The European Union appears to be backing away from a contentious fuel regulation that would hit oil sands producers, as governments there worry increasingly about their dependence on Russian energy imports.
Prime Minister Stephen Harper – in Europe this week – has won backing from key allies, including Britain, Poland and Italy, to deepen the Canada-EU energy relationship in order to enhance security of supply.
“There obviously has been some discussion here about energy security,” Mr. Harper told reporters after G7 talks in Brussels Thursday. “Our energy ministers, Natural Resources Minister [Greg] Rickford among them, met within the last month to have a very in-depth discussion of how we can move forward to enhance our energy security for the Western world generally.”
The European Commission has removed the most contentious part of the fuel quality directive that would impose new hurdles for Canadian imports, and would instead require refiners to report emissions on their feedstock regardless of the source of the crude, according to a draft document seen by Reuters news service.
The apparent change in policy would represent a much-needed win for Canada’s oil sands sector, which has been forced to defend its operations and environmental record against an onslaught of critics opposing both development of the massive northern Alberta resource and the pipelines needed to move it to market.
The Harper government, along with the government of Alberta and the oil industry, has long argued that the proposed European standard would unfairly single out Canadian oil sands crude for its carbon-intensity, while benefiting producers from countries such as Russia and Nigeria despite their questionable environmental practices. And with the ongoing crisis over Russia’s incursions into Ukraine, Canada argues Europe should be embracing its oil as a secure form of energy.
“We don’t see the crisis in Ukraine as simply an opportunity to market Canadian products, but obviously we’re deeply engaged in a discussion with our allies on how we can make sure that globally our energy supplies are secure and stable,” Mr. Harper said.
While the new proposal would not target oil sands crude, it would still require companies to report on the emissions profiles of the various crude sources they use. And it proposes a review in 2016 to determine whether to impose emissions standards based on the feedstocks.
The EU has endorsed the need for a new standard to reduce emissions from transportation fuels, but the details are still being worked out by the commission, which then has to bring it back to the European Parliament for approval.
The Canadian Association of Petroleum Producers (CAPP), the industry’s main lobby group, said it remained wary following years of debate with EU members over the fuel quality directive.
“From what we have heard of the proposal, while it doesn’t discriminate against Canadian oil to the degree it initially did, it still doesn’t encourage transparency. We haven’t seen the new proposal yet and at this point can’t comment further on specifics,” said Greg Stringham, CAPP’s vice-president of oil sands and markets.
Canada exports only tiny volumes of oil to Europe, but refiners in the U.S. Gulf Coast who process oil sands crude are increasing their shipments to the continent. Meanwhile, TransCanada Corp. is proposing the $12-billion Energy East pipeline to Saint John, N.B., from Alberta, which could result in exports of both crude and refined products.
A spokesman for Mr. Rickford said the government would not comment on “hypothetical outcome” of the commission’s policy making.
“Canada is a secure, responsible and reliable source of energy that can make a growing contribution to global energy security,” the minister’s director of communications, Chris McCluskey, said in an e-mail. “As currently written, the FQD is unscientific and discriminatory. We support the FQD’s intent to reduce transportation emissions, but believe it should be based on science and the facts.”
Derek Cummings, spokesman for Alberta International and Intergovernmental Relations Minister Cal Dallas also said little about a draft version of the policy, other than its message advocating against discriminatory treatment remained the same.
The important thing for Canada's energy sector is making sure its crude is not singled out for greenhouse-gas intensity, said Jennifer Winter, energy and environmental policy researcher at the University of Calgary’s School of Public Policy.
“I think it would be a major victory if the European Union actually decided to impose regulations on all types of crude oil, not just differentiating between Canada and other sources,” she said.
One issue that Canada has consistently raised is that the proposed rule failed to adequately account for the amount of natural gas that is flared in others countries, a practice that drives up carbon-dioxide emissions.
Environmental groups have lobbied aggressively to promote the fuel quality directive, and defend its targeting of the oil sands.
“Europe is committed to its climate change goals and opening the gates to some of the highest carbon oil in the world isn’t going to help Europe get there,” said Hannah McKinnon, of Toronto-based Environmental Defence. She added she didn’t want to “jump to any conclusions” that the battle has been lost.
“Currently, Canada does not export much tar sands to the EU, and with pipelines in all directions facing strong opposition, the prospects don’t look promising, so Europe certainly has time to strengthen these rules if that is what it comes down to.”
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