June 4, 2008 / 10:28 PM / in 10 years

U.S. should weigh impact of Canada oil sands: report

CALGARY, Alberta (Reuters) - U.S. regulators should weigh the environmental impact of oil sands extraction in Canada before granting permits for pipelines that will carry the rising flood of Canadian crude to refineries in the United States, a green group said on Wednesday.

The recommendation was one of several in a report by the Washington-based Environmental Integrity Project on massive expansions and retoolings of U.S. refineries aimed at running more oil derived from the oil sands of northern Alberta.

The report, called “Tar Sands: Feeding U.S. Refinery Expansions with Dirty Fuel,” said two-thirds of 1.6 million barrels a day of planned refinery capacity additions target oil sands feedstock.

The report, coauthored by an Environmental Defense Canada representative, details a list of ways that oil sands development and extraction exacerbates climate change, air pollution and the shrinking of the boreal forest.

But it stops short of calling for a halt to oil sands development or U.S. imports of such crude.

“When we talk about oil, we’re talking about reducing reliance and moving away from it. We know that takes time -- we are pragmatists here,” EIP director Eric Schaeffer said.

“But those first steps start with an awareness of what it means to get your oil from that source. This is a very intensely wasteful way of feeding the oil habit,” Schaeffer told a conference call with reporters.

Apart from 17 refinery expansions and five new plants under construction or consideration in the United States, the study identified another 827,120 barrels of existing refining capacity being converted to run oil sands crude.

More than $100 billion worth of projects aimed at tapping Alberta’s oil sands, the largest oil source outside the Middle East, are under way or on the drawing board as companies look to feed U.S. demand for secure energy supplies.

The huge investments have attracted the attention of environmental groups worried about high carbon dioxide emissions from oil sands extraction plants and upgraders, the impact of sprawling open-pit mines on wildlife habitat and high water usage.

The industry says it is making strides to improve its environmental performance, and investing in new technology such as carbon capture and storage to limit carbon emissions and dry tailings to eliminate the toxic waste ponds outside plants.

Such ponds made headlines earlier this year after 500 ducks were killed when they landed on one at the Syncrude Canada site.

“I don’t think anybody denies that environmental performance needs to continue to improve,” Pierre Alvarez, president of the Canadian Association of Petroleum Producers, said at the Reuters Global Energy Summit this week.

Among the EIP report’s other recommendations, it urges regulators that grant pipeline permits to consider increased greenhouse gas emissions at U.S. refineries that process oil sands crude before approving projects.

In addition, U.S. transport and energy policies should be geared to reducing oil consumption by promoting better automobile fuel standards. It should also adopt initiatives that take into account the life-cycle carbon-content of fuel, it said.

The report said the U.S. Environmental Protection Agency should limit greenhouse gas emissions and consider alternatives to oil sands-derived oil in “best available control technology” determinations when issuing construction permits for new refineries and expansions.

Reporting by Jeffrey Jones; Editing by Peter Galloway

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