At war with the oil sands

From the courts to Capitol Hill, America is turning on Alberta oil

Rebecca Cook/Reuters/ Colin O'Connor/ TransCanada Corporation

Karl Marx said that history repeats itself, first as tragedy, then as farce. The April 20 explosion of BP’s Deepwater Horizon drilling rig in the Gulf of Mexico was certainly an epic tragedy, from the all-but-forgotten deaths of 11 workers on the platform to the eventual fall of CEO Tony Hayward—a man handpicked for the job when his mentor John Browne succumbed to the political after-effects of a refinery explosion. By comparison, the July 26 rupture of line 6B in Enbridge’s Lakehead pipeline system seems a trivial matter. The total volume of crude oil dumped into the Michigan countryside before isolation valves closed the pipe is estimated by Calgary-based Enbridge at 19,500 barrels—somewhere between seven and 13 hours worth of flow from the Horizon wellhead.

Measured in U.S. gallons, that’s about 819,000. But the ultimate cost in headaches to Canada’s oil patch, at a time when it is fighting a multi-theatre political war over the U.S.’s regulatory treatment of petroleum from the Athabasca oil sands, might be higher.

In a green era, America’s oil supply issues involve a constant tug-of-war between environmental considerations and energy security. On the latter side of the argument, the case for Canada, now by far the U.S.’s largest source of imported oil, is overwhelmingly strong. But on the environmental end, things are more complicated. Environmental NGOs have made a special target of Alberta’s “dirty oil.” The unvarying message—whether from bad Flash websites or random celebrities—is that greenhouse-gas emissions from the production of synthetic tar sands oil are three times as large, barrel for barrel, as those from conventional oil.

That figure excludes emissions by the end user, and the ratio shrinks to more like 120 per cent when the full “well-to-wheels” life cycle is considered. Big Oil is quick to point out that the footprint of the oil sands is diminishing with the advent of technologies like steam-assisted gravity drainage (SAGD) and electricity cogeneration. And Canada’s government is encouraging progress by imposing a carbon price on oil sands producers. (The U.S., for its part, doesn’t yet impose one on anybody.)

The real issue for the NGOs may be that they want the U.S. to move away from oil, period. In a way, the relative ecological filthiness of Alberta synthetic petroleum is beside the point; what makes that oil a special threat is that its abundance will delay America’s transformation to a post-oil economy. And pipelines, which represent practically irreversible multi-decade supply commitments, are an attractive choke point for advocates of the anti-fossil transition and NGO veterans in the Obama administration and Congress. Enbridge’s spill thus thrusts a poorly timed elbow into the breadbasket of its sister pipeline company, TransCanada Corp., which is struggling to win U.S. approval for an extension of its Keystone system.

The Keystone line currently runs from Alberta to the oil crossroads of the continent at Cushing, Okla. The idea behind “Keystone XL” is to open new capacity for Alberta’s production by reaching out from Cushing to the Gulf Coast (where some refineries are designed to handle similar heavy oil from Venezuela, a political basket case whose output is declining). XL’s fate technically lies with the State Department, which issued a favourable draft environmental impact statement (EIS) on Apr. 20 and entertained public comments over a statutory 10-week period. The next step was to solicit opinions from other federal agencies. Last month, the Environmental Protection Agency stepped in to argue that the State Department’s brusque draft EIS, which had more or less said, “Hey, our oil’s gotta come from somewhere,” was not good enough.

“Not only will this pipeline transport large volumes of oil sands crude for at least 50 years from a known, dedicated source in Canada to refineries in the Gulf Coast, there are no significant current export markets for this crude oil other than the U.S.,” wrote EPA enforcement boss and environmental lawyer Cynthia Giles. (Her words show why Enbridge is eager to start work on its westbound Northern Gateway pipeline from the Edmonton suburbs to Kitimat, B.C., and the Pacific Rim markets beyond.) Giles’s argument is that if the U.S. is going to facilitate oil sands expansion, it must consider the consequences of what happens at the far end. The EPA also argued that the State Department has a duty to look more closely into the engineering soundness of the XL expansion and the possibility of watershed harm from leaks.

