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File photo of Natural Resources Minister Joe Oliver.

Natural Resources Minister Joe Oliver said a move by the European Union to target the oil sands could have an indirect impact on the fate of the Keystone XL pipeline project because it will stigmatize Canadian oil.

Canada has spent months fighting the European Union's proposed fuel quality directive which is designed to reduce greenhouse gas emissions. Under the proposal, oil from the oil sands would be labelled particularly dirty, creating a disincentive for European refiners to import Canadian crude. Canada has said the methodology used to create the EU's classification system is flawed and unscientific.

On Tuesday Mr. Oliver said the EU's directive would damage the reputation of Canadian oil, something that could weigh on the decision in the United States on whether to approve the Keystone pipeline project, which is supposed to bring bitumen from Alberta to refineries along the U.S. Gulf Coast.

"One of our concerns about the fuel quality directive, because it's discriminatory and targets the oil sands in an unfair and scientifically inaccurate way, is that it could stigmatize the oil from Canada and impact on our access to some markets," Mr. Oliver said after delivering a speech to an energy conference in London. "I don't see a direct tie in with Keystone but it clearly would not be helpful."

He and other Canadian ministers, including Prime Minister Stephen Harper, have been urging the U.S. to approve the pipeline project which has run into some stiff opposition in the U.S. Mr. Oliver said he did not expect a final decision by the Americans until the middle of 2014 at the earliest.

As for the EU's fuel quality directive, Mr. Oliver said he is hopeful that changes will be made. "I will say that quite a number of countries share our concerns about the unscientific nature of the directive, it's potential negative impact on the European refinery industry and the fact that it is unlikely to achieve its environmental objective," he told reporters Tuesday. "I'm of the view that there is a serious possibility of fundamental change in the directive."

Mr. Oliver won support for Canada's position from Britain. During the conference British Energy Minister Michael Fallon said Britain agrees with the Canadian position that the EU's fuel directive categories "should accurately reflect the carbon intensity of particular fuel sources".

Mr. Oliver also hit back at critics of Canada's track record on environmental protection. On Monday the Washington-based Center for Global Development ranked Canada last out of 27 wealthy nations in terms of its commitment to protecting the environment. Every other country except Canada had shown improvement in that area in the last decade, the organization said.

"Some of this name calling is not accurate or constructive," Mr. Oliver said when asked about the ranking. "Canada is a responsible developer of its resources. We will never go ahead with a project unless it's safe for Canadians and safe for the environment."

He also waded into the contentious debate about fracking, which involves pumping water, sand and chemicals into shale rock underground to unlock natural gas. The process has divided people in Britain and been banned in some European countries over concerns it can damage underground water supplies.

Mr. Oliver said Canada has not experienced any problems with fracking. "Fracking has been going on in Canada for over 50 years," he said. "There have been 175,000 wells drilled using facking in that period of time. There isn't a single instance of drinkable water contamination in that entire period."

He said people in Western Canada, where most of the fracking has taken place, "are comfortable with it because they live with it and they understand that there really isn't that kind of environmental risk." Other parts of Eastern Canada are now reviewing the process, he added noting that the decision to allow or ban fracking is up to the provinces.

European countries will have to decide for themselves but there will be consequences if fracking is not allowed, he said. "One economic consequence is the lost economic opportunity, the lost jobs and growth."

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