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Asia threatens U.S. energy security Alberta premier: Asian countries poised to take advantage of oil sands if U.S. bans use of fuel from unconventional sources Gary Park For Petroleum News
Banning “dirty fuel” from the oil sands on environmental grounds would jeopardize United States energy security and open the door to Alberta for oil-hungry countries such as China and India, Alberta Premier Ed Stelmach told a U.S. audience as he tried to head off a growing clamor to slow development of the resource.
He said the U.S. will have a difficult time escaping its addiction to oil from politically unstable and environmentally regressive regions, such as the Middle East, Venezuela and Africa, if the U.S. federal and state governments take action against the oil sands.
Stelmach, along with a delegation of Alberta government and industry representatives, made a three-day visit to Washington, D.C., in a bid to counter passage in December of the U.S. Energy Independence and Security Act that prevents the military and other federal agencies from using gasoline derived from nonconventional sources that emit more greenhouse gases over their lifetime than conventional oil wells.
Canadian industry leaders are quick to point out the impossibility of tracking the origin of any gasoline.
Having attracted the anger of environmentalists, Stelmach sought some comfort at a 30-minute meeting with Vice President Dick Cheney.
He emerged confident that the U.S. will not turn off the taps from the oil sands, declaring that Canada is on track to be the leading exporter of oil and natural gas to the U.S.
“There’s a long-term future not only in supply of oil and natural gas, but I am of the strong opinion there is a long-term future in us supplying the research and technology that Americans use … to (extract) oil out of shale in the United States,” Stelmach said.
Oil sands myth On the environmental front, he said there is a “myth out there that oil sands production comes at too high an environmental cost. This myth has gained some traction here in the U.S.
“There are ongoing attempts in this country to slow down or even stop oil sands development. Those attempts don’t reflect reality and they don’t make sense.”
Stelmach said California’s low-carbon fuel standard does not encourage environmentally friendly investment at the point of production and will only penalize imports from Alberta, which accounts for the bulk of Canadian exports that meet 6.5 percent of U.S. oil needs and 11 percent of its natural gas consumption — numbers he said could go even higher because the economics are in place.
Meeting reporters in Washington, D.C., after his speech in the U.S. Senate Finance Committee chamber, he said Alberta’s oil supply is actually cleaner than imports from the Middle East because those deliveries have to travel greater distances, increasing greenhouse gas emissions in the process.
Stelmach was emphatic that by the time low-carbon fuel standards are in place in the U.S. Alberta will be able to meet or exceed those regulations.
He also said Alberta is eager to build the value-added side of the oil sands, using the resource as feedstock for the petrochemical and refining sectors, thus “reducing the risk of disruption for our customers by spreading out this infrastructure, instead of concentrating it in the Gulf Coast.”
Reclamation, water recycling In defense of Alberta efforts to tackle oil sands’ environmental challenges, Stelmach said strict standards have resulted in 16,000 acres undergoing reclamation of the 131,000 acres disturbed by industry activity.
In addition, the government requires recycling of up to 90 percent of the water used by the industry, depending on the maturity of the facility and the type of extraction.
To date, he said, close monitoring has shown no long-term negative impacts on water quality from the oil sands.
On climate change, Stelmach said Alberta is the first jurisdiction in North America to legislate greenhouse gas reductions on large industrial facilities, ordering oil sands plants emitting more than 100,000 tons a year to lower that emissions intensity by 12 percent.
Since 1990, oil sands operators have reduced their carbon dioxide emissions by 45 percent for each unit of production and are working on further cuts.
He said his government is pioneering a new environmental management approach that goes beyond individual projects and looks at the cumulative effects of all proposed developments within a given area and is already using that approach in the Edmonton area where much bitumen from the oil sands is upgraded.
Bob Page, who works on energy and environmental issues in Alberta, said the province is under pressure to answer issues such as the U.S. Natural Resource Defense Council’s request to 15 airlines to stop relying on the oil sands for fuel.
He said there is a rising movement in the U.S. that poses a “serious new marketing problem for oil sands products which will have to be addressed by Canadians.”
Rep. Henry Brown, a South Carolina Republican, who welcomed Stelmach to Capitol Hill, said the only aspect of Alberta’s oil sands that worries him is the prospect of a pipeline being built from Alberta to the British Columbia coast to serve Asian markets.
A handful of activists staged a protest at the Canadian embassy, claiming oil sands projects have three times the environmental impact of conventional oil.
Protests in Alberta The rising tide of protest is also building in Alberta, where a coalition of environmentalists is asking a court to overturn regulatory approval of Imperial Oil’s C$7 billion Kearl project.
In approving Kearl in 2006 the Alberta Energy and Utilities Board attached a long list of conditions and ruled that cumulative impacts of Kearl and other projects should be monitored by and subject to the findings of the Cumulative Environmental Management Association, a multi-stakeholder group.
The court filing said that association has a “track record of failure,” and has failed to define science-based ecological thresholds for the oil sands region.
Uncertainty in the U.S. over the future of imports from the oil sands is reflected in plans by the U.S. Securities and Exchange Commission to place oil sands reserves on the same footing as conventional crude oil, a move that would greatly enhance the value of the resource.
The current rules date back about 30 years to a time when the oil sands were considered uneconomic to develop and prohibited companies from booking their bitumen resources as “proven crude reserves.”
Because oil sands companies are required by the SEC to use bitumen prices on Dec. 31 to determine what the resource is worth 750 million barrels was written off in 2005 because the price was set at US$16.39 per barrel. The Canadian industry has long argued the SEC should apply the average price for a calendar year because the bitumen market is so volatile.
Kevin Cramer, an attorney with the New York firm of Osler Hoskin & Harcourt, said SEC, in ordering a review, has conceded that its current practices are not an accurate guide to the oil and gas reserves held by public companies.
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