Canada’s energy industry is hoping the European corporate heavyweights in Fort McMurray, Alta., will help to derail a new fuel standard they say discriminates against oil sands crude.
Some time in the next few weeks, European nations will consider a fuel quality directive that seeks to reduce the greenhouse gas intensity of transportation fuels. The draft directive, assembled by the European Commission, includes language setting oil sands-derived crude in a distinct and separate category from other oil. It assigns the oil sands oil a substantially higher greenhouse gas intensity: 107 grams of carbon dioxide per megajoule of energy produced. Most other crudes are lumped into a basket and assigned a value of 87.5.
Green groups have celebrated the directive, saying it makes clear the environmental and economic risks of producing from the oil sands. Although very few – if any – oil sands-derived fuels now make it to Europe, critics say the draft sends a global signal about the relative dirtiness of the oil sands.
But the Canadian government has called it prejudicial, and fought to have it changed. And now the Canadian Association of Petroleum Producers is holding out hope that those nations with major interests in the oil sands – the Netherlands, U.K., France and others – will work to strip out wording they fear will set a precedent others may some day copy.
“Really the big impact on this one is going to be the oil companies that are involved in the development of the oil sands from Europe, talking to their own state and country governments,” said Greg Stringham, a vice-president with the association.
Some of those companies – including Royal Dutch Shell PLC, BP PLC and Total SA – have already taken up the torch, in hopes of using their substantial influence to shift the policy. At least one of their home countries, Britain, is already publicly supporting industry’s contention that the directive is unfair and, in some ways, unworkable.
The directive is intended to drop the carbon content of gasoline and diesel by some 6 per cent. But by creating a separate elevated-carbon category for oil sands crude (a similar category has been created for shale oil, which receives a higher number) industry argues that it doesn’t account for the substantial differences between different oil sands operators. Such a system doesn’t point a similar finger at other carbon-heavy crudes from Nigeria, Russia and Saudi Arabia. And it doesn’t reward Canadian producers who succeed in making a cleaner product.
It’s also, industry argues, very tough – and potentially expensive – to fingerprint a molecule of crude.
Such a plan will prove difficult “if you want an efficient system to be put in place,” argued Jean-Michel Gires, the president of Total’s Canadian subsidiary. He accused the fuel-quality directive authors of having “cherry-picked” the oil sands.
John Abbott, executive vice-president of Shell in Canada, says his company has “clear support” for the objectives of the directive. But, he said, “we do not believe that the current proposal which is coming out of the European Commission achieves these ends.”
He argued that the directive needs to be “based on sound science and accurate data.”
BP, too, is voicing its opposition. In an e-mail, spokesman Robert Wine said the current directive “will have the unintended consequence of making other crudes used in Europe more expensive; this would then happen with no benefit for the EU and no benefit for the environment as the oil sands crude and products will be sold elsewhere anyway.”
According to several sources, the EU hopes to pass the directive before year’s end. The question now: Are there enough European countries with oil sands interests – and will enough of those be swayed by these arguments – to change the rule?
Britain, for one, intends to try. It largely supports Canada’s position.
“We’re looking at it from the point of view of broader questions of energy security, price stability and, of course, the responsible application of innovative technology” that will cut the oil sands’ carbon footprint, said Andrew Pocock, Britain’s high commissioner (ambassador) to Canada.
And the Canadian government itself has also pledged to continue lobbying – although it, too, is hopeful European companies make the case for the oil sands.
“We hope all those who see the flawed nature of this policy will make their concerns known,” said Rudy Husny, press secretary in the Office of the Minister of International Trade.