(July 9, 2010) A recent announcement that 50 members of Congress are opposed to growing imports from Canada’s “filthy” oil sands is a matter that can only be addressed by a federal, not provincial, government initiative—using data that Eddy Isaacs in the government of Alberta can provide. The problem appears to be, however, that our federal team does not know where and how they are supposed to be entering the US Congressional dialogue.

Canadian negotiators need to participate directly in what is essentially a legal process, not just a political one. By putting the correct data on the table, the Canadian negotiators can create a situation in which the US Supreme Court would defeat Congressional opposition—if it gets that far.

The answer is not just competent lobbing.

The Canadian team should make it abundantly clear that Canadian interests with US assets will challenge any Congressional attempt to discriminate against oil sands output in US courts. The US Supreme Court is obliged to and has a history of striking down any law that is discriminatory that is not based on good science.

The GHG intensity of all US heavy oil—2/3 of oil produced in the state of California, for example—is much higher than all of the output from the Alberta oil sands. So the US SC would have to strike down any legislation/regulation that discriminates against oil imports from Alberta if it does not at least equally discriminate against California heavy oil producers.

Canada’s representatives in the US should make it very clear, at the soonest possible opportunity, that they will pursue legal remedies in US courts—not just WTO or NAFTA tribunals—if diplomacy does not work. I find in US situations, it is essential to present firm knowledge of our legal rights early in the diplomatic process.

I think it is also important to note that Alberta’s oil sands represent a platform for GHG reductions, in that many innovative opportunities to reduce GHGs at this source are available, even if they are not currently economic. By comparison, as drilling for conventional crude goes deeper and deeper, the GHG intensity of conventional crude oil production increases and fewer near-economic opportunities to mitigate the GHG intensity increase for conventional crude exist.

I am an environmentalist. So I would like to see our governments move hard on the oil sands operators to provide incentives to them to innovate to cut GHGs.  I also would like to see policies introduced in Canada that would encourage the single passenger vehicle fleet shift from gasoline to lower-GHG diesel fuel consumption. 80% of lifecycle GHGs for transportation fuels occur at the tailpipe of the vehicle, and diesel fuel GHGs—per kilometer of vehicle use—can be as much as 25% lower than gasoline fuel GHGs.

We should think of Alberta’s oil sands as the ideal diesel source and maximize Canada’s energy independence and efficiency by migrating the nation’s single passenger vehicle fleet from gasoline to diesel. This is a much more cost-effective and less limited GHG management measure, in Canada, than blending ethanol into gasoline.

And given Canada’s agriculture output and indigenous biomass supply, it makes much more sense for Canadian’s to specialize in biodiesel and diesel from algae than ethanol.

To achieve the gasoline-to-diesel switch, cost effectively, without increasing local air pollution, we need to see Canada’s ultra low sulphur diesel standard lowered to 10 ppm sulphur from the current standard of 15 ppm. On a side note, Shell’s refinery at Scotford Alberta already focuses on converting heavy and synthetic crude to diesel and already produces a product that is 10 ppm sulphur, or less.

The regulatory signals that are required to shift Canada to a “clean diesel” future could easily be built into Canada’s new CAFE standards for autos and trucks, but no such provisions appear in the current CAFE standards/proposals.

Please note that 100% of the transportation sector GHG “reductions” that have been achieved in Europe since 1990 derive from shifting the single passenger fleet from gasoline to diesel. This has led to air pollution challenges, and EU governments are only now considering regulating a 10 ppm ULSD standard.

Canada should get ahead of the curve.

Finally, please also note that one of the critical cost issues for algae-based biodiesel is CO2 supply. Biodiesel is produced by algae in reactors into which CO2 is pumped. Over time, the CO2 captured from Canadian gas processing plants, refineries and power plants should be seen to be our critical source of competitive advantage in the production of biodiesel from algae.

Aldyen Donnelly, July 9, 2010