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The Calgary Herald

US Senator Says Oilsands Won't Face 'Dirty' Fuel Ban

Shaun Polczer

American legislation to bar so-called "dirty" fuels doesn't apply to Canadian oilsands, a leading U.S. senator said Wednesday.0612 08

Speaking to a forum of Canadian and American business people in Washington, New Mexico Senator Jeff Bingaman -- a Democrat who chairs the Senate energy committee -- said output 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 Bush signed the bill into law last December, but a special interpretation committee is deciding if homegrown bitumen qualifies 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.

On Wednesday 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 refinery expansion halted.

The Illinois facility, the tenth-largest refinery in the U.S., will 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.

Ironically, the expansion will allow the refinery to produce cleaner fuels such as low-sulphur diesel and reformulated gasoline, Graham told the Herald. 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."

A Fleishman-Hillard opinion poll for the Canadian American Business Council suggests Canadians are more concerned about the environmental impacts of oilsands development while Americans care more about reducing their dependence on oil from the Middle East.

About 43 per cent of Canadians said they are prepared to stop oilsands production even if it meant paying more for gasoline, while only 31 per cent of Americans agreed.

Respondents on both sides of the border -- 75 per cent in Canada and 68 per cent in the U.S. -- said oilsands development is a "good thing."

"We're seeing tons of coverage on oilsands but we've never seen a comparison of Canadian and American attitudes," said Linda Smith, an executive vice-president with the polling firm.

Greg Stringham, the Canadian Association of Petroleum Producers' vice-president of markets and fiscal policy, said Senator Bingaman's comments are a positive indicator. But he cautioned that the environment has become an 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. "I would be surprised to see them come to a conclusion before an election."

Dan Woynillowicz, a senior policy analyst with the Pembina Institute, said it's still possible that punitive measures against oilsands could be adopted. 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 are exempted from clean fuel legislation, Woynillowicz said the American government is still likely to take action to improve its environmental performance. Both presidential candidates are on record as supporting steps to reduce emissions, he noted.

"In terms of greenhouse gas reductions, the U.S. has been doing better than Canada. We need to acknowledge that we're heading to a carbon-constrained future," he added.

"The market is sending a signal that consumers are concerned with greenhouse gas pollution from the oilsands."

© The Calgary Herald 2008

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