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LETTER FROM BRUSSELS

How Canada blocked Europe’s dirty oil label Add to ...

Canada has staked its future on the oil sands. In November, Report on Business magazine together with Thomson Reuters examine what that means both at home and abroad. Read more from the issue at tgam.ca/oil.

In the cafés and bars of Brussels, bitumen has been high on the menu. If you looked up from your table over past months, you might have found yourself confronted with photographs of giant shovels churning up the Northern Albertan landscape or even a chunk of dried-out oil sands as representatives of environmental non-governmental organizations sought to convince politicians, journalists and anyone else willing to listen that Canadian oil is dirty oil.

The street-level campaigning has of course been parallelled by legislative deliberation in the European Union institutions and a massive industry lobbying effort.

Environmental lobbyists say they have lost that battle as EU policy-makers shifted their stance, but they have won a larger war. In the European public mind, Canadian oil is indeed dirty oil.

The consolation for the industry is that it’s better to be dirty than bloody. Thanks to conflict between Ukraine and Russia that has Europe scrambling for energy alternatives, the distinction could be enough to provide a European future for Canadian oil.

Frustration levels are high on both sides of the debate. One camp, made up of NGOs and pro-environmental politicians, is dismayed that the European Commission has succumbed to pressure to scrap a proposal that would have clearly branded Canadian crude as more polluting than other forms of oil. Industry is exasperated by the amount of effort it had to expend to defeat one tiny piece of EU legislation–Article 7a of the so-called Fuel Quality Directive, or FQD for short.

The two sides are not even on the same page for terminology–the resource is referred to as tar sands by the environmentalists and oil sands by Canada and the oil industry.

The arguments began in earnest in 2009, when the Commission published research that the greenhouse gas intensity of Canada’s crude was around a fifth higher than conventional oil, given the amount of energy required to extract it.

Members of the European Parliament (MEPs) are accustomed to intense lobbying. They say the NGO efforts are impressive, but Canada’s determination to market its crude has been in a league of its own–Canadian officials tackled every relevant civil servant, every politician and every EU member state, no matter how insignificant, over Article 7a. “The Canadian lobbying against carbon emission values for tar sands has no equal,” said Jo Leinen, a German Socialist MEP. In an e-mailed statement, he said the lobby’s success in blocking the legislation gave rise “to doubts about the integrity/reliability/autonomy of the Commission itself.”

Leinen is among a group of MEPs who have written to Commission officials voicing concern that their “draft proposal has been severely weakened to avoid disincentives to imports of high-carbon fuels.” Other signatories include Dutch Green MEP Bas Eickhout, whose party is pushing the European Parliament to vote down the free trade agreement that the EU recently signed with Canada, partly because the party thinks the deal has killed the first attempt by a major trading bloc to label the oil sands as highly polluting. “We will continue to lobby for tar-sands specific values,” Eickhout says.

Originally, Article 7a would have forced energy suppliers, such as refiners, to declare if they had refined fuel from unconventional crude. The overall purpose was to guide EU member states in meeting a wider target to cut greenhouse gas emissions by 20 per cent by 2020 versus 1990 levels.

In response to the years of debate, the Commission has redrafted the proposal and a new version released in early October only requires fuel suppliers to report an EU average of greenhouse gas emission intensity for each fuel. It waives an earlier requirement to report “supplier-specific values”–EU code for indicating the precise origin.

An annex to the proposal, however, lists the Commission’s assessment of the emissions of various energy sources, including oil sands. EU sources, speaking on condition of anonymity because they are not authorized to speak to journalists, say Canada is still lobbying for the annex to be torn up.

Canada’s government has argued its oil has been unfairly singled out and that Europe should welcome crude from a democratic, peaceful nation.

The “not bloody” tag, which resonates loudly in Brussels, given the recent conflict on the European Union’s eastern border, comes from one of the many documents obtained under freedom-of-information requests by the press. A diplomatic cable from the British High Commission in Canada sent back to London in January, 2011, referred to the slogan “it may be dirty oil, but at least it’s not bloody oil.”

BusinessEurope, Europe’s main business lobby, representing oil companies such as BP, Exxon Mobil, Shell, Total and Repsol, would not put it quite like that, but says Canadian oil has a valuable role in providing alternatives to Russian supplies. “Europe is very much discussing energy security. Part of the energy reliability strategy should be about diversification of energy sources,” says Alexandre Affre, Business Europe’s director for industrial affairs. The EU would meet its greenhouse gas cutting targets, he says, without needing to be “too prescriptive.”

While in the past oil executives have referred to the FQD as an undue administrative burden, oil firms contacted for this article were reluctant to talk, saying the debate was ongoing. Energy majors–BP, Chevron, Exxon Mobil, Royal Dutch Shell and Total, all of which have stakes in the oil sands–had no comment.

Spanish oil firm Repsol, which received a trial shipment of Canadian oil sands crude earlier this year, prompting an outcry from the Brussels environment lobby, would only issue a terse statement: “We are evaluating the results of the operation so for the moment we can’t give more information,” it said.

The concern of the environment lobby–and the fervent hope of Canada–is that the Repsol shipment heralds much more of the same.

As Canada contemplates building the Energy East pipeline to refineries in Eastern Canada, the New York-based environment advocacy group the Natural Resources Defense Council has published findings that EU imports of oil sands crude would rise from 4,000 barrels per day in 2012 to more than 700,000 bpd in 2020 unless the European Union agrees on a law to limit it.

The International Energy Agency, based in Paris, said it was monitoring anecdotal reports of oil sands crude ending up in European refineries. So far, it said, only “a fraction” of the rising volumes of Canadian crude exports to Europe came from the oil sands.

In the environmentally sensitive world of the EU, even a drop is enough to stir furious debate.

 

Barbara Lewis is Reuters News’ senior EU energy and environment correspondent.

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