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U.S. advocates for oil sands tout security of supply

Group fires back at 'dirty oil' opponents, citing Canadian output as critical source

SHAWN MCCARTHY

00:00 EDT Monday, October 12, 2009

OTTAWA -- GLOBAL ENERGY REPORTER

The Houston-based Consumer Energy Alliance has a grim message for those who propose to restrict U.S. access to Canada's oil sands production to cut greenhouse gas emissions: If the U.S. doesn't buy the Alberta crude, China will.

As a result, such measures would not advance the global fight against climate change, it says. But the U.S. would be more dependent on Middle East oil, "Communist China" would be siphoning off secure North American crude supplies, and motorists would face higher prices, the alliance warns in a campaign aimed at supporting expansion of imports from the oil sands.

As the U.S. moves to adopt climate change legislation and prepares for negotiations in Copenhagen toward a new global treaty, environmentalists have stepped up their attacks on Canada's oil sands as emblematic of the world's reliance on "dirty" fuels.

With the U.S. Senate set to take up debate on climate change legislation this week, the American oil industry is fighting back, both directly and through proxy groups like the Consumer Energy Alliance.

When Prime Minister Stephen Harper visited Washington recently, the American Petroleum Institute took out ads in major newspapers, extolling the contribution that oil sands will make to U.S. energy security and noting that per-barrel emissions from the oil sands have dropped dramatically since 1990.

For its part, the Consumer Energy Alliance has launched a public relations and media blitz that directly challenges the environmentalists' attacks on the Canadian oil sands.

It's there that majors such as Exxon Mobil Corp., ConocoPhillips Co., and Royal Dutch Shell PLC - all listed as affiliates of the alliance - are expanding their production.

The campaign is part of an aggressive, multi-pronged effort by the oil industry - backed by other leading business organizations - to oppose the climate-change agenda favoured by President Barack Obama as well as the Democratic leadership, and even some Republicans, in Congress.

Corporate opposition to cap-and-trade legislation now before Congress has even caused a splintering within business associations such as the Chamber of Commerce, where several high-profile companies have quit over its call for a renewed debate on the scientific validity of climate change concerns.

The Consumer Energy Alliance is leading the fight against the low-carbon fuel standard (LCFS), the most direct assault on the oil sands to emerge in the U.S. debate.

With funding from affiliates such as the American Petroleum Institute and the National Association of Manufacturers, the advocacy group has produced television ads in key states, blogs and newspaper opinion pieces. It recently sent a letter to U.S. National Security Adviser Jim Jones, urging him to protect American strategic interests by ensuring there are no impediments to the flow of Canadian oil across the border.

In the letter, Alliance president David Holt said Americans have long expected to import the bulk of the additional supply generated by oil sands expansion, and that it is a critical secure source of energy. "News of China's involvement in the development of those resources, coupled with renewed talk of constructing an east-west pipeline for exportation of this oil to Asia, casts serious doubt on that expectation," Mr. Holt wrote.

"So too does the advancement of a nationwide LCFS policy in Congress - which, if enacted, would deny millions of Americans access to Canadian energy without materially affecting global emissions of greenhouse gases."

Already passed into law by California and Oregon, the regulation essentially precludes refiners from importing and processing oil sands crude, which requires an energy-intensive, emissions-heavy process to produce.

The climate-change bill that passed the House of Representatives early this year contained a low-carbon fuel standard in early drafts, but it was deleted amid the compromising needed to get the bill passed.

The Senate has now taken up its own climate legislation and, with several key senators supporting the low-carbon fuel standard, the debate is expected to heat up, much to the discomfort of the Alberta-based industry. At the same time, the Environmental Protection Agency has promised to regulate greenhouse gas emissions, and proponents are urging it to adopt a low-carbon fuel standard. Several states are also looking to follow California's lead. "There really has not been enough public debate, or full public understand of what a low-carbon fuel standard means, and what the impact would be," the alliance's Mr. Holt says in an interview from Houston.

"It would actually increase imports into the United States from nations that don't necessarily have our interests at heart and certainly aren't our good friends."

At the same time, a U.S. mandatory cap on emissions would penalize refineries that process oil sands bitumen, because it requires more energy to refine - and hence, more emissions - than lighter crudes require.

Environmentalists argue groups such as Consumer Energy Alliance deal in distortions and alarmist rhetoric to scare Americans into opposing any real progress on climate-change regulations.

"It's nothing more than a tactic adopted by the biggest polluters to delay any effective regulation of greenhouse gases," says Ben Schreiber, a climate change and energy analyst at Friends of the Earth in Washington.

Mr. Schreiber noted that the Consumer Energy Alliance ads and publicity material all claim the legislation before Congress contains a low-carbon fuel standard, even though that measure was deleted form the House of Representatives bill months ago and is not included in the Senate version. "It's all about scare tactics," he said.

In South Dakota, for example, the alliance has pursue a public relations campaign with TV ads, interviews in local media, and opinion pieces in newspapers to support a plan to build the U.S.'s first refinery in more than 30 years in the state, one that would rely entirely on imported bitumen from Canada.

A federal low-carbon fuel standard - similar to one passed by California - would block access to Canadian oil sands, killing the refinery and the accompanying jobs, while increasing gasoline prices for motorists, the ads say.

The group has widely disseminated a presentation given by a Department of Energy analyst who says low-carbon fuel standards would encourage Canadian producers to build a pipeline to export crude to China, make the U.S. more dependent on Middle East oil, and do nothing to cut greenhouse gas emissions.

In an interview, the Energy Department analyst, Carmen Difiglio, said his presentation was meant to stir debate at a conference and did not represent an official departmental analysis or even a definitive conclusion by him.

"People are free to use the material however they want, but it is certainly not a prediction by the Department of Energy or even myself that something particular is going to happen," he said.

He said the analysis also laid out ways to improve the design of the low-carbon fuel standard so that it would achieve greater emission reductions, including coupling it with Canadian and U.S. emission caps.

But Mr. Holt said his alliance feels it is important to spell out the perverse effects of proposed climate-change legislations and regulations - both U.S. and state levels - including the potential impact on Canadian oil imports.

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The grim message

U.S.-based Consumer Energy Alliance says cutting back on Alberta Crude would only increase dependence on Middle East oil.

OIL RESERVES, IN BILLION OF BARRELS

Saudi Arabia: 264

Canada: 178

Iran: 136

Iraq: 115

Kuwait: 102

Venezuela: 99

Abu Dhabi: 92

Russia: 60

Libya: 44

Nigeria: 36

Kazakhstan: 30

U.S.: 21

THE GLOBE AND MAIL / SOURCE: CONSUMER ENERGY ALLIANCE

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