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Targeting oil sands
US lawmakers propose taxing Canadian crude; critics warn impact on pump prices Gary Park for Petroleum News
In the less than three months since he occupied the White House, President Joe Biden has found himself at the center of more energy showdowns between the U.S. and Canada than either of his predecessors over the previous decade.
To date, the cross-border feuding has involved Keystone XL, and Enbridge’s projects to spend billions of dollars upgrading Line 5 and Line 3, which deliver a combined 1.2 million barrels per day of Western Canadian crude to the U.S. Midwest and Ontario.
The stir the pot even more, two Democratic lawmakers have floated a bill that would slap an excise tax on oil sands crude being shipped into the northern U.S. to build a fund for cleaning up any spills of crude.
The proposed law is being spearheaded by Earl Blumenauer (an Oregon member of the House of Representatives) and Ed Markey (a Massachusetts senator), both close allies of Biden, who has made no secret of his opposition to the oil sands.
Estimated cost Canadian energy lawyers and industry observers estimate the cost could run to 5.5 cents a barrel raising the total tax burden on every barrel of diluted bitumen sold into the U.S. to 9 cents.
If adopted, the bill would “further erode the economics of selling oil from Canada to the U.S., said Vivek Warrier, a partner in the energy team at the Calgary-based law firm of Bennett Jones.
The U.S. Internal Revenue Service said in a 2011 ruling that oil sands crude is not technically crude oil and should not be the target of an excise tax.
But Blumenauer’s legislation proposes rewriting language in the tax code to once again label oil sands products as crude oil.
He said in a statement that the “facts are clear: we are in a climate emergency and must take action. It is past the time when we should hold fossil fuel polluters accountable for the impact they have on the environment.”
Estimated revenue Blumenauer estimated the tax would generate US$665 million in additional revenue for the U.S. government over 10 years.
The Tar Sands Loophole Elimination Act has already won the endorsement of influential members of Congress including Senators Bernie Sanders and Elizabeth Warren and the House’s natural resources chairman Raul Grijalva.
Canada currently supplies about 49% of oil imports by the U.S., currently accounting for 3.63 million barrels per day of petroleum products, according to the U.S. Department of Energy.
An official in the office of Alberta Energy Minister Sonya Savage said the bill’s progress through Congress is being closely monitored by her government, adding that the millions of Americans who depend on Canadian oil “should know that such a move will ultimately result” in higher gasoline prices at the pumps.
Canada’s Natural Resources Minister Seamus O’Regan declined to comment.
Ben Brunnen, vice president of fiscal and economic policy at the Canadian Association of Petroleum Producers, said his organization wants to head off any U.S. tax policy that discriminates against the Canadian energy industry.
“We’ll continue to support efforts to open the door for collaboration with President Biden and his administration,” he told the Financial Post.
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