Canada oil group cheers U.S. oil sands stance

CALGARY Tue Jun 2, 2009 4:44pm EDT

CALGARY (Reuters) - Canada's top energy producers association cheered the Obama administration on Tuesday for signaling support for Alberta's oil sands, a growing source of crude supply to the United States that is widely criticized by environmental groups for contributing to global warming.

The Canadian Association of Petroleum Producers said U.S. Energy Secretary Steven Chu's comments to the Reuters Global Energy Summit this week showed the administration understood the national security benefits of importing oil from its northern neighbor.

"As we read that, we found his comments very, very positive, explicitly, or maybe more implicitly, in talking about all the advantages of doing business with Canada," said Tom Huffaker, CAPP's vice-president of environment and policy.

Environmental groups such as Greenpeace and the Natural Resources Defense Council have mounted major campaigns to get the message out to Americans that the expansion of Canada's oil sands industry threatens to intensify global warming, deforestation and damage to water resources.

Chu told the Reuters Global Energy Summit on Monday that the balance between the environmental impact from the huge energy resource in northern Alberta and its importance to U.S. energy supply is a tricky one that will require solutions from the industry.

"It's a complicated issue, because certainly Canada is a close and trusted neighbor and the oil from Canada has all sorts of good things. But there is this environmental concern, so I think we're going to have to work our way through that," Chu said. "But I'm a big believer in technology."

CAPP said it was concerned about the potential impact of looming U.S. climate and energy regulation, but said it was hopeful the eventual legislation would be fair.

"Our main point is that we don't think that it's in the interests of Canada or the United States -- because we are an important supplier to the U.S. -- to discriminate against oil sands crude simply because it's from oil sands," said David Collyer, CAPP president.

"Establish environmental policy and we'll compete against other crudes that are supplying the U.S. market," he said.

Canada is the largest foreign supplier of oil to the United States and its oil sands represent the biggest deposits of crude outside the Middle East.

The resource is mined in open pits as well as produced in wells with the aide of steam pumped into the ground. Then it must be processed by upgrading plants into light oil that can be fed into refineries.

(Reporting by Jeffrey Jones, Writing by Richard Valdmanis; Editing by Tim Dobbyn)