The European Union’s Fuel Quality Directive that the federal government is furiously lobbying to kill is the worst kind of regulatory trade barrier. Under its current wording, it would ascribe all oil produced from Canada’s oilsands a greenhouse gas rating of 107 grams of carbon dioxide per megajoule and thus force its importers to pay for carbon offsets. Conventional crude oil, emitting 87.5 grams (they say), would be OK.
What the directive fails to recognize is that the carbon intensity of oilsands production is falling (see our story from last year) and differs from project to project. Meanwhile the carbon footprint on conventional oil—especially when shipped from farther afield and refined from ever-heavier crudes—is increasing. So there’s no saying whether the directive will in fact help reduce emissions from transportation by 6% by 2020 as it’s designed to do.
It was Canadian Business that, back in 2007, brought attention to California’s low-carbon fuel standard that effectively blocks oilsands exports to that state—despite the fact that California’s own exempted heavy-oil industry has been shown to be more carbon intensive than the oilsands average. Hypocrisy aside, it is a preferable sort of regulation in that it aims to set a standard for oil imports to meet, rather than blacklisting an entire producing region.
Cenovus Energy Inc., the largest in situ (underground) oilsands producer, now says it can beat it. The company commissioned independent, wells-to-wheels studies of its Christina Lake and Foster Creek steam-assisted gravity drainage (SAGD) projects and its Pelican Lake heavy oil operation. These projects are so efficient in their conservation of heat in the steam that they have a similar life-cycle carbon output to the average of crudes sold in North America, and thus would almost certainly meet the standards to be unveiled by the California Air Resources Board next year, the company told The Calgary Herald recently.
Not that it means anything, practically speaking. The way the pipelines currently run out of Alberta, all the output of the oilsands ends up at refineries either in Canada or in the central U.S. Virtually none makes its way to either California or the EU. But it could one day, especially if regulators, instead of discriminating against the oilsands specifically, challenge producers to produce a cleaner fuel. Cenovus shows they can do it.