A provision that was inserted into the Energy Independence and Security Act of 2007 (EISA 2007) to keep the US Air Force from developing coal-to-liquids (CTL) fuels could limit imports of Canadian oil produced from tar sands.
While the requirement in Section 526 of EISA 2007 applies only to federal fuel contracts, it would be significant. US military services are the biggest single domestic purchaser of petroleum products. During fiscal 2007, they bought nearly 136.1 million bbl worldwide, according to data from the Defense Energy Supply Center.
Canadian Ambassador to the US Michael Wilson expressed his concern on Feb. 22. “Canada would not want to see an expansive interpretation of Section 526, which would then include commercially available fuel made in part from oil derived from Canadian oil sands,” he said in a letter to US Sec. of Defense Robert M. Gates.
Noting that the two countries operate under the North American Free Trade Agreement, and that Canada is the largest, safest, and most secure source of imported energy for the US, Wilson said: “Canadian oil production and Canada’s share of US oil supply are increasing, mainly because of oil sands production in Alberta.”
Not alternative fuel
Wilson’s main point was that Canada does not consider oil extracted from oil sands an alternative fuel because it is processed in conventional facilities and is produced commercially. The US Energy Information Administration has classified 174 billion bbl of Canadian oil sands as proved reserves since 2003, he said.
“There is little fuel on the US market that is 100% petroleum extracted only by conventional methodology. Oil sands-derived petroleum represents approximately 5% of US supply and is not segregated from other petroleum,” unlike biofuels, the ambassador said.
House Oversight and Government Reform Committee Chairman Henry A. Waxman (D-Calif.), who was the provision’s author, disagreed. While it was originally a response to Air Force CTL development proposals, Section 526 also applies to tar sands, “which produce significantly higher greenhouse gas emissions than are produced by comparable fuel from conventional petroleum sources,” Waxman said.
Implied subsidies
Waxman maintained, “The development and expanded use of these fuels could significantly exacerbate global warming, with highly dangerous effects. Thus, it is important to ensure that the federal government does not subsidize or otherwise support the expanded use of these fuels through government purchasing decisions.”
Section 526 was not intended to keep federal agencies from buying generally available fuels, such as diesel or jet fuel, that may contain incidental amounts from unconventional petroleum sources, Waxman said. But it would apply to any contract for a CTL or other alternative fuel, or for “a fuel produced from a nonconventional petroleum source such as tar sands,” he added.
