Harper's oil sands plan puzzles industry, greens

CALGARY, Alberta (Reuters) - Prime Minister Stephen Harper said on Friday he would ban exports of tar-like bitumen from Alberta’s oil sands to countries that do not match Canadian efforts to cut carbon emissions, a campaign promise that perplexed both the oil industry and environmentalists.

Conservative leader and Canada's Prime Minister Stephen Harper listens to a question during a news conference in Calgary, Alberta September 26, 2008. Canadians will head to the polls in a federal election October 14. REUTERS/Chris Wattie

The policy could affect Asian countries that are the target of a proposed Enbridge Inc pipeline that would move oil sands-derived crude to Canada’s West Coast to be shipped across the Pacific Ocean by tanker, Harper said.

He announced the move at a campaign stop ahead of the October 14 general election as a away to prevent companies from avoiding Canadian emission standards, he said.

Asked by reporters if it could affect future bitumen exports to Asia, he said: “Well, it could, it absolutely could.”

The ban would not affect existing contracts, all of which involve supply agreements with U.S. refineries, he said.

Enbridge’s planned $4.2 billion Gateway line would take 400,000 barrels a day of oil sands crude. The initiative is being driven by interest from refineries in such countries as Singapore and Japan, the company has said.

Harper’s plan surprised Enbridge, and the firm has yet to determine its impact, spokesman Steven Greenaway said.

The Canadian Association of Petroleum Producers, the oil industry’s main lobby group, said it too was still trying to make sense of the ban in the absence of many details.

The Conservatives did not say how close to achieving promised emission cuts any country must be to avoid the ban, or which countries were most at risk at being denied oil.

Canada’s oil sands are the largest oil reserves outside of Saudi Arabia. Producers plan to spend $100 billion exploiting the carbon-intensive resource and output is expected to nearly triple to 2.8 million barrels a day by 2015.

Federal Environment Minister John Baird and Industry Minister Jim Prentice said the proposal was unlikely to affect bitumen shipments to the United States since both presidential candidates have pledged to cut greenhouse gas emissions.

“I think it’s clear that the United States is moving gradually toward a similar policy to our policy with respect to greenhouse gas emissions,” Prentice said.

Harper’s Conservative government has said it aims to cut greenhouse gas emissions by 20 percent from 2007 levels by 2020.

Environmentalists, who criticize the government for not being nearly tough enough on industrial emitters, were unimpressed by the bitumen plan.

“If Harper really cared about reducing greenhouse gas emissions from the tar sands, then he would be talking about actually reducing the greenhouse gas emissions coming from the tar sands rather than just selecting which country they will come from,” Greenpeace campaigner Mike Hudema said.

New Democratic Party leader Jack Layton, who wants a moratorium on oil sands expansion, called it “absurd” for Harper to complain about emission rules in other countries.

“He doesn’t have limits on carbon emissions in Canada,” Layton told reporters in Vancouver, British Columbia.

The issue of raw bitumen exports is already controversial in Alberta, whose own government has called for more plants at home to upgrade the gooey crude into refinery-ready light oil.

Promoting more upgrading within Alberta would create jobs in the province, Harper said.

However, some upgrading plants have already been delayed or shelved due to spiraling costs and a tight labor supply.

Companies, including EnCana Corp and Husky Energy Inc, have struck deals to export raw bitumen to U.S. refineries, where upgrading costs are lower.

Additional reporting by Scott Haggett and Allan Dowd; editing by Rob Wilson