WASHINGTON/CALGARY Dec 8 Canada is running out
of time to offer U.S. President Barack Obama a climate change
concession that might clinch the controversial Keystone XL oil
pipeline, as the country's energy industry continues to resist
costly curbs on greenhouse gas emissions.
Two years of negotiations between the Canadian government
and the energy sector to curtail carbon pollution have not
produced an agreement. Oil producers have balked at anything
more than the 10-cents-a-barrel carbon tax imposed by the
province of Alberta.
Late last month, Environment Minister Leona Aglukkaq pointed
to "good progress" in the talks but was unable to say when a
resolution might come.
Concessions from Canada would make the pipeline more
palatable in Washington, experts say, since Obama has made
fighting climate change a second-term priority and has said that
Canada could do more to reduce carbon emissions.
By linking Alberta's fields to refiners in the Gulf Coast,
the 1,200-mile (1,900-kilometer) Keystone XL pipeline would be a
boon to an energy patch where oil sands are abundant but lead to
more carbon pollution than many other forms of crude.
Keystone's foes say that burning fossil fuels to wrench oil
sands crude from the ground will worsen climate change, and that
the $5.4 billion pipeline, which could carry up to 830,000
barrels a day, would only spur more production.
Increasing oil sands production will put Canada on track to
miss its target of curbing greenhouse gas emissions by 17
percent below 2005 levels by 2020, according to a government
report (full report:).
Keystone supporters say that is why Canada would be wise to
offer a carbon-trimming plan before the White House decides the
"If Canada were to volunteer new greenhouse gas
restrictions, that would certainly help," David Goldwyn, a
former State Department official and energy consultant, told an
industry conference in late October.
But the clock is running out. The U.S. State Department is
finishing work on a report that will weigh the climate impacts
of the pipeline in what could be one of last words before a
decision. The White House is expected to rule on Keystone by
Canada and the United States have often moved together on
climate policy, developing similar rules on auto and power-plant
emissions while turning their backs on the Kyoto Protocol to
limit climate change.
Regulating the oil and gas sector has been thornier, though,
with oil sands producers particularly concerned that higher
costs will erode their already narrow margins.
"Anything more stringent than today's system will increase
costs, possibly lowering investments and reducing production,"
the Canadian Association of Petroleum Producers wrote in a memo
to regulators in March that was made public under a freedom of
Canada's fast-growing oil sands sector will soon exceed the
capacity of existing pipelines, and analysts say producers will
be forced to rely on trains, barges and other transportation
alternatives if Keystone XL and related projects are rejected.
Those options are generally costlier and less certain than
Nevertheless, industry executives say they doubt yielding on
tougher pollution regulations will help secure Keystone.
"I don't know any policies in Canada with respect to
(greenhouse gas) emissions that would have any sort of material
impact on the approval process," Russ Girling, president of
TransCanada, the pipeline operator, said last month.
Even if Prime Minister Stephen Harper were to offer new
greenhouse gas limits this year, the vagaries of the regulatory
process virtually guarantee those plans will not be in place
until after a Keystone decision.
Canada needed 12 months to finalize regulations curbing
emissions from coal-fired power plants that were ratified last
year, and the rules were significantly weaker in the end than
"Judging by what we saw with coal-fired power plants, there
is a real risk that a proposal to limit oil and gas emissions
could be watered down before it's final," said P.J. Partington
of the Pembina Institute, a think thank that has opposed oil
sands development, which reviewed the industry memos disclosed
under the freedom of information request.