* Canada lobbied against previous labelling proposal
* Policy includes method for distinguishing various fuels
* Member states to debate the proposal
(Adds details and comment throughout)
By Barbara Lewis and Scott Haggett
BRUSSELS/CALGARY, Oct 7 A European Union plan to
label Canadian tar sands oil as highly polluting as part of its
fight against climate change has been abandoned after years of
opposition from Canada, clearing the way for exports of tar
sands crude to the European market.
A proposal published by the European Commission on Tuesday
removes what could have been an EU obstacle to shipments of the
crude and comes at a time when tensions between the EU and its
top oil supplier, Russia, are running high.
EU sources, speaking on condition of anonymity, said that
given the situation with Moscow, the desire for a trade deal
with Canada had been a factor in the commission's move to remove
the "dirty oil" tag.
Canada and the EU have been working on a trade deal for
several years. EU officials have said a final pact is expected
to be signed next year and become effective in 2016.
The commission also had been lobbied heavily by Canada and
Canadian allies such as the United Kingdom. Canada sees Europe
as a potential market for rising production from the tar sands
of northern Alberta, the world's third-largest crude reserve.
"It is no secret that our initial proposal could not go
through due to resistance faced in some member states," EU
Climate Commissioner Connie Hedegaard said in a statement
Instead of singling out Canadian oil sands crude as highly
polluting, the commission's new proposed fuel quality directive
(FQD) requires refiners to report an average emissions value of
the feedstock used in the products they produce. The proposal
confirms a draft seen by Reuters in June.
"We support the FQD's intent to reduce transportation
emissions, but believe it should be based on science and the
facts," Canadian Natural Resources Minister Greg Rickford said
in a statement on Tuesday.
Extracting tar-like bitumen from the oil sands requires
digging in open-pit mines or blasting with steam and pumping it
to the surface, meaning it uses more water and energy and emits
more carbon dioxide than conventional crude production.
Canada currently exports minimal amounts of tar sands crude
to Europe. TransCanada Corp, however, is proposing a
C$12 billion ($10.7 billion) Energy East pipeline that by 2018
would take 1.1 million barrels per day of Western Canadian crude
to Atlantic ports, from which it could be shipped to European
Canadian oil companies have already taken tentative steps
toward accessing the European market. Last month, Suncor Energy
Inc, Canada's largest tar sands producer, shipped its
first ever tanker of Western Canadian crude to Europe from the
country's east coast.
The European market for heavy crudes from the oil sands
would not be large, analysts say, representing just 485,000
barrels per day in a refining market that processes about 10
million barrels daily. The heavy crude market is currently
supplied by Mexico and Venezuela.
"It's not a very big part of the market," said Jackie
Forrest, vice-president at ARC Financial Corp. "But there is a
market there that can accept heavy crudes and, when you think
about transportation distances ... it's pretty economic to ship
crude there compared with the Venezuelans and Mexicans."
The European Commission's revised plan still proposes a
method to assess the pollution levels of various fuel types over
their life cycles and the commission said it would propose
action if these were incompatible with climate goals.
"The commission is today giving this another push, to try
and ensure that in the future, there will be a methodology and
thus an incentive to choose less-polluting fuels over more
polluting ones like, for example, oil sands," Hedegaard said.
Environmental campaigners and green politicians criticised
what they saw as a step backwards. Greenpeace accused the
European Commission under outgoing President Jose Manuel Barroso
of putting trade deals ahead of the environment.
"This should be a lesson to (Commission President-elect
Jean-Claude) Juncker and his team. Public opposition will only
intensify if he allows trade deals to be used to undermine the
EU's environmental legislation," said Greenpeace EU energy and
transport policy director Franziska Achterberg.
Oil sands crude is produced by oil majors such as BP,
Royal Dutch Shell and ExxonMobil and production
from the region is expected to rise by nearly 70 percent to 3.2
million barrels per day by 2020, according to industry
In the context of the Ukraine crisis and concerns about
Europe's energy security, Canada had argued that Europe should
embrace it as a secure source of oil.
European refining lobby group FuelsEurope welcomed the new
proposal as "a simple and effective methodology" that would help
safeguard the sector's competitiveness.
EU member states will now debate the proposal under a
fast-track procedure meant to take less than two months. It will
also require a sign-off from the European Parliament.
(Additional reporting by Scott Haggett in Calgary; Editing by
Jason Neely, Jeffrey Hodgson and Peter Galloway)