Oilsands targeted by new U.S. law
fortmcmurraytoday.com
By CAROL CHRISTIAN
Today staff
Wednesday March 26, 2008
A last minute, unnoticed clause added to a U.S. energy bill bars its government, in particular the department of defense, from using Alberta crude because it’s deemed unconventional and too dirty.
And this morning, a spokeswoman from the U.S. House Committee on Oversight and Government Reform, said there are no plans to redefine unconventional to include oilsands crude. With it now being a “matter of law,” she said the government will be enforcing the clause.
One strategic resource analyst believes the clause may have been added after some political maneuvering by Saudi Arabia as it is increasingly threatened by Canada’s growing market share of oil production.
The Energy Independence and Security Act of 2007 was signed into legislation in December. One provision in the Carbon Neutral Government Act incorporated into the energy act effectively bars the U.S. government from buying fuels that have greater life-cycle emissions than fuels produced from conventional petroleum sources. The U.S. defines Alberta oilsands as unconventional because the bitumen mined form the ground requires upgrading and refining as opposed to the traditional crude pumped from oil wells.
The clause was added by California Democrat Representative Henry Waxman, chairman of the house committee on oversight and government reform and ranking Republican Tom Davis. In a letter dated March 17 to the Senate Committee on Energy and Natural Resources, Waxman wrote the clause was in response to proposals by the Air Force to develop coal-to-liquid fuels which produce almost double the greenhouse gas emissions of comparable conventional fuel.
“The provision is also applicable to fuels derived from tarsands, which produce significantly higher greenhouse gas emissions than are produced by comparable fuel from conventional petroleum sources.”
With the last-minute addition of this clause, “They were able to bypass any sort of debate on this thing, and it did not catch the attention of senior members of the Republican party who could have deleted this particular piece of legislation from the bill,” said strategic resource analyst Paul Michael Wihbey.
Meanwhile, Canada’s Ambassador to Washington, Michael Wilson, is urging the White House, State Department and department of defense to reconsider the clause, and to reclassify Canadian oilsands crude as conventional.
In a letter to the U.S administration, Wilson warned of “unintended consequences” if the law is applied.
American refineries that import Canadian crude will be caught in the middle: They will have to sacrifice the importation of Alberta crude to adhere to the U.S. legislation. Wihbey noted the American department of defense is the largest single purchaser of conventional oil in the world at around 300,000 barrels a day (excluding overseas imports).
Wihbey predicted that eventually, there will be “very significant negative impacts” on purchases of oilsands crude, and both the provincial and national economies. It’s uncertain what the implications for exporting oilsands crude to other markers like India and China, would be, however.
Wihbey also questions the impacts to the U.S. supply especially at a time when exports from Mexico and Venezuela are in serious decline.
As for the catalyst that seeded the clause, Wihbey believes Saudi Arabia is starting to feel threatened by the Canadians stripping away its market share.
Recalling the OPEC summit in the fall, Wihbey said for the first time Saudi oil minister Ali al-Naimi “took a swipe at the oilsands, and to me, that’s the context for a lot of this.”
He claimed the minister said ‘Canada is one of the world’s costliest oil producers and requires high prices to remain viable.’ Al-Naimi had suggested the Saudi product was a better value for investors, claiming, incorrectly, it costs $40 to $60 a barrel to produce the oilsands crude from the massive reserves which he recognized were second only to Saudi Arabia. It costs closer to $23 a barrel to produce a barrel of oilsands oil. He acknowledged the two countries are direct competitors for the biggest customer: the U.S.
Al-Naimi is said to have described his country as a “very economical supplier,” which is why it doesn’t explore outside of the country’ ... “I am not aware of any more lucrative acreage outside of Saudi Arabia.”
In addition, Wihbey recalled David Kirsch, head of Oil Markets PFC Energy, saying that “In the U.S mid-continent, the penetration of oilsands crude is deep, they are increasingly competing with the long haul crude from the Middle East. Until recently we saw a Saudi domination, but now it is becoming a Canadian affair.”
And that’s why the Saudis are starting to play hardball, explained Wihbey.
“The Saudis, unlike the Canadians, are business savvy, know how to play the game, and they spend the money to do it,” said Wihbey. “They do what they have to do to protect their interests.
“They’re playing hardball ... then all of a sudden this legislation pops in, literally a month after these statements were made in November,” noted Wihbey. He described Washington as the second capital of Saudi Arabia. “It’s always been like that. They put a lot of effort they spare no change. They know how important Washington is.” |
