Alberta: EU oil sands ranking a threat to trade

BRUSSELS (Reuters) - The government of Alberta, home to the bulk of Canada's oil sands, has written to EU experts voicing "grave concerns" that the bloc's plans to rank unconventional oil as a highly polluting fuel are unfair and a potential threat to trade ties.

"The proposed measure has been deliberately crafted in such a way as to discriminate specifically and uniquely against oil sands derived fuels," said a copy of the letter seen by Reuters.

"Alberta believes that the fuel quality directive implementing measure as it currently stands would be incompatible with the EU's international trade obligations."

The letter came ahead of a meeting scheduled for Tuesday of a committee of EU government experts. They plan to debate a proposed green ranking of fuels, which is designed to enable fuel suppliers to identify the most carbon-intensive options.

The proposed ranking assigns tar sands a default greenhouse gas value of 107 grams of carbon per megajoule, making it clear to buyers that it has a greater climate impact than conventional crude oil, whose value is 87.5 grams, an EU source said.

The letter on behalf of the Alberta government -- signed by its United Kingdom office and sent to all 27 members of the expert committee -- argues there is no scientific reason to differentiate between Canada's oil sands and other crude sources.

EU Commission sources have said the measures do not label only Canadian oil sands as carbon intensive, but also those from Venezuela. They have said the measures take account of carbon emitted across the entire life-cycle of a fuel.

If any oil sand-derived product can demonstrate that over its life-cycle its emissions are less than 107 grams per megajoule, only its actual emissions will be taken into account.

Two of the other unconventional fuel sources have higher values than oil sands. They are oil shale at 131.3 and coal-to-liquid at 172.

EXTENSIVE RESEARCH

Environmental groups have strongly backed the Commission stand-point. They say it is supported by extensive research.

"It's not true that oil sands are unfairly singled out," said Nusa Urbancic, fuels campaigner at green transport lobby group T&E.

"The Commission has spent a year reviewing all the available science, including that provided by the oil sands industry and the conclusion is unequivocal that oil sands are more carbon intensive."

The EU green fuel ranking represents the final plank of legislation introduced in 2008, when the EU agreed to reduce the carbon intensity of its transport fuels by 6 percent by 2020.

That is part of a wider target to reduce EU carbon emissions by 20 percent by 2020.

A decision on whether to include tar sands in the ranking was delayed after Canada previously said the EU's standards to promote greener fuels would harm the market for its oil sands.

An EU source said Tuesday's committee meeting would probably not get as far as a vote and would instead meet again for further discussion and a vote at some stage.

Once the expert committee approves the measures, the European Parliament has three months to pass or reject them. If rejected, the Commission can submit a revised proposal. If there is no vote, the committee will meet for further debate.

Oil companies active in Canada include Royal Dutch Shell and sources said the British and Dutch governments could be sympathetic to Alberta's position.

The oil sands debate coincides with difficult talks between Canada and the European Union on a proposed free trade deal. The two sides have yet to agree on a range of issues, including intellectual property and market access for agricultural products.

Canadian energy minister Joe Oliver suggested earlier this month Ottawa could take the EU to the World Trade Organization if the Europeans adopted the fuel quality directive, although a spokesman for the Canadian trade minister said last week the free trade discussions were a separate issue.

"While we disagree with this draft directive, this matter is not linked to our commitment to productive free trade discussions with the European Union," the spokesman said.

(Additional reporting by David Ljunggren in Ottawa; diting by Rex Merrifield and Sebastian Moffett)

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