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Harper drops bombshell PM vows to ban bitumen exports to countries with low emissions standards Gary Park For Petroleum News
Prime Minister Stephen Harper brought his federal election campaign to Calgary, Canada’s oil headquarters, on Sept. 26 and flabbergasted the industry and the Alberta government by pledging to ban bitumen exports to countries with inferior greenhouse gas emission standards.
If Harper’s Conservative government is re-elected Oct. 14 it will impose the prohibition to ensure that Canada is not “just an energy provider (but) a clean energy superpower,” he said.
“This is the right thing to do for our environment and our economy,” Harper said. “It will not allow industry to skirt our tough environmental targets by exporting unprocessed oil to avoid our regulations.”
Coming without any warning or prior discussion, the announcement has spread uncertainty through the industry and riled the Alberta government, raising constitutional questions over whether the Alberta or Canadian government has jurisdictional authority over the oil sands.
Alberta Deputy Premier Ron Stevens said the Canadian government issued a press release of less than 25 words, “falling sharply short of a fully developed policy … it’s incredibly speculative.
Jurisdictional dispute looms “This is an important issue for Alberta, as development of this natural resource rests with the Alberta government and this resource is owned by the Alberta people,” Stevens said.
But others note that the federal government controls exports of natural resources, while environmental regulations are a shared responsibility.
Harper left no question about where he stands, insisting his government expects all provinces to abide by federal environmental targets.
He also said Ottawa can pull “two or three constitutional levers” in the event of a clash with Alberta over whose authority prevails in the oil sands.
“Ultimately, the federal government has significant control over exports, significant control over international trade,” he said.
Harper suggested that his strategy could help the Alberta government achieve its goal of building more upgraders in Alberta to turn bitumen into refinery-ready crude and keep more of the value-added end of oil sands production in the province.
Stéphane Dion, leader of the Liberal party, the leading opposition party, called for a price on greenhouse gas emissions “to protect us from a situation where the exports from Alberta around the world will be stopped by tariffs.”
Of the 1.3 million barrels per day of bitumen produced in Alberta, 500,000 b/d is shipped to the United States.
The U.S. Congress in late September upheld provisions in the U.S. Energy and Independence Security Act that would prevent federal agencies from using fuels derived from unconventional sources that generate more greenhouse gases than conventional oil and gas.
But the United States still falls short of the Harper government’s plan to cut greenhouse gases by 20 percent from 2007 levels by 2020, although it has yet to legislate that goal.
U.S. unlikely to be affected Federal Industry Minister Jim Prentice said the target of Harper’s prohibition “could be the United States … it could be Asia.”
However, he said “it’s clear the United States is moving gradually toward a similar policy (to Canada’s) with respect to greenhouse gas emissions.”
Both he and Environment Minister John Baird said they are confident the United States will eventually adopt climate-change policies that are in line with those proposed by the Harper administration.
They said the proposed ban would be unlikely to affect shipments to Canada’s next-door neighbor since both U.S. presidential candidates have promised to cut carbon emissions.
Asked by reporters if his move could block exports to Asia, Harper said: “Well, it could, it absolutely could.”
But he emphasized a ban would not cancel existing contracts, all of which involve supply agreements with U.S. refineries.
Joseph Doucet, an energy policy professor at the University of Alberta, noted that the United States has a wide range of environmental legislation that, in some cases, exceed and, in others, fall short of Canada’s standards.
Free trade could override ban He also was uncertain whether a Canadian government could limit bitumen exports under trade pacts such as the North American Free Trade Agreement.
The Canadian Association of Petroleum Producers, caught off guard by the announcement, will work with whoever wins the Canadian election, a spokesman said.
He said the industry lobby group “will have to see how (Harper’s pledge) translates into policy.”
Doucet told the Calgary Herald he view Harper’s commitment as “electioneering … I’m not sure how they would do this, or even if they can. It’s a likely source of irritation for the (Alberta) government.”
The other market for Alberta bitumen that sits on the horizon is Asia, if Enbridge is able to arrange supplies and markets for its planned C$4 billion, 400,000 b/d Gateway pipeline from the oil sands to the British Columbia deepwater port at Kitimat.
Enbridge has listed China, South Korea and Japan, along with California, as possible markets.
Officials at Enbridge, admitting they were surprised, said the company needed to clarify Harper’s plan before reacting.
Peter Linder, president of Delta One Capital, viewed the potential impact as minimal, arguing bitumen shipments to Asia are unlikely to grow significantly because loading and transportation costs are expected to rise.
He said there is no reason for Canadian producers to ship their production halfway around the world when they have an obvious market in the United States, with the refining capacity to handle bitumen.
One of the few enthusiastic responses came from Neil Shelly, executive director of the Alberta Industrial Heartland Association, which represents the petroleum industry including oil sands producers.
He described the move as “very progressive … it levels the playing field for us because we will be capturing carbon dioxide and the U.S. does not have those requirements.”
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