Canadian Prime Minister Stephen Harper is appealing to his European peers to stop EU plans to single out Alberta’s oil sands as a source of high-polluting energy as the country struggles to find new markets for its oil.
Harper will push the issue with French President Francois Hollande today after raising it with U.K. Prime Minister David Cameron yesterday. Canadian Natural Resources Minister Joe Oliver is also meeting with government and industry officials in London this week.
If Europe labels Canadian bitumen as more polluting than other oil sources, it could affect the economic viability of proposed pipelines and embolden environmental critics determined to stop projects such as Calgary-based TransCanada Corp. (TRP)’s Keystone XL and Enbridge Inc. (ENB)’s Northern Gateway, Oliver said.
“We don’t want to see our reputation sullied and our resource singled out for special negative treatment,” Oliver said in an interview with Bloomberg News. The fuel quality directive could affect TransCanada’s Energy East proposal, as well as give ammunition to people opposed to development of the deposits, he said.
The directive “would be used by those who are opposed to the development of the oil sands as further propaganda,” Oliver said by telephone yesterday.
Harper will raise the issue with Hollande when they meet in Paris today, according to a person familiar with Harper’s plans who asked not to be identified because the talks are private. The issue was already discussed at a lunch attended by Harper and Cameron, Oliver said.
In a May letter obtained this week by Bloomberg News, Oliver urged European Commissioner for Climate Action Connie Hedegaard to change the EU’s “fundamentally flawed” plan because it isn’t based on science. The directive would rank transportation fuels based on how they have been sourced, Oliver said, with “conventional” crude assigned lower greenhouse gas intensities than crude from oil sands. Canada wants the EU to revise the rule so it would be based on the actual emissions of individual grades of crude, rewarding companies that reduce emissions of their production.
Oliver said in his letter that crude produced by five of the top exporters to the EU--Russia, Nigeria, Iraq, Saudi Arabia, and Angola--have “demonstrably higher” emission levels than the directive’s standard for conventional oil.
Megan Leslie, spokeswoman for environmental issues for Canada’s main opposition New Democratic Party, told reporters last month the EU proposal was a “perfectly reasonable way to set regulations.”
“Canada’s behavior in this scenario has not been one of respect for the EU and their own authority to make their own decisions and it has also been I think to the detriment of our international relations,” Leslie told reporters last month.
Hedegaard told the European Parliament last month the rule would put a “true value” on the relative impact on emissions of different fuels, Bloomberg BNA reported.
The European Commission said in April last year it would delay a decision on the directive until “early 2013” so it could examine the economic effect of the measure.
Environmental groups such as 350.org and the Sierra Club have lobbied President Barack Obama to reject the Keystone XL pipeline, which would carry crude from Alberta’s oil sands to refineries along the Gulf Coast, saying that oil-sands crude has a larger climate-change impact.
A State Department analysis released in March said that while oil sands mining releases more of the gases linked by scientists to global warming, rejecting Keystone XL won’t reduce the rate of development in the oil sands or the amount of heavy crude refined in the U.S.
Last year, Obama denied a permit for Keystone XL, citing concerns it may be a threat to the ecologically sensitive Sand Hills region in Nebraska.
Obama said he would decide on a new permit request for the pipeline this year, Republican North Dakota Senator and Keystone XL supporter John Hoeven said in March, after a meeting with the president and other Republican lawmakers.
“What is harming Canada is the perception among environmentalists claiming that oil sands oil is dirty oil,” said Lawrence Herman, a lawyer at Cassels Brock & Blackwell LLP in Toronto, who specializes in trade issues. “I fear that Canada does not have an adequate answer,” Herman said by telephone June 7.
Harper said last year that selling energy outside the U.S. is a national priority. A glut of oil in the U.S. has helped depress the price of heavy crude from the oil sands, known as Western Canada Select. Oil-sands crude has traded at an average discount this year of $22.50 a barrel to the main U.S. grade, according to data compiled by Bloomberg.
Canada, which has the world’s third-largest pool of oil reserves, currently exports less than 2 percent of its oil to Europe, according to the British Petroleum Statistical Review of World Energy. TransCanada’s Energy East project, which would ship oil to Canada’s east coast for export to Europe, could change that. At that point, “what would be a perhaps theoretical concern with respect to the European market becomes a practical one,” Oliver said.
Canadian oil producers “wouldn’t want to rule out the option of Europe,” said Greg Stringham, vice president of oil sands and markets for the Calgary-based Canadian Association of Petroleum Producers, in a June 12 phone interview. “We, as an industry, don’t want to preclude any market because of poor policy,” Stringham said.
The directive is aimed at reducing the greenhouse gas emissions from producing and consuming transportation fuels by 6 percent by 2020. In his letter, Oliver recommends the EU appoint a third party such as the International Energy Agency to analyze the emissions of different types of oil production.
“This is a matter we’ve discussed with European leaders and will continue to raise,” Harper told reporters in London June 12. “We don’t have a difficulty with the concept of evaluating the various qualities of fuels, but this simply has to be done on an objective, scientific and transparent basis.”
According to Canada’s government, EU refineries would have to reduce their fuels greenhouse gases “intensity” by an additional 22 percent before they could use oil sands crude if the directive is passed, making it uncompetitive for them unless Canadian crude is discounted.
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