U.S. oil law 'won't affect Canada'

Leading U.S. senator says oilsands don't qualify as a 'dirty' product

Shaun Polczer
Canwest News Service
June 12, 2008

CALGARY -- American legislation to bar so-called "dirty" fuels doesn't apply to Canadian oilsands, a leading U.S. senator said yesterday.

Speaking to a forum of Canadian and American business people in Washington, Senator Jeff Bingaman (D-N.M.), chairman the senate energy committee, said oil from Alberta's oilsands doesn't qualify as dirty oil under U.S. law.

The provision, Section 526, bars the U.S. government from buying alternative fuels that create high levels of greenhouse gas.

President George W. Bush signed the bill into law last December, but a special interpretation committee is deciding if Canadian oilsands products qualify for punishment under the law.

Bingaman said it doesn't.

"Since Canadian feedstocks are commingled with U.S. feedstocks at oil refineries, it's hard to see how Section 526 could be enforced against Canadian oilsands in any case," he told the Canadian American Business Council. "I do not believe that Section 526 will be a barrier to oil imports from Canada."

Environmental groups on both sides of the border have been lobbying to have oilsands declared "dirty oil."

Various delegations to Washington, including one led by Premier Ed Stelmach, have faced protests from environmentalists who see oil produced from bitumen as a major source of greenhouse gases linked to global warming.

Yesterday, the Wall Street Journal reported that a coalition of environmental groups led by the Sierra Club succeeded in having air permits for the Wood River, Ill, refinery expansion halted.

The facility, the 10th-largest refinery in the U.S., would process more than 350,000 barrels per day of heavy oil from the ConocoPhilllips-EnCana oilsands venture.

The project was expected to be complete by the first quarter of 2011, but Conoco spokesman Bill Graham said it's unclear if it will be delayed.

The expansion will actually allow the refinery to produce cleaner fuels such as low-sulphur diesel and reformulated gasoline, Graham said. He suggested the public at large is starting to blame the environmental lobby and government red tape for high fuel prices.

Most Americans are happy to have reliable oil supplies from Canada, he said.

"The environmental groups are certainly more aggressive, but what's interesting is the opinion of the public as a whole."

Greg Stringham, the Canadian Association of Petroleum Producers' vice-president of markets and fiscal policy, said Bingaman's comments are a positive indicator. But he cautioned that the environment has become a bipartisan issue that will cross party lines in the upcoming presidential election.

He said he doesn't expect the dirty oil issue to be resolved before November.

"We just have to wait and see how they interpret it [Section 526]," he said.

Dan Woynillowicz, a senior policy analyst with the Pembina Institute, an environmentalist organization, said it's still possible that punitive measures against oilsands will be adopted in the U.S. He dismissed Bingaman's comments as a personal opinion.

"They really are nothing more than the senator's interpretation of Section 526 and how it might be implemented," he said.

Even if oilsands is exempted from clean fuel legislation, Woynillowicz said the American government is still likely to take action to improve its environmental performance.