Another reason for high fuel prices . . .

Alberta crude may be too dirty, U.S. law says


MARTIN MITTELSTAEDT
From Tuesday's Globe and Mail
January 15, 2008 at 5:43 AM EST


Alberta's oil sands are taking a hit from new U.S. energy legislation passed last month that has an unusual wrinkle suggesting that Canadian crude might be too dirty for the U.S. government.

The legislation won't allow any U.S. federal agencies to buy vehicle fuel derived from non-conventional sources unless the life cycle of its greenhouse-gas emissions is the same or less than that of conventional petroleum.

The sticky bitumen in Alberta's tar sands is considered one of the world's biggest potential sources of energy, but it's also one of the dirtiest in terms of carbon dioxide emissions because it takes so much power to wring it out of the soil in which it's trapped, putting it in the crosshairs of the new rules.

The directive could have a financial impact on the oil patch because the U.S. government is one of the world's largest and most voracious consumers of energy, and it follows similar moves by many states, including California. The legislation, the Energy Independence and Security Act of 2007, was signed by President George W. Bush in December.

Elizabeth Martin-Perera, climate policy specialist at the New York-based Natural Resources Defense Council, says the provision covers new contracts for all government operations, including the military and the postal service, which together operate thousands of vehicles and are considered the No. 1 and No. 2 vehicle fuel users in the country.

The action is part of a growing move to take into account all greenhouse gases caused by the production and use of gasoline and other fuels. It puts unconventional petroleum, such as the synthetic crude from Canada's oil sands at a disadvantage compared to easy-to-harvest oil from the wellhead.

"It's another market signal to tar sands producers that, increasingly, consumers are looking to move away from high-carbon fuels," says Dan Woynillowicz, a spokesman for the Pembina Institute, an environmental think tank.

The fuel requirement is in Section 526 of the new law, which runs for about 800 pages. Its main provisions deal with increasing the fuel efficiency of the U.S. vehicle fleet and increasing the use of biofuels. The part affecting non-conventional oil hasn't received much notice.
Syncrude Canada Ltd., the largest oil sand producer, declined to comment, and referred questions to the Canadian Association of Petroleum Producers.

Association president Pierre Alvarez played down the procurement policy, saying the Canadian industry will defend itself by arguing that long-distance shipping of oil from the Middle East and elsewhere also carries a substantial environmental price tag. "In fact, Canadian fuels don't appear all that bad," he said. "It's distance that's a big-ticket item."

An estimate by the Canadian Centre for Energy Information that used figures supplied by Syncrude, among others, said the emissions from oil sands fuel are about 7.6 per cent higher than the average of all North American crude imports. However, independent experts say the oil sands emit about 20 per cent more greenhouse gases than conventional sources.

Worries over climate change are driving the new rules.
"Canada's oil sands will face large-market risk unless the Canadian government, or the Alberta government, take this challenge seriously," said Hal Harvey of the California-based William and Flora Hewlett Foundation, which helped develop a low-emission fuel standard in California.

Click to expand...

Transit Panel Urges Gas Tax Increase

WASHINGTON (AP) - Federal gasoline taxes should be raised up to 40 cents per gallon over five years, a special commission urged Tuesday in calling for drastic changes to fix aging bridges and roads and reduce traffic deaths.


The two-year study by the National Surface Transportation Policy and Revenue Study Commission is the first to recommend broad changes after the devastating bridge collapse in Minneapolis last August. It warns that urgent action is needed to avoid future disasters.

Among the other recommendations by the 12-member commission:
_Work to cut traffic fatalities in half over the next 17 years by urging states to embrace new strategies to improve safety.
_Ease traffic congestion by expanding state and local public transit systems and highway capacity.

_Protect the environment by smoothing traffic flow, encouraging alternative commute options such as carpooling and public transit and promoting energy-efficient construction and lighting in transit systems to reduce carbon dioxide emissions.

_Seek to develop new energy sources with new research programs costing $200 million annually over the next decade.

Under the proposal to raise gas taxes, the current tax of 18.4 cents per gallon would be increased by 5 cents to 8 cents annually for five years and then indexed to inflation afterward to help fix the infrastructure, expand public transit and highways as well as broaden railway and rural access.

Other sources of revenue could come from tolls, peak-hour "congestion pricing" on highways, freight fees and ticket taxes for passenger rail improvements, according to the report.

But the proposals for improving the nation's transportation system, which are expected to cost $225 billion each year for the next 50 years, is at risk of stalling because of internal division. The commission's chairwoman, Transportation Secretary Mary Peters, and two other members oppose gas tax increases and were issuing a dissenting opinion to the report that said private-sector investment and tolls would be sufficient.

The gas tax has not been increased since 1993, and recent efforts by Congress to raise it have faltered over the objections of the Bush administration. The tax increase is designed to take effect in 2009, after President Bush leaves office.

It is time for a "new beginning," the report said, calling the current strategy of patchwork repair "no longer acceptable."

The report also calls for the country to rebuild and expand its rail network to meet a growing demand for alternatives to congested highways and to promote partnerships between the public and private sectors at U.S. ports.

The commission was formed by Congress in 2005 to study the future needs of the nation's surface transportation system, which includes roads, mass-transit systems, ports and rail lines—as well as to recommend funding options.

The report comes as state governments and several business groups, including the U.S. Chamber of Commerce and the National Association of Manufacturers, are calling on the federal government to raise gas taxes to pay for substantial transportation improvements. The Minneapolis bridge collapse, which killed 13 people and injured about 100, also shone a national spotlight on the unsteady condition of the nation's roads and bridges and drew new calls for additional spending.

The Bush administration has said that raising taxes won't cut congestion and creates additional risks for congressional pork, such as Alaska's infamous multimillion dollar "Bridge to Nowhere," which has been scuttled.
In its report, the commission unanimously agreed that measures of accountability were needed to keep watch over state and federal spending.
Besides Peters, the two commissioners opposing a tax increase are Maria Cino, Peters' former deputy who is organizing the 2008 Republican National Convention, and Rick Geddes, a Cornell University professor who has served as a senior staff economist in the Bush administration on the President's Council of Economic Advisers.

Click to expand...