UPDATE 1-Canada not ready for major offshore spill -watchdog

Tue Feb 5, 2013 1:46pm EST

* Canada seeks to boost exports of oil, gas, metals
    * EU, United States worried about risks of Canada oil


    By David Ljunggren
    OTTAWA, Feb 5 (Reuters) - Canada's offshore petroleum boards
are not equipped to cope with a major spill, the country's
environmental watchdog warned on Tuesday in a report that also
said the booming energy sector needed more oversight.
    Environment Commissioner Scott Vaughan said in a report that
unless Canada improved its record on environmental regulation,
resource customers might be deterred.
    His conclusions are sensitive for the ruling pro-business
Conservatives, who expect some C$650 billion ($650 billion) of
new investments in natural resource projects over the next
decade and want more extraction of oil, gas and metals.
    "Considering the central role of natural resources in
today's Canadian economy, it is critical that environmental
protections keep pace with economic developments. In this report
... we found numerous shortcomings," Vaughan wrote. 
    "These shortcomings leave me concerned that environmental
protection is failing to keep pace with economic development." 
    Vaughan also said that Canada was set to reduce direct
spending on the fossil fuel sector as part of an international
push to phase out subsidies. 
    He said the two offshore petroleum boards operating in
Atlantic Canada, in the provinces of Nova Scotia and
Newfoundland, were not adequately prepared for disaster. The
boards are run jointly by Ottawa and the provinces.
    "We identified several shortcomings, including insufficient
spill response tools across the federal government, inadequately
tested capacity, poorly coordinated response plans," he said.
    Offshore development was expanding even as Ottawa made slow
progress establishing marine protected areas, he added.
    Four oil projects off Newfoundland produced around 100
million barrels in 2011. Production off Nova Scotia is limited
to natural gas for the time being.
    Federal Environment Minister Peter Kent said Ottawa was
reviewing the responsibilities of the various organizations
charged with tackling oil spills. 
    "Our government is committed to developing Canada's rich
natural resources while strengthening environmental
protections," he said in a statement.
    Critics regularly accuse the Conservatives of ignoring the
environment. Canada, home to the world's third largest proven
reserves of crude, is already the largest exporter of energy to
the United States and last year the government made it easier to
get permission to build mines and pipelines.
    Exports, half of them from natural resources, make up around
30 percent of Canadian gross domestic product.
    The government strongly backs increased extraction from the
oil-rich tar sands of Alberta. Stripping out crude from the
clay-like sands requires more energy than regular oil drilling,
a fact which is already causing Canada trouble abroad.
    The European Union is set to vote later this year on whether
to classify tar sands oil as particularly dirty.
    U.S. President Barack Obama delayed approval of TransCanada
Corp's proposed Keystone XL pipeline from the tar sands
to the Gulf Coast after opposition from green groups.
    "A key challenge in expanding Canada's development and
export of natural resources ... will involve meeting or
exceeding the environmental standards and consumer expectations
of foreign markets," said Vaughan. "Therefore it is vital from
an economic perspective that Canada's environmental protections
keep pace with economic development."