February 5, 2013 / 4:08 PM / in 5 years

Canada not ready for major offshore spill -watchdog

* Canada seeks to boost exports of oil, gas, metals

* EU, United States worried about risks of Canada oil

By David Ljunggren

OTTAWA, Feb 5 (Reuters) - Canada’s offshore petroleum boards are not equipped to cope with a major spill, the country’s environmental watchdog said on Tuesday in a report that also said regulators could struggle to handle a booming resource sector.

Environment Commissioner Scott Vaughan, who said officials were not carrying out enough inspections of resource projects in the north, suggested that unless Canada tightened its oversight, customers for Canadian resources might be deterred by the country’s environmental record.

The report is sensitive for the ruling pro-business Conservatives, who expect some C$650 billion ($650 billion) of new investments in natural resource projects over the next decade and want more extraction of oil, gas and metals.

“Considering the central role of natural resources in today’s Canadian economy, it is critical that environmental protections keep pace with economic developments. In this report ... we found numerous shortcomings,” Vaughan wrote.

“These shortcomings leave me concerned that environmental protection is failing to keep pace with economic development.”

Vaughan said Canada would not be ready to deal with a major spill such as the Deepwater Horizon BP disaster in the Gulf of Mexico in 2010.

The two offshore petroleum boards operating in Atlantic Canada - in the provinces of Nova Scotia and Newfoundland - were not adequately prepared and needed to do more. The boards are run jointly by Ottawa and the provinces.

“We identified several shortcomings, including insufficient spill response tools across the federal government, inadequately tested capacity (and) poorly coordinated response plans,” he said.

Offshore development continued to expand even as Ottawa made slow progress establishing marine protected areas, he added. Atlantic oil fields are far off-shore and must deal with conditions such as icebergs, fog and bad weather.

There are four oil projects off Newfoundland that produced around 100 million barrels in 2011. Production off Nova Scotia is limited to natural gas for the time being.

Critics regularly accuse the Conservatives of ignoring the environment. Canada, home to the world’s third largest proven reserves of crude, is already the largest exporter of energy to the United States and last year the government made it easier to get permission to build mines and pipelines.

Exports make up around 30 percent of Canadian gross domestic product, with natural resources accounting for half of that.

In the north, Vaughan said officials were “not conducting the required inspections that are necessary for ensuring that the terms and conditions of project approvals are being met”.

The government strongly backs increased extraction from the oil-rich tar sands of Alberta. Stripping out crude from the clay-like sands requires more energy than regular oil drilling, a fact which is already causing Canada trouble abroad.

The European Union is set to vote later this year on whether to classify tar sands oil as particularly dirty, a move Ottawa fears could deter potential customers for Canadian crude.

In the United States, President Barack Obama delayed approval of TransCanada Corp’s proposed Keystone XL pipeline from the tar sands to the Gulf Coast after opposition from green groups.

“A key challenge in expanding Canada’s development and export of natural resources ... will involve meeting or exceeding the environmental standards and consumer expectations of foreign markets,” said Vaughan.

“Therefore it is vital from an economic perspective that Canada’s environmental protections keep pace with economic development.”

The federal government and Alberta have already announced plans to set up environmental monitoring systems in the oil sands region.

Federal Environment Minister Peter Kent, who is in Sweden for a meeting, would react to the report later in the day, officials said.

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