The Sierra Club and Southern Alliance for Clean Energy have sued the U.S. Department of Defense in federal court to stop the military from purchasing fuels derived from the oil sands of western Canada. Sierra Club, et al. v. U.S. Defense Energy Support Center, No. 3:10-cv-02673 (N.D. CA). The environmental groups allege that DOD is violating Section 526 of the Energy Independence and Security Act of 2007, 42 U.S.C. § 17142, which prohibits federal agencies from purchasing fuel from "unconventional sources" if the lifecycle greenhouse gas emissions associated with such fuels exceed those of fuels derived from conventional sources of petroleum. Since heat must typically be used to separate oil from oil sands (also known as bitumen), the carbon emissions associated with producing this heat result in higher overall lifecycle emissions than for ordinary crude oil.

The DOD's Defense Energy Support Center, which buys more than 100 million barrels of fuel per year from various refiners for the military and other federal agencies, has taken the position that its fuel contracts comply with law as long as they do not specify oil sands as the source of oil to be used by the refiners. The U.S. Chamber of Commerce, the American Petroleum Institute, and the National Petrochemical and Refiners Association have moved to intervene in the suit on behalf of the DOD, arguing that Section 526 cannot practically be applied to Canadian oil sands, since the oil from that source, which represents about half of Canadian oil imported to U.S. refineries, is typically blended with oil from other sources during the refining process.

The lawsuit, which also alleges violations of the Administrative Procedure Act and National Environmental Policy Act, is still in the early stages, and the district court is not expected to rule on the industry groups' motion to intervene until November 2010. Senators Lindsey Graham (R-SC) and Saxby Chambliss (R-GA) have introduced a bill known as the Oil Energy Security Act of 2010, which would moot the litigation by repealing Section 526.