Governator's fuel plan could cause 'collateral damage' to U.S.

Robert Remington, Calgary Herald, Jan. 23, 2010--Jeff Rubin, writing in a blog post this week, said Gov. Arnold Schwarzenegger and his gubernatorial colleagues in other U.S. states should think twice before banning dirty oil from Alberta. "If they don't like the fuel Canada has to offer, their only other choice is to get off the road entirely," said Rubin.

American domestic production is half what it used to be. Mexico's reserves are drying up. Venezuela's only additional production source is its Orinoco tarsands, similar to Alberta's and owned by a state controlled Hugo Chavez, who isn't exactly warm and fuzzy about America. As for the Middle East, OPEC member states are gobbling up 10 million barrels of cheap subsidized oil every day, Rubin notes.

"The reason the United States will be so dependent on Canadian tarsands is that there ain't a whole lot else left," says the author of Why Your World is About to Get a Whole Lot Smaller: Oil and the End of Globalization.

Despite this reality, Arnold and governors in 11 other states are bent on bringing in a low-carbon fuel standard (LCFS) for vehicles -- a solution more simplistic than the script for Commando. Low-carbon fuel legislation will do nothing to prevent global warming and will only jeopardize America's fuel security, according to Shantel Beach, a researcher with the Washington, D.C.,-based Council on Hemispheric Affairs (COHA).

In a North American media conference call this week, the former University of Calgary undergraduate explained that if Alberta can't sell its oil to the U.S., it has a willing market in China, which has a 60 per cent stake in Athabasca Oil Sands Corp.'s MacKay and Dover oilsands deposits. Regulatory approval for the Northern Gateway Pipeline to the West Coast would be a spigot the Chinese would welcome.

Late last year, Beach published a study for COHA that was called a "breath of fresh air" amid the rampant demonization of the oilsands. The lengthy title of the report speaks for itself: "The U.S. Targets Canada's Oilsands: Washington Should Tread Lightly with its Environmental Legislation so that Carbon Cuts will not Come at the Expense of Canada's Energy Sovereignty or U.S. Energy Security."

The U.S. imports 18 per cent of its oil from Canada, most of it from Alberta. In September, we provided more petroleum to the U.S. than Saudi Arabia, Iraq, Kuwait and Russia combined. Michael Whatley, vice-president of the oil-industry backed Consumer Energy Alliance, joined Beach on the conference call and said this about LCFS legislation: "If we are talking about policies that are going to take (18 per cent of U.S.) imports off the table, you're talking about major, major ramifications in terms of U.S. fuels policy."

According to Whatley, Canadian oilsands have no higher carbon intensity than other U.S. imports on a "well-to-wheels" basis, a formula that factors in the cost of shipping Middle East, Venezuelan and other crude to the U.S.

That's not entirely correct. Canadian oilsands are about 10 per cent more carbon-intensive on a well-to-wheels basis, Beach says. But Alberta's carbon sequestration efforts, which are promising yet unproven technologies, hope to level the field, making the carbon intensity of Alberta oilsands equal to that of conventional oil.

Whatley says California is being "intellectually dishonest" in setting its LCFS, noting that California heavy oil, which comprises about half of the state's own production, was grandfathered in by the state.

"The specific political intent here is to discriminate against Canadian imports," Whatley said.

Meanwhile, the dirty oil campaign continues. Petropolis, a new documentary made for Greenpeace and currently running in Toronto, takes an aerial look at the oilsands with no narration, only music. The film, according to one description, shows "a scarred, torn and toxic remote vastness, looking for all the world like the alien desolation of sci-fi films."

There's no denying that the oilsands could be cleaner and water issues addressed. Rubin advocates a $50 to $60 per tonne price on carbon emissions, which he says will force shareholders to demand better emissions controls of oilsands companies.

As for Arnold's LCFS approach, it may make Californians feel good, but the consequences could be reminiscent of the title of one of the Governator's movies: Collateral Damage.