blog2008

'Dirty oil' bill all bark and no bite

Charles Frank
Calgary Herald
Saturday, September 27, 2008

If you didn't know better, you'd think all the high-fiving by environmentalists this week over the apparent enshrinement of Section 526 in the U.S. Energy and Independence Security Act will: (a) bring the development of Alberta's oilsands to a grinding halt or (b) keep our so-called "dirty oil" from being shipped into the United States.

We're here to tell you not to panic. It won't do either.

Nor, for that matter, is it the "symbolic victory" Liz Barratt-Brown, a senior attorney with the Natural Resources Defense Council, a U.S. environmental group, claimed after the U.S. Congress passed the legislation in spite of intense lobbying from Canadian and Alberta government officials.

That effort, you might recall, also included a hasty trip to Washington by Premier Ed Stelmach, who was hoping some personal contact might help convince American lawmakers that the contents of Section 526 were not only ill-conceived, but wrong-headed.

Obviously, the premier's pleas fell on deaf ears. So where does that leave us?

Yes, the legislation itself is aimed at restricting the kind of gasoline used by the vehicles belonging to certain government agencies, with an eye to circumventing fuel from sources whose production processes release undue amounts of greenhouse gases.

Like the oilsands.

But there's a catch. Actually there are a couple of important snags in the plan that was implemented specifically to "punish" intransigent oilsands producers for what the environmentalists believe is their cavalier attitude toward greenhouse gas emissions.

While nobody can say for certain how many vehicles may or may not come under the restrictions enshrined in the new legislation, it's safe to assume that it will not apply to the vast majority -- let's say 99 per cent -- of U.S. gasoline consumers.

That's right. It doesn't apply to truckers, commuters, casual drivers, RVers, driving-school owners, school bus operators, corporate fleet managers or just about anyone else who will need to fill up at a gas pump to get around.

More to the point -- even if the new legislation did apply to the aforementioned users -- there is virtually no way to prove which litre of gasoline at a particular gas station had its gestation in the oilsands and is, as a result, the end product of our so-called "dirty oil".

Enforcement would be a nightmare to say the least. Kinda makes you wonder what all the fuss has been about, doesn't it?

Perhaps that's why even as lawmakers were passing the U.S. Energy and Independence Security Act, Calgary-based EnCana and U.S. energy giant ConocoPhillips were announcing they would spend $3.6 billion to start construction on an expansion of their jointly owned Wood River refinery in Roxana, Ill.

When complete, the expansion will more than double the refinery's ability to take oil from the oilsands and turn it into gasoline and diesel fuel, which will in turn be shipped into what the companies describe as "the heart of one of North America's largest consumer markets."

That, of course, is good news. It reaffirms that the multinational corporations that have been lining up to get a piece of our oilsands -- and bring the billions of dollars worth of oil contained therein to market -- are not being intimidated by the egregious attempts of the environmental lobby to short-circuit those developments using any means at their disposal.

Three years ago, when the oilsands were officially endorsed as being the second-largest pool of recoverable oil in the world (the 171 billion barrels they contain are second only to Saudi Arabia's reserves) by the International Energy Agency, we predicted that Alberta would find itself under unprecedented scrutiny with respect to oilsands-related environmental issues.

Not only has that come to pass -- our oilsands are now routinely the subject of protests in far-off places such as Washington and London -- but the worldwide surge in concern over climate-change issues has raised tough questions about all industries that generate large amounts of greenhouse gases.

Fair enough. The harsh truth is that the oilpatch and the Alberta government have been blindsided by the "dirty oil" tag that has been hung on the oilsands by the environmental lobby. And they have been painfully slow to find a way to tell their side of the story at a time when their harshest critics are using every medium and forum available to make their case.

At a time when separating truth from fiction has never been more important -- as all the fuss over Section 526 illustrates -- the province and the industry have to get their game together and energetically defend and explain the oilsands to interested parties around the globe.

That they will need help with that assignment is self-evident.

cfrank@theherald.canwest.com

© The Calgary Herald 2008

---

Alberta blindsided by U.S. fuel law

Ottawa, province must work together to protect our interests on Capitol Hill

Paula Simons
Edmonton Journal
September 16, 2008

The U.S. Energy Independence and Security Act passed last December, without a fuss on this side of the border.

Yet Section 526 of the 822-page piece of legislation should have set Canadian alarm bells ringing. The section forbids any federal agency -- such as the Defense Department or the U.S. Postal Service -- from buying "synthetic" fuel from non-conventional sources for any "mobility-related" uses.

The section was authored by Congressman Henry Waxman, a California Democrat, and chair of the House of Representatives committee on oversight and government reform.

