Thursday, July 2, 2009

Section 526 Dodged

Sometimes regulators come up with brainstorms that appear simple yet end up kicking over the whole ant hill. Properly applied this piece of nonsense would shut down the coal industry. In this case it promised to close of the one source of oil the is effectively domestic and promises to carry the US through the transition to alternative energy. And where do you think that they buy all that heavy equipment?

The oilsands happens to be the biggest capital goods market in NAFTA right now and we should shut it down?
Anyway, common sense struck and the offending clause was deftly circumvented and made inoperative very quietly.

The last drop of oil ever used in the USA will likely come from the oilsands.

Of course the so called climate bill will also be dancing around this minefield. All law makers want to be seen doing something, but even the dumbest knows that his political career will not long survive a stupid jump in the price of gasoline at the pump brought on by some bright new tax.


Section 526

Section 526 of the Energy Independence and Security Act of 2007 had some strong implications for the Canadian oil sands. Section 526 targeted unconventional petroleum sources with greenhouse gas emissions greater than conventional sources. In other words, Section 526 prohibits the government from purchasing fuels with a higher carbon intensity than gasoline.

On June 17, the U.S. Senate Energy and Natural Resources Committee voted for a bill that could put the oil sands back in our good graces. One amendment passed by a voice vote stated U.S. refiners would not be in violation of Section 526 by buying crude oil produced from Canadian oil sands.

With oil prices on their way to $80 per barrel, any weakening of Section 526 will undoubtedly boost oil sands activity. And I expect those smaller companies developing new in-situ recovery methods will come out on top in the next round of oil sands' profits.

Until next time,
Keith Kohl

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