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One up, one down Alberta oil sands gains as European Union scraps plans to penalize bitumen, but sector fingered by Canada’s environmental watchdog Gary Park For Petroleum News
The Alberta oil sands have received a lift on the international front and a knockback domestically.
The European Union has declared it will abandon a plan to officially label crude bitumen as “dirty,” meaning a sustained lobbying effort by the Canadian government to open a route from Alberta to Europe is on the verge of succeeding.
That reinforces the case being made by TransCanada for its C$12 billion Energy East pipeline which is on the verge of being submitted to Canada’s National Energy Board. The 2,800-mile system is designed to carry 1.1 million barrels per day of oil sands production and possibly light crude from the Bakken to Ontario and Quebec refineries and eventually to New Brunswick for export to Europe.
It is also the Canadian petroleum industry’s strategy to counter President Barack Obama’s stalling on Keystone XL.
Accusing finger But as fast as Energy East showed signs of making headway, the Canadian government’s own environmental watchdog fueled the resentment against oil sands development.
Newly appointed Environment and Sustainable Development Commissioner Julie Gelfand delivered her first report pointing an accusing finger at the federal government’s failure to comply with the Copenhagen Accord by reducing greenhouse gas emissions by 17 percent from 2005 levels by 2020.
She said it is “not clear how the government intends to address the significant environmental challenges that future growth and development will likely bring about,” with the oil sands portrayed as the chief culprit.
In 2012, the Canadian and Alberta governments unveiled a Joint Oil Sands Monitoring, JOSM, program to be functioning by 2015.
Gelfand’s office selected nine of the 38 monitoring initiatives that were being led by the federal government and found that four were delayed, due to factors such as a lack of staff, delayed contracts with laboratories and delays in obtaining permits to establish monitoring sites.
The report also determined that the federal role in monitoring the oil sands was “unclear” after 2015.
The auditors said Environment Canada’s “continued involvement was important” to stakeholders even though the role has yet to be determined.
They also found that in the 2013-14 fiscal year, the petroleum industry covered C$18.1 million of the C$24.6 million spent on 38 of JOSM’s 58 projects for monitoring air, water and wildlife in the oil sands region.
Emissions regulations promised In 2006, the government of Prime Minister Stephen Harper promised emissions regulations for the oil and gas sector which are deemed critical to meeting emissions reductions targets.
The report said that, despite evasive government action on the status of the regulations, a framework has been completed and “detailed regulatory proposals have been available internally for over a year,” but the Harper administration has kept its consultations confined to a small working group.
Environment Minister Leona Aglukkaq refused to discuss the findings with reporters and Gelfand’s claim that the federal government is making no effort to work with the province’s, while her department issued a written report citing only what the government has already done.
No transportation fuel penalties On the other side of the Atlantic, a new European Commission proposal will ensure that no transportation fuel, such as diesel and compressed natural gas, supplied to the 28-country European Union will be penalized based on the carbon intensity of the base fuel, such as oil sands crude.
European Commission Climate Commissioner Connie Hedegaard said it was “no secret” that the initial proposal, labeled a Fuel Quality Directive, would be rejected because of resistance in some member countries.
However, she said the commission will try to ensure that measures are taken to ensure that less polluting fuels get preference.
For the oil sands industry the door is now open to determine whether European refineries are equipped to upgrade crude bitumen into transportation fuels.
The first test is already under way involving a shipment of 570,000 barrels from Suncor Energy’s oil sands operation to a refinery owned by Repsol, Spain’s national oil company.
The European Union’s attempts to block imports of crude bitumen started in 2009 when member states adopted legislation to cut emissions from transportation fuels by 6 percent by 2020, having already claimed the oil sands are significantly more polluting than conventional crude.
The Canadian government retaliated through a lobbying effort that accused the European Union of unfairly singling out the oil sands.
Amid the conflict in the Ukraine and concerns that oil and gas supplies from Russia to Europe could be cut off, Harper told reporters at the Group of Seven summit in Brussels in June that the Ukraine crisis was an opportunity for Canada to present itself to its European allies as a “secure and stable” energy supplier.
Alberta Premier Jim Prentice told the Financial Post the apparent removal of an obstacle to Europe is “very positive news” for his province which stands to gain “equal access to critical markets” for its oil sands production.
Franziska Achterberg, Greenpeace’s European Union energy and transportation policy director, said the European Commission’s retreat from its earlier hard line “will do nothing to stop climate wrecking fuels like the tar sands from entering the EU market.”
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