REFILE-EU might not condemn tar sands oil as dirty-Canada

Tue Oct 18, 2011 3:26pm EDT

* Canada sees "good chance" EU will back away from plan

* Canada worried about negative image of tar sands

* Says senseless to single out tar sands crude

By David Ljunggren

OTTAWA, Oct 18 (Reuters) - The European Union could yet reject a proposal to classify crude from Alberta's tar sands as dirty oil, the Canadian energy minister Joe Oliver said on Tuesday, a move which would potentially boost Canada's hopes of becoming a key global energy supplier.

As part of a plan to cut greenhouse gas emissions, the EU's executive commission wants to single out crude from the enormous northern Alberta oil sands as being particularly energy-intensive to produce.

Canada's Conservative government fears this could limit the future market for tar sands crude and blur the message that Canada is, in Oliver's words, a reliable energy superpower which will develop the sands in a socially responsible way.

Speaking to Reuters in an interview, Oliver insisted that a move to single out oil sands crude made no sense from a scientific point of view and would concern European firms who have invested heavily in the industry.

"We definitely don't think we've lost ... there's a good chance because we believe science is on our side," he said shortly before flying to Europe to press home the Canadian government's message. "This is far from over."

The EU proposal to place tar sands oil on its fuel quality directive must be approved by separate votes of European officials and by lawmakers before it comes into force.

"We're not exporting oil sands oil to Europe but we don't want the potential stigmatization and we're quite concerned about that issue," said Oliver.

The tar sands contain more than 170 billion barrels of recoverable oil and are the world's third-largest crude reserve behind Saudi Arabia and Venezuela.

Green groups have long portrayed the sands as an environmental disaster because of the energy needed to extract the crude, and Canada is battling vocal opposition to a proposed pipeline taking bitumen from the tar sands to refineries on the U.S. Gulf Coast.

"Our government is now seen as a kind of anti-environmental bully that does whatever the tar sands companies ask it to do," said Keith Stewart of Greenpeace Canada.

Oliver said the carbon intensity of crude from the oil sands was similar to oil from major suppliers to the EU such as Mexico, Venezuela, Nigeria and Russia, and sometimes lower.

Diplomats say the European Union is split over the fuel quality directive, with Britain and the Netherlands - home to firms which are investing in the sands - privately helping to push the Canadian point of view.

The British "have been very very helpful and we're pleased about that," Oliver said. "Many European companies are heavily invested in the oil sands and they also would be concerned."

Oliver suggested earlier this month that Ottawa could take the EU to the World Trade Organization if the Europeans adopted the fuel quality directive.

"The government hasn't taken a position on what its alternatives are but we definitely will not sit passively by if something negative were to happen," he said on Tuesday when asked about taking the case to the WTO.

Big companies active in the oil sands include Suncor Energy Inc , Total SA , Royal Dutch Shell Plc and Canadian Natural Resources Ltd . They and other have invested tens of billions of dollars in projects in the region.

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