Canada warns EU on oil sands ranking plan

Reuters News
Posted: Oct 23, 2011 4:28 PM
Canada warns EU on oil sands ranking plan

By Jeffrey Hodgson

TORONTO (Reuters) - Canada warned on Sunday it will "defend its interests" if the European Union (EU) goes through with a proposal to rank Canadian oil sands as a highly polluting fuel.

In a letter to EU Energy Commissioner Guenther Oettinger, Canadian Natural Resources Minister Joe Oliver also said the European Commission's Fuel Quality Directive (FQD) potentially violates the EU's international trade obligations.

"Canada objects to policy measures that ignore evidence-based approaches to meet the stated goal of the FQD, in favor of what appears to be an asymmetrical and arbitrary proposal," the letter said.

"If unjustified, discriminatory measures to implement the FQD are put in place, Canada will not hesitate to defend its interests."

The letter is part of a broader push by Canada, the western province of Alberta and the energy industry to sway the EU from labeling the lucrative export as inherently dirty.

The government of Alberta, home to the bulk of Canada's oil sands, has written to EU experts voicing "grave concerns" that the bloc's plans to rank unconventional oil as a highly polluting fuel are unfair and a potential threat to trade ties.

EU legal advisers have said the proposals can probably be defended if Ottawa challenges the move at the World Trade Organization (WTO).

Canada exports no oil sands-derived crude to Europe, but government and industry officials worry that tagging the supply as much more carbon-intensive than other crudes could set a costly precedent for current or potential markets.

Oliver has previously suggested Ottawa could take the EU to the WTO if the Europeans adopt the fuel directive. He has traveled to Europe to press Canada's case and in an interview with Reuters on Friday in London said the EU's plans were discriminatory.

Environmental groups say developing Canada's oil sands, the world's third largest crude deposit, emits unacceptably high volumes of greenhouse gases because the extraction methods and processing needed to allow refineries to use the heavy oil require far more energy than conventional oil production.

The energy industry says their oil sands operations are comparable in terms of carbon gas emissions with many other oil operations around the world, when judged from production to end use.

The latest letter was sent ahead of a meeting in which EU government experts will debate a proposed green ranking of fuels, which is designed to enable fuel suppliers to identify the most carbon-intensive options.

European oil companies active in Canada include BP, Total and Royal Dutch Shell.