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U.S. Government Should Foster Canadian Oilsands Development, Study Says

To successfully reduce the United States' dependence on fuels from outside North America the country "must encourage development" of Canadian oilsands and mitigate the additional carbon dioxide emitted during the sands' extraction and refinement by "promoting the replacement of coal with gas in electricity generation," according to a new study by Rice University's Baker Institute for Public Policy.

Co-authored by two Rice Scholars at the Baker Institute: Dagobert Brito, Rice's Peterkin Professor of Political Economy, and Robert Curl, Rice's Pitzer-Schlumberger Professor Emeritus of Natural Sciences and professor emeritus of chemistry the paper says the U.S. government must pursue policies that foster the diversion of Canadian oilsands crude to U.S. Gulf Coast refineries.

The study calculates that this move would reduce the U.S. trade deficit through increased trade with Canada. The recommendations come within the context of recent discoveries of natural gas in the U.S., developments in technology for the exploitation of Canadian oilsand that dramatically changed the liquid-fuels market in North America and the world as well as debates over the Keystone pipeline project.

"The market for petroleum is global. Canada will produce oil from the sands regardless of any U.S. policies," the authors wrote. "It is less expensive for Canada to use U.S. Gulf ports to market their oil. This oil will create jobs in the U.S. petrochemical industry and would be a secure source of oil for the United States were world oil markets to be disrupted."

The authors added that Canada is the United States' largest trading partner and that experts estimate more than 50% of Canadian income from the sale of oil would be spent in the U.S., which would have a substantial impact on the federal balance of payments.

To address climate change-related concerns over the additional carbon dioxide associated with Canadian oilsand production, the study's calculations demonstrate that the replacement of coal electricity generation with gas would do much to reduce carbon dioxide emissions in the U.S. and is the least expensive way to pursue a reduction.

"The present glut in the gas market is a golden opportunity to push this change by adding a limit in terms of metric tons of carbon dioxide per megawatt-hour through adding carbon dioxide to the pollutant list for electricity generation plants, and gradually tightening it," the authors said.

Citing U.S. Energy Information Administration data, the study points out that the amount of natural gas that can be recovered in the United States is 2,100 Tcf, enough to supply the U.S. for about 90 years at current consumption rates. Canadian oilsands reserves are estimated to be about 170 billion barrels of oil -- second only to Saudi Arabia and enough to supply 5 billion barrels a day for more than 90 years.

"We believe concern about additional carbon dioxide emissions from Canadian oilsands production is misplaced," the authors said. "The strategic advantage of access to this resource far outweighs the extra carbon dioxide from its production, as this carbon dioxide can be more economically offset elsewhere in the economy. Effective government policy would encourage the development of the Canadian oilsands and the mitigation of the carbon dioxide emissions."

The full study is available on the Rice University's Baker Institute for Public Policy website.

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