In a letter to the U.S. Department of Defense, Waxman made the law's intent clear:
"This provision ensures that federal agencies are not spending taxpayer dollars on new fuel sources that will exacerbate global warming," Waxman wrote. "This provision is also applicable to fuel derived from tar sands, which also produce signficantly higher greenhouse gas emissions than are produced by comparable fuel from conventional petroleum sources."

How practical the law is remains unclear -- after all, it's not as if you can buy special oil or gasoline derived exclusively from oilsands. The crude we export comes from a mix of conventional and non-conventional oil. (Right now, Alberta produces about 1.2 million barrel of synthetic crude a day, versus 586,000 barrels a day of conventional oil.) It's hard to fathom how the U.S. Postal Service or Defense Department could ever prove to Congress that they weren't buying gas or jet fuel derived, in part, from synthetic crude.

Still, neither the Alberta government, nor the federal Department of Foreign Affairs and International Trade seems to have realized the potential impact of the Energy Independence and Security Act before it passed.

As my Journal colleague Archie McLean first revealed last week, the Alberta government only learned the details of section 526 when the Globe and Mail broke the story last Jan. 15, a month after it became law.

It does seem outrageous. The Alberta government has a special trade office in Washington, with a budget of $1.4 million a year and a staff of four, headed by former Alberta cabinet minister Gary Mar, whose job it is to promote and protect this province's economic interests.

Mar admits his office missed the importance of the section -- but he blames the mix-up on the convoluted American legislative process.

"Section 526 wasn't in the original text of the act. It was an amendment that came late in the stages of debate," he says.
"But even if someone had seen it, given the context, they might not have been concerned."

Mar says Waxman originally framed his amendment to focus on technology to turn coal into liquid fuel and sold it that way to the House. No one, he says, including the petroleum industry, understood that Section 526 would ban the use of synthetic fuels.

Still, if the Globe could see that the Energy Independence and Security Act might be a problem, why couldn't the Alberta trade office? It's embarrassing to think that a matter of this much importance to our province's economy somehow flew under our provincial radar.

It's not fair to put all the blame on Mar and his tiny staff, though. It's not actually a provincial responsibility to monitor and lobby American legislators. That's the job of the federal government, specifically the Department of Foreign Affairs and International Trade. On Monday, no one at Foreign Affairs could tell me exactly when the department first became aware of the implications of the Energy Independence and Security Act.

But it's clear that Ottawa dropped the ball -- failing to head this legislation off at the pass, failing to give the Alberta government any warning it was coming.

With the U.S. economy sliding into recession, protectionist sentiment south of the border is heating up. No matter who wins the presidency, we'll likely see a more protectionist Congress when the American elections are over.

At the same time, the international public relations campaign against the oilsands -- or tar sands -- grows louder all the time. Even if a law like the U.S. Energy Independence and Security Act poses little practical risk to our oil exports, it poses a significant political threat, by singling out and demonizing, as it does, synthetic crude as a particular environmental threat. Whether the criticism is justified or not, our oilsands have become a most convenient international whipping boy for green activists.

All told, there's never been a more crucial time for the province and the federal government to be working together to protect our interests on Capitol Hill. It's no easy task to outlobby the lobbyists, especially in a cutthroat political culture like Washington's. But at the very least, we should be able to rely on our politicians, diplomats and civil servants to be vigilant when it comes to proposed legislation that could have a major influence on national economic and political interests.

---

Section 526, U.S. Energy and Independence Security Act

Text of H.R. 6: Energy Independence and Security Act of 2007

SEC. 526. PROCUREMENT AND ACQUISITION OF ALTERNATIVE FUELS.

No Federal agency shall enter into a contract for procurement of an alternative or synthetic fuel, including a fuel produced from nonconventional petroleum sources, for any mobility-related use, other than for research or testing, unless the contract specifies that the lifecycle greenhouse gas emissions associated with the production and combustion of the fuel supplied under the contract must, on an ongoing basis, be less than or equal to such emissions from the equivalent conventional fuel produced from conventional petroleum sources.

Harper export bombshell leaves oilpatch puzzled

Industry eager to study policy details

Shaun Polczer
Calgary Herald
Saturday, September 27, 2008

Prime Minister Stephen Harper said in Calgary on Friday he wants to make Canada
a clean energy superpower. Part of his plan to do so includes restricting bitumen
and oilsands exports to countries that don't limit greenhouse gas emissions.
CREDIT: Ted Jacob, Calgary Herald

Oilpatch insiders are taking a wait-and-see approach to Prime Minister Stephen Harper's bombshell announcement his government would move to restrict bitumen and oilsands exports to countries that don't limit greenhouse gases.

