Canada oil spill program hit by cheap crude, lacks applicants

By Ethan Lou

Nov 6 (Reuters) - The two-year oil price crash has hurt a Canadian government program that funds research on oil spill cleanups, resulting in fewer applicants than expected, a senior federal official said.

As a result, the government will expand the scope of its Oil Spill Response Science Program and open a second call for applications this month, Marc Wickham, Natural Resources Canada's director of energy science and technology programs, said in an interview late last week.

The program funds research that improves cleanup methods for marine oil spills. Those eligible include production, pipeline and shipping companies in the energy sector.

Wickham spoke with Reuters after it obtained details of the program's amendment through an access-to-information request.

Potential spills have been a concern for opponents of proposed Canadian pipelines that transport crude to coastal facilities.

Pipelines grant Canada's largely landlocked energy sector better access to international markets. But more exports would significantly increase tanker traffic, which critics say raises the chance of spills.

Transport Minister Marc Garneau told a radio show last week the government will this year deliver on its pledge for an oil tanker moratorium on the northern west coast.

According to Natural Resources, its spill program provides a conditionally repayable C$5 million ($3.7 million) for four to eight projects between this year and 2019.

Wickham said the program received 15 to 20 applications so far out of an expected 25 to 30.

"The lower price of oil, it affects companies operating in this segment," he said. "They would be more cautious in terms of moving forward with proposals and projects."

Last year, Canadian oil and gas companies laid off more than 35,000 workers, according to industry estimates.

Oil (CLc1) , hit a one-year high of $52 a barrel in October - about half its levels two years ago - but has dipped since to about $44 a barrel. The outlook for prices, however, has improved, and with that, "we hope that applicants will want to come back," Wickham said.

Wickham said the department is expanding the program to include research on all oil recovery techniques, not just mechanical recovery.

The department is also amending its separate Energy Innovation Program, which funds research on clean energy, so that Canada's provincial governments can have more involvement, Wickham said.

Canada's Liberal government took power last November on a pledge to do more for the environment, and its tanker ban effectively killed Enbridge Inc's (ENB.TO) obstacle-ridden Northern Gateway pipeline to the northern west coast.

The government is set to decide next month on Kinder Morgan Inc's (KMI.N) expansion of its Trans Mountain pipeline to the southern west coast.

Another major project, TransCanada Corp's (TRP.TO) Energy East pipeline to the Atlantic, is before the National Energy Board regulator.

($1 = 1.3407 Canadian dollars)