Whither oil sands?

Despite my aversion to Governor Arnold Schwarzenegger, whom I would not trust as far as I could throw him (which is not far, I can assure you), I have always applauded the Californian stance on the environment. They are almost always ahead of the game, and their policies are usually more environmentally stringent than anywhere else in North America, more on a par with Northern Europe than with the rest of the States or Canada.
So it was with great interest that I noted that their new auto fuel policy looks at gases discharged during the full life cycle of the petroleum, and not just at tailpipe emissions. This has important implications for Canada, as a huge exporter of gas to the US, particularly as regards gasoline extracted from Alberta's oil sands, which are a very high-emission source of energy.
I have always felt the oil sands project to be a huge mistake on environmental grounds. The whole concept of using large volumes of increasingly expensive natural gas in the extraction of oil just seems bizarre to me. By some estimates, tar sands oil produces two to three times more greenhouse gases than conventional oil, and is a major contributor to Canada's horrible (and worsening) GHG emissions record. While, those estimates are probably exaggerated, it still has to be a major step in the wrong direction.
If the amount of money that has been pumped into the oil tar sands of Alberta had been invested in energy efficiency measures and alternative energy solutions, we would probably not even need them (as well as being a world leader in clean energy, with all the potential economic benefits that would bring).
The same of course could be said of the Ontario government's infatuation with nuclear power, but that is a whole other issue. Or is it?