Alberta FQD Letter

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Alberta United Kingdom OfficeHigh Commission of Canada

1 Grosvenor SquareLondon W1K 4AB

Tel: +44 (0)20 7258 6349Fax: +44 (0)20 7258 6309

www.albertacanada.com

October 19, 2011

Dear Sir:

This letter is intended to bring to your attention the grave concerns held by the

Government of Alberta (Canada) over the language contained in the current European

Commission proposal for an implementation measure of the Fuel Quality Directive datedOctober 4, 2011.

I am writing to you as representative for the province of Alberta, Canada. You may beaware that Alberta, Canada holds the third largest oil reserves in the world, most of which

are in the form of oil sands, a naturally occurring mixture of sand, water and bitumen, a

heavy form of oil.

Alberta has followed the development of the European Unions Fuel Quality Directive

(FQD) closely and it is important that you know that Alberta fully supports the intent

of

the FQD as we share the same carbon reduction vision as the European Union. However,we have grown increasingly concerned as it has become apparent that the proposed

implementing measure has been deliberately crafted in such a way as to discriminate

specifically and uniquely against oil sands derived fuels.

Simply stated, we are asking for a principled approach and ask that the implementation

measures be developed in a way that it ensures the following:

1. Equal treatment of all crudes and not based on selective discrimination:

There is no scientific reason to single out Canadian oil sands from other

crude sources as the lifecycle GHG emissions are within the continuum of

existing source crudes entering the European market;

2. Policy is based on reliable data and sound science: Evaluate each source of

crude on its own merit using a consistent methodology;

3. Avoid duplication: Account for Albertas carbon reduction law (carbon

price);

4. Do not penalize transparency: The province of Albertas energy sector is

among the most transparent and highly regulated jurisdictions in the world.

The current language would penalize transparency and create a disincentive

for other jurisdictions to develop more transparent reporting.


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Alberta shares the European Unions goal of carbon reduction, and is in fact a leader in

that regard in North America. However, to be effective carbon reduction regimes must be

developed in a way that is transparent, science-based and non-discriminatory. The FQDimplementing measure as currently drafted is none of these.

Albertas concerns begin with the lack of transparency with how both the EU averagedefault value and the oil sands derived fuels default value have been assigned. The

Commission has never fully disclosed the methodology used to develop these values and

they do not agree with the preliminary analysis of outside experts, which find that there isactually very little difference between the life-cycle GHG intensity of oil sands derived

fuels and other sources of EU supply.

This FQD implementing measure proposal tries to justify its discriminatory treatment ofoil sands fuels by creating an artificial separate category of natural bitumen. This

definition has not been found previously in the literature but rather was specifically and

arbitrarily designed to encompass only the oil sands while not impeding other crudes thatare associated with similar or higher carbon intensity.

A separate emissions intensity value for oil sands fuels is possible only because Alberta isan open and transparent regulator, with data about emissions from our industry openly

available. The draft implementing measure itself states that Although it would be

desirable to attribute specific greenhouse gas intensity to each fossil fuel feedstock from

each and every geographical source globally, such an approach would require a massiveamount of information which is currently not readily available on evenly distributed

geographic basis. The difficulty in obtaining accurate information about others is not an

excuse to discriminate against those for whom information is easy to obtain. Albertafeels that it is being punished by the current proposal for our very openness, whereas

other jurisdictions that are not so forthcoming are in turn rewarded for their lack of

transparency.

The proposed implementation measure thus provides a perverse incentive for other oil

producing jurisdictions not to be more open with data about the GHG intensity of theirindustry as to do so would invite the same kind of discrimination that Alberta faces. This

is compounded by the incentives to reduce flaring found in the draft implementing

measure. Flaring is the largest source of GHGs in the production of crude oil, but in the

current proposal , high flaring crudes would not only be assigned the average defaultvalue (which does not seem to include emissions from flaring), but would apparently also

receive credit for any reductions in flaring that would apply not to their actual emissions

but to the default value. This would greatly advantage high-carbon flared crude oilproduction in comparison to oil sands crudes that may be, in actuality, lower in emissions

intensity.


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I mentioned earlier that Alberta has been a leader in North America in low-carbon

policies. This includes being the first jurisdiction in North America to regulate carbonemissions for large industry (including all oil sands operations), with mandated

reductions in intensity and a price on carbon emissions for those unable to comply. The

FQD draft implementing measure does not, however, credit oil sands derived fuels forthis, but rather imposes a second penalty on producers. Again, the FQD would seem to

act as a disincentive for other jurisdictions to implement carbon reduction measures such

as Albertas, in order to avoid also being double regulated for the same emissions.

For all of these reasons, Alberta believes that the Commission proposal as it is currently

drafted would not be an effective means of reducing carbon emissions but would rather

act as a deliberate and discriminatory barrier to a single specific kind of crude oilCanadian oil sands, while incentivizing a lack of transparency among other crude oil

suppliers. Alberta believes that the FQD implementing measure as it currently stands

would be incompatible with the EUs international trade obligations.

As you may be aware, California is proposing to amend their Low Carbon Fuel Standard

regulation. They have recently put forward a proposal that treats all crudes equallywithin a jurisidictional average, and sets reduction requirements off of this single

average. Such an approach could fully and transparently capture changes in crude

supplies over time and avoid incentives for crude shuffling, while achieving real

reductions in greenhouse gas emissions. Other non-discriminatory approaches to lowcarbon fuel standards are also possible.

If the Fuel Quality Committee feels that it would benefit from more detailed informationabout these concerns with the Commission proposal, Alberta would be welcome the

opportunity to answer, in person or in writing, any technical questions the Fuel Quality

Committee may have. In the mean time, please find attached for your further

information, a more in-depth analysis of Albertas concerns with the draft FQDimplementing measure and additional information about GHG emissions from the oil

sands and Albertas carbon management regulations. Please do not hesitate to contact mefor further information.

Yours sincerely,

Alberta-United Kingdom Office

Jeffrey G. Sundquist

Managing Director

[email protected]

Tel: 44-020-7258-6349Fax: 44-020-7258-6309

Enclosed
mailto:[email protected]:[email protected]:[email protected]

Documents

Alberta FQD Letter