Kissing off Canada

Investor's Business Daily

Energy Policy: Quick — what country has the world's largest oil reserves? Saudi Arabia? Iran? Nigeria? Venezuela? Wrong on all counts. The answer is Canada. And our neighbor to the north is worried we don't want it.

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. It isn't even close.

Yet, according to the Financial Times of London, Canada's government recently sent U.S. Defense Secretary Robert Gates a letter of warning that it might not be able to sell the U.S. any of its oil, which the Pentagon desperately needs for national defense.

For that, you can thank the Energy Independence and Security Act of 2007, passed with great gusto and self-righteousness by the Democratic Congress.

Under Section 526 of that law, tar sands are considered to be an alternative fuel. But the law requires oil sold to the U.S. government and produced from alternative sources to emit fewer greenhouse gases than oil produced from conventional crude sources.

That's a big problem.

Estimates show that removing the highly sticky, coagulated oil found in tar sands produces as much as five times the amount of greenhouse gas as pumping from a conventional well.

"Classifying the oil sands as a nonconventional fuel," said Tristan Landry, a spokesman for Canada's Embassy in Washington, "would unnecessarily complicate the integrated Canada-U.S. energy relationship."

"Unnecessarily complicate" is putting it politely. Really, it's like someone dying of thirst but refusing to drink from a burbling spring just feet away. It makes absolutely no sense.

If enforced, this provision of the law will not only make our oil more costly, it will imperil our national security.

But then, we never did think much of the 2007 energy bill. It forced a nearly 400% increase of renewable fuels on U.S. companies and consumers by 2022, but provided no real road map for getting there.

It set the stage for $18 billion in new taxes on oil companies, discouraging production. It stiffened CAFE standards on cars, a feel-good measure that only will lead to higher vehicle prices.

Indeed, everything Congress has done on energy seems contrived to create less energy and higher prices across the economy.

That's especially true for our foolish new ethanol standards, which have removed 15% of our farmland from food production to make the ethanol equivalent of just 2% of our gasoline. Been to a supermarket lately? You're paying for this in every thing you buy now, from frozen pizza to canned corn.

Now, here we sit, a neighbor of the country with the world's largest oil supplies and we're going to tell them no thanks? This is the equivalent of legislative malpractice. But you'll have to get used to that if, as many expect, we elect a Democratic president and enlarge the Democrats' hold on the two houses of Congress.

But oh, don't worry about all that oil in Canada. The tar sands will still be developed. U.S. companies have already partnered with Canadian companies to dig the stuff up.

And they won't want for customers. There's little doubt that China and India — who are adding half a million barrels to the world demand each year, or roughly 40% of total global demand growth — will happily take our place as consumer of first resort.

The past two years have shown Congress' ineptitude when it comes to energy. This is but another example, resulting in higher prices, soaring food costs and now, perhaps, a recession brought on by a failure to understand basic economics.

Source: Investor's Business Daily

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