In his May 18 summary of the amendments to the Waxman-Markey climate change bill ("ACES"), David Doniger at the Natural Resources Defence Council ("NRDC") accurately reports that the federal Low carbon fuel standard. ("LCFS") that was incorporated in the March 31 draft has been dropped from the bill. Doniger goes on to suggest that the LCFS would have limited US oil companies’ consumption of feedstock originating in Alberta’s oilsands. I have since heard it suggested, in Canada, that the removal of the LCFS from ACES gets Canadian oilsands producers off the hook, for now.

This, however, is not the case. One of the reasons the US House dropped the federal LCFS from the bill is that it is reasonable to conclude that the cap and trade provisions of the bill are sufficiently (I would suggest excessively) discriminatory against oilsands-based feedstock and refined product exports into the US.

I addressed this aspect of the bill in my prior summary of its implications for Canada. I will be drafting an updated summary over the weekend after tomorrow House vote on the bill (which has grow to 1,201 pages from the original 648 of the March 31 version), and will go over this aspect of the proposed law in the new summary.

Over and above the discriminatory elements that remain in the ACES draft legislation, President Obama has indicated that the US EPA will issue waivers allowing US states to adopt the California LCFS if they so wish. To date, 15 US states including most of the major northeastern states have indicated their intention to do so. This has major implications for all Ontario, Quebec, Nova Scotia and New Brunswick refineries, because:

• the Ontario refineries increasingly rely on feedstock from Alberta’s oilsands and
• the other eastern refineries rely heavily on feedstocks from Venezuela.

The California LCFS assigns the same default GHG factor to products derived from Venezuelan feedstocks that is assigned to those derived from Alberta’s oilsands. Please note that the LCFS assigns disproportionately favourable (compared to reported actual) GHG factors to products derived from California heavy oil and Nigerian conventional crude oil.

Canadian producers should be able to get US courts to strike down bogus US LCFS GHG factors, but will only be able to do so by tracking, auditing and publicly disclosing actual Canadian wellhead-to-refinery gate GHGs, by upgrading facility and reinfery, more comprehensively than is common practice at this time.