become as problematic as hydraulic fracturing. In one celebrated case, Total injected steam into bitumen formation at too high a pressure. The steam then blew out a 300-metre hole in the forest in what regulators called "a catastrophic explosion."

If the technology worked really well, it would use less energy and steam over time to produce more bitumen. But exactly the opposite has happened. In the late 1980s, 2.38 barrels of steam was consumed to produce a barrel of SAGD bitumen. In 2010, the steam industry average increased to 3.3 barrels. That's a 50 per cent decline in efficiency over a 20 year period. For some companies, such as Opti-Nexen, the steam to oil ratio is now a dismal six barrels. More steam just means more energy and more emissions and less production.

In a recent presentation on technological innovation in the oil sands, University of Calgary petroleum engineer Steve Larter called the lack of innovation a "clear daunting challenge."

Added Larter: "We have not been revolutionary -- steam oil ratios have gotten worse with time as more difficult reservoirs are developed." He also admitted that technologies that lead to major downward shifts of the invested energy (for example, steam) and emissions versus oil produced have not yet appeared. Moreover, the high capital cost of current oil sands investment curbs innovation. Once Big Oil has invested billions in poor performing steam technology, there is no incentive to develop better technologies that might make their original investment obsolete.

Any industry that employs a technology that actually gets worse with time is profoundly wasteful. (Engineers call it the "broken feedback loop.") The most efficient steam operators now burn 0.7 GJ of natural gas per barrel of steamed bitumen. But they are the exception and not the rule. Based on greenhouse gas (GHG) intensity, the estimated industry average energy consumption is now 1.8 GJ/bbl, or 2.6 times higher than best practice. Perverse natural gas subsidies (oil sands companies can write off fuel as a cost) partly explain this lack of innovation and wastage.

Larter concluded that there is "no real evidence of a successful competition-based technology drive in energy R&D." Moreover, the industry, driven by short-term interests, remains as risk adverse and as unimaginative as the government of Saudi Arabia.

As one industry insider confided to the Tyee: "The steam extraction plants being built by industry today consume two to three times more steam than necessary and will burden Alberta's (and Canada's) economic productivity for subsequent generations."

One innovation that could change the game for the oil sands proposes to use microbes to gasify bitumen deposits into methane. The process, which would create fewer emissions than any mining or steaming project, would make Canada an "electricity, technology and gas exporter" of methane instead of oil. But the process might take a decade to commercialize.

In the meantime, innovation and research flounders in Canada's oil patch.

Next Week: The Conclusion of 10 Ethical Challenges of the Oil Sands

[Follow the link for more Energy reporting on The Tyee.]