Sheila McNulty Oil sands and climate change legislation move to centre stage

The move of Canada’s oil sands to centre stage could not have been more poorly timed.

A new report by Cambridge Energy Research Associates says that the oil sands have moved from the fringe to the centre of energy supply. Technological advances in the development of this unconventional fuel have made tapping it more economic, and drawn much interest, creating what CERA calls an increasingly important part of the fabric of hemispheric and global energy security.

Canada’s oil sands make it the world’s second largest holder of recoverable oil reserves after Saudi Arabia. This immense resource is estimated at 173bn barrels. And Canada is the number one foreign supplier of oil to the US.

Yet the recognition of the importance of this energy source has come about just as the US – and the world at large – has moved to limit the impact of climate change with legislation aimed at regulating the emission of green house gasses. The oil sands are a major polluter.

And environmentalists do not believe the major oil companies producing fuel from the oil sands will remain unscathed by the growing public and political scrutiny of such high polluting businesses.

Susan Casey-Lefkowitz, senior attorney at the Natural Resources Defense Council, states that the movement in the US to reduce carbon pollution leaves no room for expansion of high carbon dirty fuels such as those from the oil sands. And from looking at what is to become the American Clean Energy and Security Act, now going through the processes in Congress, one would agree.

However, intense opposition from the oil industry and Canada meant that a low carbon fuel standard that would have curbed use of the fuel in the US was removed from the bill (the administration has instead opted for increased ‘corporate auto fuel efficiency’ standards). Nonetheless, Ms Casey-Lefkowitz notes that such fuel standards are being discussed at the state level in California, Oregon, Washington and Florida, for starters, and are part of the emerging package of American regulation of carbon pollution – whether they find a home in this climate bill or not.

CERA does not deny the fuel is controversial. Indeed, Daniel Yergin, chairman of CERA, notes in releasing the research that oil sands have become a source of contention because their production process is among the more carbon-intensive of oil supply sources.

The development of Canadian oil sands encapsulates the complexities that the world faces on energy, environment and security.

And these are complexities the Obama administration will have to confront head on if the climate change legislation moving through Congress will have the desired impact.

Related links:

Obama unveils fuel efficiency alliance (FT, 19/05/09)
Suncor and PetroCanada begin oil sands consolidation (FT Energy Source, 23/03/09)