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An aerial view of the United States military headquarters, the Pentagon, seen in 2008.

JASON REED/Jason Reed /Reuters

The U.S. Defence Department has rebuffed an environmentalist campaign to stop it from using fuel processed from oil sands crude, saying there would be no environmental benefit and such a move would be impractical.

In a decision posted on the U.S. federal register last week, the department said its use of products from the oil sands had "no significant impact" on the environment, and therefore did not require it to change its procurement practices. The Defence Logistical Agency purchased $12.6-billion (U.S.) worth of fuel in 2010, and is the largest single consumer of petroleum products in the U.S. government.

For several years, the department battled environmental groups such as the Sierra Club that demanded it comply with the controversial Section 526 of the 2007 energy act, which prohibits U.S. federal agencies from purchasing fuels that are derived from unconventional crude that produces higher greenhouse gas emissions than conventional oil.

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The Canadian government and oil sands producers lobbied aggressively against any enforcement of the section that would target the oil sands, while California congressman Henry Waxman – who authored the section – pushed for broad application of the law, including on Canadian imports.

The Defence Department based its analysis on a narrow interpretation of environmental impact, and so is unlikely to have an impact on the U.S. debate about Canada's carbon-intensive oil production and whether the Obama administration should approve the Keystone XL pipeline, which would expand U.S. imports from Alberta.

But a Washington-based lobbyist for the Canadian industry said the decision should end the long-running battle about oil sands producers' ability to supply refiners, who in turn supply the U.S. government.

"I would say it's a major victory for the Canadian oil sands producers because they supply a significant amount of the crude oil that is refined and converted to product for the Department of Defence," said Tom Corcoran, executive director for the Washington-based Center for North American Energy Security, which lobbies on behalf of the producers.

"If the Department of Defence had come to the opposite conclusion, that would have stimulated greater effort from those who were supporters of [Section] 526 to make it apply in the commercial market as well."

The Defence Department's assessment looked only at emissions from transporting and using fuel, and determined there was no significant difference between products from the oil sands and those made from conventional oil.

In an environmental assessment of the Keystone pipeline, the U.S. State Department found the production, refining and use of oil sands crude results in 18 per cent higher emissions than the life-cycle of the average crude used in the U.S. But it noted the difference occurs at the stage of extraction and processing, not in transporting and consuming.

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DLA Energy also said it would be virtually impossible to purchase petroleum products only refiners who did not process oil sands crude, and an serious attempt to do so would leave it unable to fulfill its proper functions.

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