The Surmont oil sands project in Alberta, co-owned by Total and ConocoPhillipsNathan VanderKlippe
The Obama administration is determined to regulate greenhouse-gas emissions - with or without passage of the climate-change legislation now before Congress - and the Canadian oil sands could be in the crosshairs, a prominent Democratic adviser says.
The U.S. climate-change debate is about to heat up as the Senate begins debating legislation that would create a national cap-and-trade system and President Barack Obama prepares to travel to China and India next month in pursuit of a global climate deal in December at a meeting in Copenhagen.
The administration has served notice to opponents of the climate-change bill that, without legislation, the Environmental Protection Agency will regulate emissions. That threat represents "a bold shot across the bow" of opponents in Congress and in the U.S. business community, who are gearing up to fight the legislation, John Podesta, the former head of Mr. Obama's transition team, told a conference in Ottawa yesterday. After leaving the conference, he met with Liberal Leader Michael Ignatieff.
"The status quo is not the alternative" to legislation, said Mr. Podesta, who now advises the Obama team on energy and the environment. "Aggressive regulation by the Environmental Protection Agency is in the offing if the Senate can't get its act together and act."
A former White House chief of staff under Bill Clinton, Mr. Podesta has strong ties to the Obama administration, including his role as head of the Center for American Progress, a liberal think tank that supplied several high-profile members of the Obama team.
He is also a prominent supporter of the "clean energy agenda," arguing that the transition of the United States to a low-carbon economy will not only benefit the planet, but drive productivity growth and job creation.
Mr. Podesta travelled to Ottawa yesterday to address a clean-technology summit organized by Sustainable Development Technology Canada, which finances start-up companies that develop pollution-abatement and renewable energy technology.
Mr. Podesta said the Obama administration is already moving to "revolutionize the way Americans produce and consume energy."
The Harper government is following the U.S. lead on climate policy, arguing the two economies are too intertwined for disparate approaches. But, at the same time, Ottawa is attempting to head off any U.S. measures that would stifle growth in the Canadian oil sands.
Mr. Podesta told his Canadian audience that the new administration is ambivalent about demands from environmental groups and some Democrats to use climate regulations to block expansion of the oil sands. While the White House is keen to reduce U.S. reliance on "dirty" oil, administration officials are also well aware that Alberta boasts the world's second-largest reserve of crude, and represents a secure source of energy for American consumers.
The new U.S. ambassador, David Jacobson, toured the oil sands last week and said environmental issues must be balanced with energy security concerns.
Still, the cap-and-trade legislation that was passed by the House of Representatives - and the parallel bill in the Senate - could pose serious problems for oil-sands producers. U.S. refiners are investing billions of dollars in new technology to refine the sludge-like bitumen that is produced in the oil sands, an energy-intensive, emissions-heavy process. A cap-and-trade system would dramatically drive up the cost of refining that Canadian crude.
The Canadian and Alberta governments also worry that Washington could adopt a low-carbon fuel standard, a regulation pioneered by California that would essentially prevent refiners from purchasing supply from the Alberta oil sands.
"I think a low-carbon fuel standard is probably in the offing," Mr. Podesta said. "And that would have an effect on the development of the oil sands."
The House of Representatives bill that passed last spring initially included a low-carbon fuel standard, but it was dropped. The current Senate bill does not include such a provision, but many observers believe Washington will eventually pass one - Mr. Podesta noted that Mr. Obama has long supported such a measure.
The Canadian industry says it is making progress in reducing greenhouse-gas emissions, and argues that oil-sands crude results in emissions that are only 20 to 30 per cent higher than conventional oil when all emissions - from production, to refining, to automobile exhaust - are included.
But an early proponent of California's low-carbon fuel standard said the oil sands would still be penalized heavily under a federal fuel regulation, which he expects to be eventually adopted.
Terry Tamminen is an environmental adviser to California Governor Arnold Schwarzenegger, and has also consulted with the governments of British Columbia and Ontario. He too expects the United States to adopt a national low-carbon fuel standard.
"And that would absolutely be bad news for the oil sands. ... Right now, it is one of the highest carbon-content fuels available," Mr. Tamminen said.