Canada has options for oilsands production, think-tank says

By Barbara Yaffe
Vancouver Sun
January 11, 2010

If the Obama administration brings in tough environmental measures, Canada may sell its oil elsewhere

A respected American think-tank is urging the Obama government to think twice before introducing environmental measures that would disadvantage Alberta’s oilsands.

“Washington may find that if it pushes too hard or too fast with carbon-cutting legislation targeting the oilsands, its friendly neighbour might finally grow tired of being taken for granted when it comes to oil,” warns the Council on Hemispheric Affairs.

The 35-year-old Washington, D.C.-based organization, described by U.S. media as a liberal think-tank, states in a recently released report: “Canada can and likely will push back, especially since China is more than happy to step in and purchase oil . . . if the U.S. chooses not to.”

That prospect is taking on enhanced credibility as planning proceeds for the Northern Gateway pipeline project to carry oilsands petroleum to Kitimat in northern B.C. for potential shipment to Asia.

The warning issued by the American think-tank resurrects a controversial theme first floated in the 1990s by the Chretien government, that perhaps Canada could use oil as a potentially powerful political tool in talks related to a Canada-U. S. softwood lumber trade deal. The notion was quickly rejected.

What makes this report interesting is that Canadians tend to believe that they have few levers to influence American policy making. And that it would be too risky to ever use oil as a bargaining chip.

Further, that Canada is not even on the radar screen for American lawmakers.

The report, written by researcher Shantel Beach who attended the University of Calgary, seems to contradict all such assumptions.

“It would be foolish,” writes Beach, “to underestimate the lengths that Canada will go to in defence of their [sic] industry.”

The report comes at a delicate time, when the Obama administration is under sustained pressure from environmentalists to rely on clean energy resources, and when Canada is poised to follow a U.S. lead in implementing a cap and trade scheme to limit greenhouse gases (GHG).

For all the efforts to address GHG emissions, the Harper government clearly wants to protect the U.S. market for Alberta oil, even as the oilsands increasingly are being targeted by environmental activists as a scourge on the planet.

And the fact is, the U.S. is heavily reliant on Canadian oil.

The Council on Hemispheric Affairs notes that 17 per cent of total U.S. oil imports come from Canada — nearly double the imports from the next largest supplier, Mexico. It states that last September Canada provided more oil to the U.S. than Saudi Arabia, Iraq, Kuwait and Russia combined.

The U.S. appetite remains gluttonous, with the country producing 10 per cent of the world’s petroleum but consuming 24 per cent.

Gasoline demand south of the border is going up, not down.

Last September, consumption climbed by nearly five per cent, according to numbers from the U.S. Energy Information Administration.

The report asserts the “U. S. must respect Canada’s needs when considering its environmental legislation” and is critical of members of the U.S.

Congress and Senate who are framing the energy discussion “in unfriendly terms that hint at reducing U.S. emissions at Canada’s expense.”

Because of the long-standing friendship with Canada, the U.S. “will likely expect Canada to continue quenching its perpetual thirst for oil,” ignoring the notion that Canada has other export options for its petroleum bounty.

This report, from a Canadian perspective, could not be more welcome. The big question, of course, is whether the Americans will take any note of it.

byaffe@vancouversun.com
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