Dr. L. R. Radovic is a Professor of Energy and Geo-Environmental Engineering at Penn State University (q.v.). Chapters from his book, Energy and Fuels in Society, can be found online. Chapter 10, titled "Synthetic Fuels, Oil Shale, and Tar Sands" gives a good explanation and background on these sources of "non-conventional oil" and what we can expect from them (q.v.). The bottom line is that non-conventional oil resources are vast, but not easy or economical to develop. They can and will be developed, as depletion of conventional resources raises the price of oil, but fuel produced from them will never be as cheap as what we enjoyed (if that's the term for it) in the '90s. Cheap oil spawned the SUV phenomenon, but the popularity of large, low fuel mileage vehicles will not survive the coming oil price hikes.
If we're not careful how we go about it, the development of non-conventional oil resources will do considerable damage to the environment. The most abundant non-conventional oil resource is coal, used in the Fischer-Tropsh synthesis of liquid hydrocarbon fuels. The most immediately exploitable non-conventional oil resource is Canada's reserve of tar sand deposits. Both coal and tar sands are most economically developed via large-scale open-pit mining. The introduction of monster hauling trucks and loaders has made it feasible to remove increasingly thick overburden of dirt and rock to expose the underlying coal and oil sand beds.
In the eastern US, the Bush administation has scrapped former EPA regulations that required open-pit mining companies to restore the land to its original contours after mining operations. This has put the administration's stamp of approval on the practice of leveling mountains and filling nearby valleys as the most expedient dumping areas for the removed overburden. In Canada, regulations are stricter, and the landscape overlying the most accessible tar sand deposits is relatively flat arctic muskeg, so alteration of the landscape and destruction of wildlife habitat is not as big an issue. However, extracting heavy oil from the mined tar sands creates a great deal of oily waste water, which is discharged into settling ponds covering many square miles. Contamination of local rivers and water supplies is a major environmental concern.
Environmental damage from open pit mining might be avoided by developing technologies to make underground mining safer and more productive. A concept for a semi-autonomous underground mining vehicle is described in another article at this site (q.v.). If successful, it would make underground mining economically competitive with open pit methods, even for shallow ore deposits with only a few tens of meters of overburden.
Another issue with development of non-conventional oil resources is CO2 emisssions. It takes a lot of energy to extract and upgrade bitumen from oil sands. It takes even more energy to synthesize liquid hydrocarbon fuels from coal. One reason that it has been economically feasible to produce oil from the Athabasca sands, even before the recent climb of oil prices to over $30 a barrel, is that the region has ample supplies of natural gas that can be used to generate steam and produce hydrogen for upgrading bitumen to synthetic crude. The natural gas used to produce one barrel of synthetic crude releases about 100 kg of CO2 into the atmosphere. I don't have numbers for liquid hydrocarbons synthesized from coal, but the amount of CO2 released in production would be considerably more than 100 kg.
When natural gas is used to produce hydrogen, the CO2 released is in a nearly pure waste stream. One way to reduce CO2 emissions associated with oil production from tar sands would be to pipe this waste CO2 to conventional oil fields in the region, for sequestration and enhanced oil recovery (EOR). A good article on the use of CO2 for EOR is available on the web pages of Millenium Energy Inc. (q.v.) It suggests that pure CO2 will soon be recognized as a resource of some value, because of its potential to enhance oil production from aging fields.
Further reductions in emitted CO2 could be achieved by using natural gas to fuel high temperature solid oxide fuel cells. Waste heat from the fuel cells would produce high temperature steam and hot water for the extraction process, while any electricity not used for powering pumps and other equipment could be exported. Direct methane SOFCs also yield pure CO2 waste streams that can be sold for use in enhanced oil recovery. If construction of pipelines to deliver CO2 to well heads is too costly, a possible alternative is freezing the CO2 and trucking it to well heads in the form of dry ice. Using these methods, it should be possible to produce upgraded syn-crude with zero added CO2 emissions compared to conventional crude, while simultaneously boosting production from aging conventional oil fields.
The big question regarding non-conventional oil resources is whether they can or will be developed quickly enough to forestall an energy crisis when conventional oil peaks. In one sense, the answer is patently "no", because oil production outside of OPEC has already peaked, and the $33 / bbl we've been seeing lately is a symptom of that. But the "big 5" swing producers in OPEC do still have the ability to increase production. The current high prices simply reflect the fact that no other producers are in a position to boost production and pick up market share by undercutting those prices.
Production from the Athabascan tar sands is being expanded as quickly as possible. It was marginally profitable when oil was selling at $18 / bbl; at current prices, there is no lack of investment capital for expanding production. The only limits are those imposed by the time required for construction of new facilities and acquisition of custom built equipment.