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April 2011

Vol. 16, No. 15 Week of April 10, 2011

The sands of time

Obama, other US politicians make oil sands crude a key part of US energy security; Canada’s opposition leaders attack incentives

Gary Park

For Petroleum News

At the political level, Alberta’s oil sands are catching flak from within Canada and finding friends in the United States.

President Barack Obama, in presenting his “Blueprint for a Secure Energy Future” that emphasizes a shift from oil to cleaner, more efficient alternative fuels, listed Canada among his country’s partners in its quest for energy security.

In a welcome message for Canada’s producing provinces and companies, he placed Canada alongside Mexico and Brazil as the keys to reducing current U.S. imports of 9.16 million barrels per day of crude and 2.6 million bpd of refined products by about 30 percent over the next decade.

Canada’s share of the oil volume is now about 2.5 million bpd, up 40 percent since 2000 and almost double Mexico’s 1.28 million bpd, followed by Saudi Arabia at 1.09 million bpd and Nigeria at 1.03 million bpd.

Deliberately or not, Obama made no mention of the public controversy that swirls around the oil sands, which account for about one-third of Canada’s cross-border shipments.

His roadmap coincided with urgent appeals by Republican congressmen for speedy approval by Secretary of State Hillary Clinton of TransCanada’s Keystone XL pipeline to carry 500,000 bpd of oil sands crude to refineries in Texas.

Congressman Connie Mack, R-Fla., dismissed the concerns about the environmental impact of oil sands production in extolling the benefits of a project he said would create “tens of thousands of jobs” and arguing that Canada had the right to extract its oil however it sees fit.

Oil sands in Canadian firing line

Against that background, two of Canada’s political leaders who are campaigning to defeat Prime Minister Stephen Harper in a May 2 election put the oil sands in the firing line.

New Democratic Party leader Jack Layton, who has no hope of becoming prime minister but could support a minority government under the Liberal’s Michael Ignatieff, took dead aim at “Canada’s dirtiest energy sources.”

He called for the transfer of C$2 billion in federal “subsidies” for the oil and gas sector to renewable energy projects and green jobs.

The NDP also wants a “more measured pace of development” in the oil sands, including a moratorium on new projects until the environmental footprint is reduced.

Layton said Canada is lagging behind other world leaders who are committed to eliminating direct tax incentives for fossil fuel production.

“We don’t think the (oil sands) projects need taxpayers’ help,” he said.

Ignatieff accused the Harper government of “walking away” from regulating the oil sands at a time when the outside world is looking to see whether the resource will be responsibly developed.

“We understand that the oil sands are a national industry that is going to be employing people for a century,” he said. “But I don’t want to be in a country that is associated with the reputation of having dirty oil.”

Ignatieff said his priority is to achieve a “sustainable fossil fuel energy sector so that we can look ourselves in the mirror and say this is not destroying the environment.”

Rebuke from Stelmach

Alberta Premier Ed Stelmach rebuked the two opposition leaders for using a resource of national importance to divide Canada.

“Someone who wants to be the prime minister of Canada is now pitting one province against another to garner support in another region of Canada,” he said.

Jason Kenney, a regional minister for southern Alberta in the federal cabinet, said Layton had conveniently ignored the fact that a federal budget on March 22 promised to scrap potentially hundreds of millions of dollars of tax breaks for the oil patch.

“What really concerns me is the very pejorative tone of Jack Layton’s attacks on this very major industry,” Kenney said.

Don Thompson, president of the Oil Sands Developers Group, made a plea for all federal political leaders to recognize that Alberta’s bitumen resources are an important economic contributor to all of Canada.

“Rather than using the oil sands to score points, I think they ought to be using them to move this country forward,” he said.

“Let’s be clear. Right now the oil sands are well over half of Canada’s production and something like 70 percent of Canada’s crude oil requirements. And they’re 97 percent of our reserves.

“So when you speak about Canadian oil, you are speaking of the Canadian oil sands,” Thompson said.

Tom Huffaker, vice president of the Canadian Association of Petroleum Producers, said Canada has now received a “pretty significant series of signals” from Clinton and Obama that “when the U.S. looks to import oil it would prefer to be reliant on Canada than most other suppliers.”

He said Obama “pretty clearly” singled out Canada as part of the solution to insecure supply sources as volumes from global trouble sports decline.






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