Industry officials estimate the sands in northern Alberta could yield as much as 175 billion barrels of oil, making Canada second only to Saudi Arabia in crude oil reserves. But the extraction process produces a high amount of the greenhouse gases blamed for climate change.
Environmental groups want Obama to get tough with Canada over the issue, and the president has said he would like to work with Canada on developing carbon capture and storage to help deal with the massive emissions from the sands as well as the U.S. coal industry. The new, largely unproven technology would bury harmful emissions underground.
Obama and Harper were to announce on Thursday that their nations would expand cooperation on research and demonstration projects, according to a U.S. official who spoke on condition of anonymity. The agreement was short on details, but Obama planned to highlight that the $787 billion economic stimulus package he just signed contains $3 billion for carbon capture and sequestration technology and $11 billion for smart grid efforts, the official said.
As Obama pulled up to Parliament Hill under gray skies, a cheering crowd of more than 1,000 people greeted him. A woman along his motorcade route carried a sign that read "Yes we CANada!"
Obama shook hands with Harper and waved to the crowd, prompting a huge cheer. He met privately with Harper before key members of their teams joined them for a working lunch. The two leaders will cap their visit with a brief joint appearance before reporters.
It is Obama's first chance since taking office to command an audience abroad, let alone get an impression of the conservative leader Harper. The two had not met previously.
Earlier, Obama was greeted off Air Force One by Governor General Michaelle Jean, who represents Britain's Queen Elizabeth II as head of state in a mostly ceremonial role. Red-coated Mounties lined a path on the icy tarmac as Obama and Jean went indoors for a meeting.
Canada and the United States have the largest trading relationship between any two countries in the world. And for all the talk of ending a dangerous reliance on foreign oil, the U.S. depends more on Canada for imported oil than it does any other country.
As Obama grapples with an economy in free fall, he has kept his focus at home. As if to underscore that urgent domestic tone, he isn't staying the night or even sticking around for dinner in Canada. He will be in Ottawa for under seven hours.
Yet that pace belies an agenda packed with sensitive topics.
Canada is planning to pull its 2,500 combat troops out of Afghanistan's volatile south in 2011, following the loss of more than 100 troops killed in the country since 2001. Obama is headed the other direction, dispatching 17,000 more U.S. troops to the war zone.
Both the U.S. and Canada have urged other NATO countries to contribute more to stabilize Afghanistan, where insurgents have gained new strength and the top U.S commander is warning of a "tough year." But Canada's people say they have shouldered their burden enough.
Obama plans to tell Harper that the U.S. is overhauling its strategy in Afghanistan, with more effort on diplomacy.
On the economy, Obama comes with a reassuring pro-trade message. There is no strident talk from the White House about renegotiating the North American Free Trade Agreement - or even pulling out as a tool of leverage. Obama raised that idea as a candidate for president with an eye toward strengthening labor and environmental standards. But reopening a lucrative trade pact among Canada, Mexico and the U.S. is not a mess Obama wants to get into now.
Other issues are the "Buy American" clause in the economic stimulus bill Obama signed into law Tuesday and his administration's move to impose stricter "country of origin" labeling on fresh meats and other foods sold in U.S. stores.
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Associated Press writers Jennifer Loven and Rob Gillies in Ottawa and Julie Pace in Washington contributed to this report.
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