The EU spares the oil sands – for now
During a brief Thursday morning press conference, Alberta Premier Alison Redford told reporters she’s going to be “kind of busy over the next seven weeks.” (Translation: expect an election to be called soon). But she wasn’t so busy that she couldn’t speak about the results of the European Union’s (EU) vote on its proposed fuel quality directive.
The EU has voted not to label oil sands crude as more carbon intensive than conventional crude, although the issue will likely be taken up again by a committee of EU ministers later this year. While admitting the result wasn’t conclusive, Redford still called it, “an important victory for Alberta.”
Alberta has been focused on this debate across the pond because it, and the federal government, happen to be terrified that the oil sands will be labeled a dirty fuel by the Euros.
Why are they terrified? Because under the directive, EU refiners and marketers would be required to reduce the carbon content of their fuel mix. And if oil sands crude is labeled as a more carbon-intensive fuel, those refiners and marketers would be less likely to buy oil sands crude to refine and sell.
Europe doesn’t get its oil from Alberta anyway, so it’s not like oil sands producers would lose a valuable market if this happened. But there is great concern about the precedent labeling oil sands crude will set in other markets that are valuable – like the U.S.
The $40.3 billion 2012-13 budget that Redford released two weeks ago shows just how high the financial stakes are for the province here.
The government says 27.8 per cent of its revenue will come from non-renewable resource revenue. Of that amount, the government forecasts just over 50 per cent of it during the 2012-13 fiscal year will come from bitumen royalties.
The government projects those numbers to go up substantially, too. It forecasts bitumen royalties to reach $5.6 billion in 2012-2013, $7.6 billion in 2013-14 and $9.9 billion in 2014-2015.
And as the Alberta government continues its free-spending ways, it has also said it will balance the budget in 2013-14. But for that to happen, it needs the oil sands gravy train to keep rolling. So it can ill afford to have the oil sands negatively impacted by anything anywhere. That’s especially true when natural gas royalties are expected to stay in the $1.3-1.6 billion range during the same period.
Alberta dodged a bullet today. But the oil sands opponents in the EU still have a few more they can fire, and they will use them.