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 July 15, 2006
US to remove roadblocks to oil sands imports

 Calgary, Canada (GLOBE-Net) - The U.S. government will remove any roadblocks to increased energy imports from Canada's oil sands according to U.S. Energy Secretary Sam Bodman during a tour of the oil sands last week. He also said the United States will do what it can to encourage the production of more oil supplies from the region.

"As we learn more about what the opportunities are, what the barriers are, you will see concrete actions taken," Bodman said at a Calgary, Alberta, news conference.

Bodman commented on talks with Canadian Energy Minister Gary Lunn and Alberta's Premier Ralph Klein about how increased oil production from the oil sands could be integrated into the North American pipeline and oil-refining network.

Canada is already the largest supplier of crude oil and refined products to the United States, exporting more than 2 million barrels a day. That trade is expected to grow as output from the oil sands increases -- possibly rising to 3 million barrels a day by 2015. Some analysts speculate that 4 million barrels a day is possible.

Bodman pledged to make sure that the U.S. removes any impediments to the planned growth. "Whether it's 3 million or 4 million barrels a day, that would have a profound effect, if that were to be accomplished on the picture for oil usage in the United States," he said.

According to University of Alberta economist Frank Atkins, the energy secretary was concerned about ensuring the US receives a steady supply of Alberta oil. "The U.S. has an insatiable demand for oil and we're supplying as much as we can and this meeting is just to make sure there are no interruptions to the supply," Atkins told CTV's Newsnet.

The Energy Secretary's concern is in part motivated by the rising costs of conventional oil supplies from the Middle East and increased political tensions in that region. Oil prices surged over $78 US a barrel Friday before sliding back and closing at just over $77 US as violence in the Middle East increased.

Bodman said he expected to take concrete steps during his remaining 2-1/2 years as energy secretary to ensure new Canadian supplies. "I expect that during that time we will have made significant progress in terms of removing barriers, in terms of identifying what the opportunities are, and in laying out things we can jointly work on," he added.

The need to increase US refining capability to upgrade the relatively heavier oil produced from the Alberta oil sands is one area being considered by the US government.

Further development of the Alberta oil sands could have a major impact on Alberta's revenues from oil and gas development. Alberta's take from the sale of oil and gas exploration rights has risen to $2.31-billion so far this year, breaking 2005's $2.26-billion haul barely half way through 2006.

However, it could also have a deleterious impact on the environment, including increased generation of greenhouse gas emissions. Environmental impacts associated with oil sands development pose real constraints on further development of this resource. These include pond tailings, carbon dioxide emissions, soaring natural gas costs and dwindling amounts of available water that could severely limit the industry's ability to continue its exponential growth.

The Alberta government is developing regulations to enable the government to impose limits perhaps as early as next year on greenhouse gas emissions by large industrial generators -- including oil sands companies. Details of the proposed regulations are still unclear, but they will require more conservative emissions reductions than under the Kyoto regime, though these will be spread over a longer period of time.

More than 80 per cent of oil sands reserves are too deep to be extracted by open pit mining, so in future most oil sands crude will be retrieved by injecting steam into the ground. The heat source for all that hot water and steam is mostly natural gas, a relatively expensive energy source.

Burning gas to generate steam remains the rule, but the oil sands industry is working to change that. Canadian companies Nexen and OPTI Canada are gasifying and burning the least profitable bitumen to generate steam. Some companies are experimenting with burning coke, a waste product of upgrading. Others are injecting solvents to reduce heat requirements or even igniting the oil sand underground to liquefy it.

It is clear, however, that the Alberta government will be actively pursuing opportunities to follow through on some of the suggestions raised by the US Energy Secretary during his visit to that province. Alberta Energy Minister Greg Melchin is quoted by Canadian Press as saying it was "vital" for both the province and the country to have a closer working relationship with Washington to formulate a North American energy policy.

"Given we have a large resource, given that most of that is really going to be exported to the United States - our largest customer - I think it's time we put a little more effort to devoting the time and energy to what should be a thoroughly thought-through integrated approach," he is quoted as saying.