* Canada seeks to boost exports of oil, gas, metals
* EU, United States worried about risks of Canada oil
By David Ljunggren
OTTAWA, Feb 5 Canada's offshore petroleum boards
are not equipped to cope with a major spill, the country's
environmental watchdog said on Tuesday in a report that also
said regulators could struggle to handle a booming resource
Environment Commissioner Scott Vaughan, who said officials
were not carrying out enough inspections of resource projects in
the north, suggested that unless Canada tightened its oversight,
customers for Canadian resources might be deterred by the
country's environmental record.
The report is 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 said Canada would not be ready to deal with a major
spill such as the Deepwater Horizon BP disaster in the Gulf of
Mexico in 2010.
The two offshore petroleum boards operating in Atlantic
Canada - in the provinces of Nova Scotia and Newfoundland - were
not adequately prepared and needed to do more. 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 (and) poorly coordinated response plans," he
Offshore development continued to expand even as Ottawa made
slow progress establishing marine protected areas, he added.
Atlantic oil fields are far off-shore and must deal with
conditions such as icebergs, fog and bad weather.
There are four oil projects off Newfoundland that produced
around 100 million barrels in 2011. Production off Nova Scotia
is limited to natural gas for the time being.
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 make up around 30 percent of Canadian gross domestic
product, with natural resources accounting for half of that.
In the north, Vaughan said officials were "not conducting
the required inspections that are necessary for ensuring that
the terms and conditions of project approvals are being met".
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, a move Ottawa
fears could deter potential customers for Canadian crude.
In the United States, 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
The federal government and Alberta have already announced
plans to set up environmental monitoring systems in the oil
Federal Environment Minister Peter Kent, who is in Sweden
for a meeting, would react to the report later in the day,