From MarketWatch.com – May 26, 2011

By Bill Mann

PORT TOWNSEND, Wash. (MarketWatch) — A big battle is shaping up over
environmental regulation of Canada’s oil sands, the second-largest oil
deposits in the world. And, surprisingly, it’s Conservatives against
Conservatives.

In this corner, it’s Prime Minister Stephen Harper’s federal
Conservatives, who just gained a majority government. In that corner,
it’s Alberta’s conservative provincial government, led by hard-nosed,
oil-industry friendly premier Ed Stelmach.

A diplomatic cable recently released by Wikileaks highlights the
problems: It revealed an exchange between then-Canadian Environment
Minister Jim Prentice and U.S. Ambassador to Canada David Jacobsen, in
which the American said he believed Ottawa was being “too slow” about
regulating the expansive oil sands.

The U.S. wants a big part of that “non-terrorist” Alberta oil but it
doesn’t want its chief supplier to look environmentally dirty, for
obvious political reasons. Canada is now the U.S.’ largest oil supplier.

Canada, being a helpful vendor, apparently agrees, so last week, new
Canadian Environment Minister Peter Kent announced that Ottawa will
introduce environmental regulations later this year for the oil-sands
sector designed to reduce greenhouse gases spewed from one of the
country’s most polluting industries.

The water quality at the oil sands — or, as environmentalists call the
bitumen mines, the tar sands — is also very much an issue. A leak that
fouled the water and killed hundreds of waterfowl in the far-north oil
fields two years ago may have spurred the U.S. ambassador’s plea for
Ottawa to toughen up environmental controls.

Part of this new Ottawa vow to assume environmental control over what
the Alberta government insists is a provincially-owned resource may well
be tied in to Harper’s visit this week to the G8 summit in France.
There’s a good chance environmental groups will show up with pictures —
or billboards — of oil-soaked Alberta waterfowl. Harper doesn’t want
Canada to be known on the world stage as the world’s “dirty-oil”
producer. (Although extracting crude from bitumen is indeed, at best, a
dirty, water-and-energy consuming business).

A group of U.S. Senators visited the oil sands last December and said,
not surprisingly, they were satisfied with the environmental protections
in place in Alberta. Ottawa apparently isn’t, despite Alberta’s belated
environmental-protection moves.

Alberta will fight back

Alberta isn’t going to give up in this battle with fellow Conservatives without a fight.

Provincial finance minister Lloyd Snelgrove criticized Ottawa for
regulating a provincial resource, which would add “multiple layers of
government trying to the same thing, [where] nobody wins.”

Snelgrove
told the Calgary Herald
that Stelmach’s Alberta government has been worried for some time
Ottawa would step in and regulate the provincial resource, adding
unnecessary duplication and costs to the multibillion-dollar sector.

“The federal government has sat on the sidelines for years and years and
years. Now they see their little golden goose is under attack and they
want to be the voice for Canada on the world stage and we respect that,”
Snelgrove told the Calgary Herald.

The Wikileaks cable, little-reported in U.S. media, which is a bit
surprising, considering its importance to the U.S. energy future, also
revealed that the Obama administration inquired about a possible
moratorium on new oil sands development as global criticism mounted over
the second-largest proven oil reserves in the world.

A San Francisco-based environmental group has run anti-oil sands
billboards and newspaper ads in Canada, the U.S. and in Europe, urging
tourists not to come to Alberta. Stelmach, who recently announced he’ll
be leaving office soon, replied angrily, buying billboards and print ads
of his own saying Alberta is addressing environmental concerns.

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