The U.S. Congress has proposed legislation that would institute a low-carbon fuel standard, following in California’s footsteps. To date, none of the proposals has passed. But meanwhile, individual states are looking into the passage of a California-like standard, which would restrict the carbon intensity of their transportation and home heating fuels. Unfortunately, such a standard would also reduce oil imports from our northern neighbor, Canada. Canadian proven oil reserves – second in the world only to Saudi Arabia – are composed mostly of oil sands, a heavy oil that emits more carbon emissions in its production than conventional oil does. Canada is our largest supplier of imported oil, and removing oil sands from our oil import basket without substituting domestic sources of oil would result only in more imported oil from less stable countries, increasing our dependence on non-secure oil supplies. Plus, Canadian oil sands would still be purchased and consumed by other countries (e.g., China). Thus our abstinence would not reduce global greenhouse gas emissions. It would merely increase prices for American consumers and increase our reliance on oil imported from unstable parts of the world.
What are Oil Sands?
Oil sands consist of bitumen, a heavy black viscous oil, and clay, sand, and water. Because the bitumen in oil sands cannot be pumped directly from the ground in its natural state, oil sands must be obtained from open pits or by strip mining or by being heated underground before extraction. Once mined, the bitumen is separated from the clay, sand, and other minerals through a process that uses hot water and agitation to cause the separation. It is then refined with lighter hydrocarbons to reduce its thickness, producing synthetic crude.[i]
Since 2000, the efficiency of the extraction process has improved immensely, requiring only half the amount of steam per unit of output compared to 10 years ago,[ii] thereby decreasing energy use and life-cycle greenhouse gas (GHG) emissions. Since 1990, GHG emissions per barrel of oil sands have been reduced by 27 percent.[iii] And technology is expected to continue to improve.[iv] Further, oil sands account for only about 0.1 percent of global GHG emissions.[v]
How Do GHG Emissions from Oil Sands Compare to Conventional Crude Oil?
According to a study by the Cambridge Energy Research Associates (CERA), on a well-to-wheel basis, total GHG emissions are only 5 to 15 percent higher than the average crude oil consumed in the United States. CERA makes that comparison on the basis of the total life cycle that includes oil extraction, processing, distribution, and combustion of the gasoline through the tailpipe (i.e., well to wheel). [vi] And according to the Environmental Protection Agency, the amount of carbon emitted from the tailpipe per mile traveled is constant .—19.4 pounds of carbon dioxide emitted per mile regardless of the origin of the oil.[vii] However, the oil sands industry does not intend to stop with those statistics. The Canadian arm of Statoil, for instance, has pledged to decrease the carbon emissions from their production of Canadian oil sands by 20 percent by 2025, and 40 percent by 2025, with the help of technologies that should be on line by 2015 or 2016.[viii]
State Activity
On January 18, 2007, California Governor Arnold Schwarzenegger signed an Executive Order establishing a Low Carbon Fuel Standard (LCFS) for transportation fuels sold in California. The standard requires that by 2020, the carbon intensity of California’s passenger vehicle fuels be reduced by at least 10 percent.[ix] It also requires the reporting of all life-cycle GHG emissions in the transportation fuels supplied to California beginning in 2010.[x]
Following in California’s footsteps, other states are looking at passing a low-carbon fuel standard. The Midwestern Governors Association is advocating the study and implementation of such a standard.[xi] However, consumers in at least one of those states, Wisconsin, realize that the standard would mean higher gasoline prices, greater dependence on imported oil from unstable areas, and zero environmental gain inasmuch as Asia would pick up any slack supplies. Because Wisconsin relies heavily on oil sands imported from neighboring Alberta, it could see an increase in gasoline prices of up to $1 a gallon and an increase in fuel oil prices of $400 a season.[xii] As a result, a low-carbon fuel standard would deny consumers and manufacturers in Wisconsin the secure and affordable energy that lies just across the Canadian border. The Midwestern Governors Association expects to produce a final standard that states such as Wisconsin will be asked to endorse in full later this year.[xiii]
Another state to be adversely impacted is Delaware, which recently signed a pact for a low-carbon fuel standard with states in the Northeast. Since Delaware does not produce its own crude oil and relies on petroleum products being supplied through ports in Wilmington and along the Delaware River, a low-carbon fuel standard would result in consumers seeing increases in the cost of gasoline, diesel, and home heating oil. That would hurt jobs in manufacturing and chemical production, because higher fuel costs might lead those industries to relocate. Further, because one-fifth of Delaware homes are heated by fuel oil, a low-carbon fuel standard would make it harder for home owners to pay heating bills that already must be subsidized for low-income families.[xiv]
Who Will Be the Primary Beneficiary?
If the United States limits its imports of oil from Canada to only conventional crude oil, about 40 to 50 percent of our current Canadian imports will be sold to other countries, most likely countries in Asia. Even greater amounts would be exported elsewhere in the future because the majority of Canada’s oil reserves are oil sands.[xv] China’s state-owned oil company has spent billions early this year to acquire a majority stake in a pair of Canadian oil sands projects. Korea, Japan, and India are reported to have current or developing oil interests in Canada as well.[xvi] And because the U.S. Department of the Interior is delaying lease sales in the outer continental shelf and making production harder on public lands, few of those lost Canadian oil supplies could be expected to come from domestic sources. Corn-based ethanol is also not the answer, since on a life-cycle basis it emits more GHG gases than gasoline.[xvii] Thus, the United States will be increasing its imports from unstable areas of the world, such as the Middle East, Nigeria, and Libya. And because the Canadian oil sands will still be mined and consumed globally, there will be no net benefit in the amount of global GHG emissions released into the atmosphere.
