New California fuel rule may violate NAFTA: lawyer

California adopted a first-ever rule Thursday requiring refineries, producers and importers of motor fuels sold in the state to reduce the "carbon intensity" of their products by 10 percent by 2020, with greater cuts thereafter.

The measures to slash such emissions would force refiners to consider the carbon footprint of the fuels they produce, a potential blow to synthetic crude upgraded from Alberta's oil sands, whose production emits more carbon-dioxide than conventional oil.

However, the state may have no business imposing such rules on oil produced in other countries, a Canadian lawyer said, and the provisions may violate international trade treaties.

"There's definitely a NAFTA case and a WTO case. There's no doubt in my mind about it," said Simon Potter, a partner at the McCarthy Tetrault law firm whose practice includes trade and competition law.

"This is California deciding they are going to treat oil differently depending on ... where it comes from. It's an obvious violation of the requirement for national treatment."

NAFTA provisions guarantee that companies and products from Canada, the United States and Mexico are not discriminated against on the basis of nationality or origin.

"Once you get across the border, you have to be treated like everybody else," said Potter, a former president of the Canadian Bar Association.

"To the extent that these measures make oil from one part of the world that they consider dirty more expensive than identical oil from another part of the world they consider clean, they've got a discriminatory treatment issue."

Canadian trade officials said in an e-mailed statement that the new California rules may amount to discrimination against the country's crude oil.