Friday, March 21, 2008

A Sticky Situation: Section 526

According to an editorial from March 10 in Investor’s Business Daily, “Canada has an estimated 1.6 trillion barrels of oil on its territory, much of it locked in tough-to-excavate tar sands in the province of Alberta. By comparison, oil-rich Saudi Arabia has an estimated 270 billion barrels left.” With the recent surge in oil prices, this resource is being developed at an ever increasing pace as more oil majors seek a piece of the ‘maple syrup' pie.

We have learned that US energy policy can be and is quite ridiculous. It can be argued that this is once again evidenced by Section 526 of the Energy Independence and Security Act of 2007. This provision could potentially prevent the US government, a huge consumer of oil, from procuring fuel derived from Canadian tar sands.


No Federal agency shall enter into a contract for procurement of an alternative or synthetic fuel, including a fuel produced from nonconventional petroleum sources, for any mobility-related use, other than for research or testing, unless the contract specifies that the lifecycle greenhouse gas emissions associated with the production and combustion of the fuel supplied under the contract must, on an ongoing basis, be less than or equal to such emissions from the equivalent conventional fuel produced from conventional petroleum sources.

This could be applauded as a way of ensuring that the US government, in its search for secure fuel supplies, does not seek alternatives that result in unintended environmental consequences, as is too often the case (e.g. corn-derived ethanol). But, as argued by Geoffrey Styles of GSW Strategy Group, LLC (on March 20), following through on this policy will simply export the emissions elsewhere; tar sand producers will have no problem finding new, happy customers, like oil-thirsty China and India.

Another article covering this issue indicates that the provision may have been aimed specifically at Air Force plans to aggressively pursue coal-to-liquid jet fuels: “The energy bill provision, which was added by Rep. Henry Waxman (D-Calif.), is aimed largely at the Pentagon plans to buy coal-based jet fuels.” This could have huge ramifications on Air Force fuel policy: “Air Force leadership has stated a goal of using domestically produced synthetic fuel for half of its domestic aviation fuel by 2016”.

This conundrum can be viewed in two ways (and perhaps more):

Taking the view of Geoffrey Styles, an exception to the law could be made to allow the US government to procure fuels derived from Canadian tar sands, and thereby ensure a vast and secure source of energy, knowing that increased GHG emissions will occur regardless, and that production efficiency improvements may lead to reduced emissions in the future.


The US government can stand by this policy and set an example for US citizens and the world by showing that the US is ready to face up to climate change and recognize the importance of examining life cycle impacts of alternative energy choices.

Would you like maple syrup with that energy policy?

1 comment:

M. King Hubbert said...

Worth noting:
Even if the US government decides to follow this provision, there may be huge logistical issues that prevent it. Geoffrey Styles explains this in his blog by explaining that the tar sands production is pooled with conventional crude piped from Canada down to Chicago. Therefore, differentiating between the unconventional and conventional sources could be quite a task.