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Oil sands firm says it can meet tough US carbon rules

A Calgary-based oil sands company has determined that its carbon footprint is low enough to meet a contentious California fuel standard, one that the Canadian government and its oil industry allies have fought for years.

It could be a significant turning point in a years-old debate that once threatened to strike a crippling blow to Alberta's oil sands.

Cenovus Energy Inc. recently told the Calgary Herald that oil produced from several of its northern Alberta operations can meet the emissions laws soon to be finalized by Golden State legislators.

That California legislation, known as a low carbon fuel standard, penalizes fuel suppliers for selling gasoline, diesel and jet fuel with high production emissions.

In practice, that means suppliers would likely avoid crude oil from northern Alberta's oil sands, where carbon emissions are generally 23 percent higher per barrel than regular oil, according to a European Union-commissioned study.

The Tyee has reported extensively (click here and here) on how the Canadian government and oil industry lobby groups have fought a fierce battle to keep the legislation from passing.

The economic rationale was simple: If a national standard were ever enacted based on the California model, it could conceivably wipe out a huge fuel market -- and profits -- for Alberta's oil sands industry, according to a Ceres-RiskMetrics report from last year.

Which is why the recent Cenovus announcement could be a big deal. If oil sands companies can meet tough U.S. fuel standard requirements, it not only removes a huge market risk, but might grant them social license to operate in a carbon-concerned world.

Cenvous uses less steam -- and hence burns less emissions-releasing natural gas -- to produce oil sands crude than many of its competitors.

And independent analyses have reportedly determined the company's Christina Lake and Foster Lake operations to be among the least carbon-intensive in the industry.

California's Air Resources Board is expected to release specifics about its low carbon fuel standard plan next year.

In the meantime, Canadian officials -- including former B.C. premier Gordon Campbell -- are vigorously lobbying against similar legislation in Europe.

Geoff Dembicki reports on energy and climate issues for The Tyee.

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