Exclusive: Alberta: EU oil sands ranking threatens

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 European Commission's Legal Service has said the EU tar sand proposals could probably be defended if Canada were to take its case to the World Trade Organization, in another letter seen by Reuters on Friday.

"The Commission's Legal Service has provided reassurance that the greenhouse gas methodology set out in the implementing directive... may probably be defended in the case of a challenge before the WTO," it said.

Both letters were sent to EU government experts ahead of a meeting next Tuesday where they will 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 position, saying 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."

European Green politicians said the plans should help to ensure dirty fuel does not enter European petrol pumps.

"It is now up to EU member states to approve the proposals and we call on the Council not to succumb to pressure from the tar sands lobby," Green member of the European Parliament Satu Hassi said in a statement.

The EU green fuel ranking completes 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.

Oil companies active in Canada include BP, Total and Anglo-Dutch firm Royal Dutch Shell. 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 Natural Resources 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.

Oliver has travelled to Europe to press Canada's case and in an interview with Reuters on Friday in London said the EU's plans were perverse.

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; editing by Rex Merrifield and Sebastian Moffett)

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