12/16/2011 11:55 am ET | Updated Feb 15, 2012

EU Tar Sands Proposal Could Damage Reputation, Canada Says

* Canada says EU green fuel proposal singles out tar sands

* EU tar sands plan threatens Canada's economic interests

* EU vote on fuel quality directive seen this month

By Marie Maitre

PARIS, Dec 16 (Reuters) - The European Union must not
single out Canada's unconventional oil in a proposed ranking of
fuels, said a government representative of Alberta, home to the
bulk of Canada's oil wealth, calling for an equal treatment with
other fuels.

Cal Dallas, Alberta's Minister of International relations,
told Reuters the EU tar sands proposal could damage the
reputation of Canada's most lucrative export, but he declined to
say if Ottawa could take the case to the World Trade

"I remain hopeful that we will be able to come to a
reasonable solution," Dallas said in an interview in Paris as
part of a European tour due to take him to the WTO in Geneva,
and to Britain, a traditional ally of Canada.

Britain, home to oil majors BP and Royal Dutch Shell
, has led opposition to the EU proposal to label oil
derived from Canada's huge reserves of tar sands, as highly
polluting in a proposed green fuel ranking.

"We support the idea of measuring these fuels and the move
to a lower-carbon environment but we feel that as it (the EU
fuel quality directive or FQD) is currently proposed we are
being penalised," Dallas said.

"The data for other fuel sources is not transparent, is not
available, and is not being considered in the development of the

The EU ranking assigns tar sands a default greenhouse gas
value of 107 grams of carbon per megajoule, informing buyers it
has more climate impact than conventional crude with 87.5 grams,
EU sources have said.

The EU green fuel ranking completes legislation introduced
in 2008, when the bloc agreed to reduce the carbon intensity of
its transport fuels by 6 percent by 2020.

Dallas said Alberta's oil industry was making headway in
improving its environmental track record. Extracting oil from a
mix of sand and clay is energy and water intensive.

"Any development of this scale does have an impact," he
said, adding: "There are tremendous advances that have been made
in terms of water use, in terms of the energy required to
extract the resource, and the level of monitoring is rising."

The FQD pauses a "reputational issue" to Canada, home to the
world's third largest oil reserves after Saudi Arabia and
Venezuela, Dallas said. Ottawa has lobbied hard to build
acceptance of oil derived from tar sands, which it sees as vital
to its economic future.

But Dallas said investments will continue to pour in on
Alberta even if the EU goes ahead with current plans as
international majors have already spent billions of dollars to
develop production.

"Fuel derived from oil sands is going to be an essential
component of our immediate future," Dallas said.

"The investment plans that are openly discussed and
published contemplate hundreds of billions of dollars of
investments in the future. There is a strong set of indicators
that global investors will continue to make commitments to
develop the oil sand resources."

Dallas also shrugged off any temptation Canada may have to
limit foreign companies' access to its vast oil resources.

"I don't contemplate that there will be any change and one
of the reasons why we are seeing this level of investments from
around the globe is that we are a very predictable, very secure
democracy that has offered a very transparent set of rules for
business and investments."

(Reporting by Marie Maitre; editing by Jason Neely)