Conclusion
Canada is currently the number one supplier of oil to the United States, and the amount of Canadian oil being consumed in the United States continues to increase. The U.S.-Canadian trading relationship is the largest in the world, contributing to the countries’ international friendship and alliance. Increasingly, however, Canadian oil will be produced from oil sands, a heavy oil that results in 5 to 15 percent higher GHG emissions from production to consumption, as compared to the conventional crude oil consumed in the United States. Therefore, the current trend of increasing Canadian oil imports to the United States will not last long if the U.S. federal government and/or state governments enact a low-carbon fuel standard. Unfortunately, the U.S. loss will be the gain of other countries, which will snap up Canadian oil sands and produce just those higher GHG emissions that the low-carbon fuel standard seeks to prevent. The United States will be forced to import oil from less stable countries, using even more fuel to transport the oil from farther away than our Canadian neighbor. So, does a low carbon fuel standard make any sense?
See Low Carbon Fuel Standards: Recipes for Higher Gasoline Prices and Greater Reliance on Middle Eastern Oil: https://www.instituteforenergyresearch.org/2009/02/18/low-carbon-fuel-standards-recipes-for-higher-gasoline-prices-and-greater-reliance-on-middle-eastern-oil/
[i] About Tar Sands, http://ostseis.anl.gov/guide/tarsands/index.cfm
[ii] Cambridge Energy Research Associates, Growth in the Canadian Oil Sands: Finding the New Balance, http://www.cera.com/aspx/cda/client/knowledgeArea/serviceDescription.aspx?KID=228
[iii] Canada’s Oil Sands, http://www-static.shell.com/static/can-en/downloads/aboutshell/aosp/unique_resource/co2_onepager.pdf
[iv] Cambridge Energy Research Associates, Growth in the Canadian Oil Sands: Finding the New Balance, http://www.cera.com/aspx/cda/client/knowledgeArea/serviceDescription.aspx?KID=228
[v] Canada’s Oil Sands, http://www-static.shell.com/static/can-en/downloads/aboutshell/aosp/unique_resource/co2_onepager.pdf
[vi] Cambridge Energy Research Associates, Growth in the Canadian Oil Sands: Finding the New Balance, http://www.cera.com/aspx/cda/client/knowledgeArea/serviceDescription.aspx?KID=228
[vii] Delaware Online, Now’s not the time for low-carbon fuels, March 22, 2010, http://www.delawareonline.com/article/20100322/OPINION07/3220301/1004/OPINION/Now-s-not-the-time-for-low-carbon-fuels
[viii] Statoil sees big cut in oil sands CO2, March 22, 2010, http://www.reuters.com/article/idUSTRE62L4Y420100322
[ix] Press Release, Gov. Schwarzenegger Signs Executive Order Establishing World’s First Low Carbon Standard for Transportation Fuels, http://gov.ca.gov/press-release/5174/
[x] A Primer on the California Low Carbon Fuel Standard and Midwestern Corn Ethanol, http://www.dnv.us/focus/climate_change/hot_topics/A_Primer_on_the_California_Low_Carbon_Fuel_Standard_and_Midwestern_Corn_Ethanol.asp
[xi]LaCrosse-Tribune.com, Michael Whatley: Proposed standard would hurt consumers, manufacturers, March 16, 2009, http://www.lacrossetribune.com/news/opinion/article_08e03f56-304d-11df-8576-001cc4c03286.html
[xii] LaCrosse-Tribune.com, Could low-carbon standard drive gas prices up?, March 8, 2009, http://www.lacrossetribune.com/news/local/article_d3a14f96-29a4-11df-98c3-001cc4c002e0.html
[xiii] LaCrosse-Tribune.com, Michael Whatley: Proposed standard would hurt consumers, manufacturers, March 16, 2009, http://www.lacrossetribune.com/news/opinion/article_08e03f56-304d-11df-8576-001cc4c03286.html
[xiv] Delaware Online, Now’s not the time for low-carbon fuels, March 22, 2010, http://www.delawareonline.com/article/20100322/OPINION07/3220301/1004/OPINION/Now-s-not-the-time-for-low-carbon-fuels
[xv] Energy Information Administration, Annual Energy Outlook 2008, Table 11.4, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec11_9.pdf
[xvi] China Steps Up to Purchase America’s Share of Canadian Oil Sands, February 16, 2010, http://www.ecofactory.com/news/china-steps-purchase-americas-share-canadian-oil-sands-021610
[xvii] A Primer on the California Low Carbon Fuel Standard and Midwestern Corn Ethanol, http://www.dnv.us/focus/climate_change/hot_topics/A_Primer_on_the_California_Low_Carbon_Fuel_Standard_and_Midwestern_Corn_Ethanol.asp