That’s an argument that Enbridge’s boo-boo, which led to symbolically irresistible news images of oil-blackened Canada geese, certainly won’t weaken. The Deepwater Horizon spill had put NGOs opposed to Alberta synthetic oil on the defensive by making pipelines from faraway Mordor look like an attractive alternative to expanded offshore drilling close to home. They still look pretty good by comparison, given how quickly the isolation valves stopped the 6B spill; but then again, nobody died at Three Mile Island either, and that incident still managed to make life miserable for nuclear energy for 30 years.

The EPA is not alone in trying to stop Keystone XL; the effort, led by California Democratic congressman and scrappy green-economy bantam Henry Waxman, permeates the executive and legislative branches. In tandem with Giles’s missive, 50 congressmen signed a letter in June asking Secretary of State Hillary Clinton to order a fuller environmental assessment of the project. And on June 22, at a Georgetown conference where Alberta oil and government representatives and Ambassador Gary Doer were meeting with policy-makers, former Clinton administration chief of staff John Podesta heaped scorn on the oil sands’ eco-credentials and made a point of questioning the State Department’s “hurry” to approve the pipeline.

On July 26, in an apparent response to the pressure, the department announced that it would be extending the inter-agency comment period by 90 days, pushing formal approval for Keystone XL forward into 2011. TransCanada and Alberta Premier Ed Stelmach declared themselves comfortable with the delay, but the stakes are high: XL represents a near-doubling of the Keystone system’s capacity, from 590,000 barrels a day to 1.1 million.

In a little-noticed parallel development, the fight against the oil sands is also being carried into the courts. In 2007, Waxman, using low-profile procedural moves that later had Republicans and Canadians crying foul, inserted a provision, Section 526, into the Energy Independence and Security Act (EISA) that outlawed federal agencies—including the Department of Defense, the world’s single biggest institutional oil customer—from buying “nonconventional” fuel unless its full-life-cycle greenhouse emissions were less than or equal to the “conventional” equivalent.

“Based on a study that was done [in 2006], the Department of Defense uses well over 300,000 barrels of oil every day, and roughly 20 per cent of that comes from Canada,” says Tom Corcoran, a former Republican congressman who now leads industry-backed lobbying efforts at the Center for North American Energy Security. But the importance of the 526 fight goes beyond one big customer, Corcoran adds. “Section 526 is basically a low-carbon fuel standard for federal government purchases, but it’s inevitable that there will be an effort to extend that standard to the whole economy.”

The explicit intent of section 526 was to smother U.S. Air Force plans to develop ecologically nightmarish domestic coal-to-fuel plants. But its possible application to Alberta synthetic oil has been the subject of interpretive struggles, diplomatic finger-wagging, and repeal efforts. Waxman contends that 526 applies to the oil sands; colleague Jeff Bingaman (D-NM), head of the Senate energy committee, thinks it doesn’t.

The Department of Defense has opted for a narrow view of the section vis-à-vis the oil sands, which is to say that it has largely ignored it. But this state of affairs may not be tenable. On June 18, the Sierra Club and the Southern Alliance for Clean Energy filed suit with the U.S. District Court in San Francisco against Defense Secretary Robert Gates, the department itself, and its main oil-buying agency, the Defense Energy Support Center (DESC).

The NGO plaintiffs say DESC contracts that include Alberta synthetic oil are violating EISA.

Or, to put it another way: they are arguing that an “Energy Independence and Security” law forbids the U.S. military from using its closest ally’s fuel products to power its vehicles and aircraft, specifically because Saudi and Iraqi oil are environmentally cleaner. Sometimes words just don’t mean what you think they would.

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