During an election stop-over in Calgary on Friday, Harper said a re-elected Conservative government would prohibit bitumen exports to countries that don't have emission reduction targets equivalent to Canada's.

"More than just an energy provider, Canada must be a clean energy superpower," he said.

The Harper government has pledged to reduce Canada's emissions of greenhouse gases linked to global warming 20 per cent by 2020, far less than the targets agreed to by the previous Liberal government under the Kyoto Accord.

Environmentalists have complained rampant development of Alberta's oilsands -- the world's second-largest oil reserves -- is largely responsible for Canada's surging carbon footprint.

Canada produces more than a million barrels of ultra-heavy oil and bitumen a day, a figure that is expected to triple over the next decade.

To diversify export markets, companies such as Calgary-based Enbridge Inc. have proposed projects such as the $4-billion Gateway pipeline, which would move half a million barrels a day to the West Coast where it could then be shipped to places such as China.

Harper said the policy wouldn't affect current contracts with U.S. refiners but said it could "absolutely" jeopardize future exports to Asia.

Enbridge spokeswoman Gina Jordan said the company is seeking more clarity before making a formal reaction. "We were certainly surprised by today's announcement and we're looking at the details."

In past interviews, CEO Pat Daniel has said the Gateway would ship oil to Asian countries other than China, as well as American states such as California, which currently has some of the toughest greenhouse gas standards in the world.

But the U.S. itself is a patchwork of conflicting legislation and standards that may or may not be equivalent even to Canada's watered down commitments.

Joseph Doucet, a professor of energy policy and director of the Centre for Applied Business Research on Energy and the Environment at the University of Alberta, agreed most U.S. action to curb emissions is at the state level.

He said it's not clear how a Conservative government would restrict bitumen exports or whether it would be possible under deals such as the North American Free Trade Agreement.

The provinces have control over resources, but the federal government is responsible for international treaties and trade agreements.

Although it's uncommon for Ottawa to restrict certain types of exports, it's also not without precedent, Doucet said. Canada imposed trade sanctions on South Africa in the 1980s to protest apartheid and participates in efforts to curtail certain types of technology that could be used for military purposes.

In addition, countries such as the U.S., for example, have long lists of countries they won't do business with, including Cuba and Iran.

But Doucet said it's unclear how much weight Harper's proposed policy carries in the context of the ongoing campaign.

"My feeling is that it's politics . . . electioneering," he said. "I'm not sure how they would do this, or even if they can. It's likely a source of irritation for the provincial government."

Intergovernmental Affairs Minister and Deputy Premier Ron Stevens discounted the announcement, describing it as "incredibly speculative." While the province has taken steps to mandate emissions reductions for big industrial polluters, Stevens noted the federal targets haven't been formally legislated.

"Alberta's bitumen belongs to the people of Alberta and when people outside of Alberta start talking about impacting in some fashion the ability of Albertans to sell our resource, it's of interest to us," he said.

"It's not a policy. It's a statement. What it does is it just lends additional uncertainty to the matter."

Adam Sparkes, the Canadian Association of Petroleum Producers' manager of intergovernmental affairs, said the announcement came out of the blue, but said his group will work with whichever government comes to power on Oct. 14.

"We're surprised, but I wouldn't say dismayed. We're in the middle of an election and we'll stay focused on working with whichever government Canadians choose to elect."

Other points in the Harper plan included a pledge to support a Mackenzie Valley pipeline, which Canadian Energy Pipeline Association president Brenda Kenny said is positive for Canada's energy transportation companies.

Her group has more than $40 billion worth of proposed capital projects on the books, a figure that rises to $80 billion when it includes two Arctic pipelines from Alaska and the Northwest Territories.

Although she agreed the government needs to create certainty for investors, Kenny said she's not about to draw too many conclusions from Friday's announcement.

"Everybody understands that in an election campaign certain platforms are put forward that need to be fleshed out over time. I don't think it causes undue uncertainty."

Enbridge shares gained 22 cents on the Toronto Stock Exchange Friday to close at $40.50.

spolczer@theherald.canwest.com

© The Calgary Herald 2008

Two US LNG importers seek permission to export LNG

Two filings with the Department of Energy reveal important information: two LNG import terminal companies (Cheniere Energy & Freeport) are seeking permission to EXPORT LNG, because, as the Cheniere Energy filing points out, "due to global LNG market conditions, U.S. natural gas demand and prices do not currently support the importation of LNG into the U.S."

http://edocket.access.gpo.gov/2008/pdf/E8-21059.pdf
http://edocket.access.gpo.gov/2008/pdf/E8-20991.pdf

Gotta love it. But investors in WestPac LNG may not sleep so well at night!