Canada's oil industry can live with U.S. states adopting low-carbon fuel standards, so long as they follow British Columbia's oil-sands-friendly model rather than the California approach.
As dozens of American states pursue climate-change regulations aimed at transportation fuels, the Alberta-based industry is focusing on the crucial details of the proposed rules, rather than aggressively opposing their adoption.
The Canadian Association of Petroleum Producers (CAPP) points to B.C.'s low-carbon fuel standard as a model that does not impose a discriminatory regulatory burden on oil sands producers.
British Columbia adopted low-carbon fuel rules last month. Unlike California regulations, the B.C. version treats all gasoline the same in terms of carbon intensity, whether it is derived from oil sands bitumen or conventional light crude.
California has assigned a much higher carbon footprint to gasoline from oil sands production compared with conventional gasoline, and the Canadian industry fears other states will follow that example.
CAPP policy adviser Rick Hyndman said any low-carbon fuel standard should manage emissions solely in the local market, rather than impose additional burdens on distant producers who already face regulation in their home province.
"We think the emissions ought to be managed in the region in which they are generated," he said in an interview.
The proposed state regulations represent a potentially costly hurdle for oil sands producers, who also face climate change regulations at the federal level in Canada and the United States, as well as Alberta's own emissions limits.
Last week, governors from 11 Northeast states agreed to pursue a common low-carbon fuel standard (LCFS) to address greenhouse gas emissions in the transportation sector. Midwestern states - which are major customers of Canadian crude - have also committed to adopt an LCFS, as have Washington and Oregon.
But those states have not yet worked out details of the regulatory plan, and environmentalists and the Canadian oil industry are gearing up for a furious battle over treatment of Alberta's so-called "dirty oil."
Mr. Hyndman said the regulations - if adopted - should provide incentives for development of low-carbon alternatives like advanced biofuels, rather than favour fuels from conventional crude over those produced from oil sands bitumen.
However, that approach would fail to address the rising carbon content of the U.S. oil supply, which is increasingly reliant on heavier grades of crude, like oil sands bitumen, said Roland Hwang, manager for transportation issues at the Natural Resources Defense Council.
"It just doesn't make any sense from an overall carbon-management perspective to treat all types of crude the same," he said.
Mr. Hwang said there are concerns that, even as U.S. motorists adopt low-carbon alternatives like electric vehicles and biofuels, the oil industry will offset those gains by processing, on average, heavier grades of crude that result in more emissions.
So far, only California and B.C. have actually released detail regulations.
The province expects companies that distribute gasoline and diesel to adopt a variety of strategies for achieving a 10-per-cent reduction in the province's overall emissions from transportation fuels by 2020. But it doesn't specify how they should get there.
"This is a performance-based regulation that will offer a choice of pathways for the market to determine," said Jake Jacobs, a spokesman for the province's Environment Ministry.
Massachusetts Environment Commissioner Laurie Burt said the state faces a number of tough issues as it works with its counterparts, and no decision has been made about how the various types of crude sources will be regulated.
But the clear aim is to reduce the state's - and the overall region's reliance - use of petroleum-based fuels, Ms. Burt said in an interview.
"We need to reduce our reliance on high-carbon-intensity fuels that come into our region," she said.
"So looking at a carbon program that has market competition to encourage lower-carbon fuels but doesn't pick winners and losers is something that is very attractive to our region."