Friday, July 14, 2006

Canada's Energy Sovereignty, or Lack Thereof

There is an unfortunate tendency in Canada to buy into the cornucopean vision offered by politicians and the media that we are an energy rich nation with sufficient energy reserves of all kinds to satisfy our needs decades or even centuries into the future. And with the simple statistics of reserves and production it is difficult to argue with that. But when you look deeper into those statistics and match that up with our energy needs and the nature of those needs and the realities of who has control over those energy reserves, you get a very different and unnerving picture. Our energy wealth begins to look very much like the American financial wealth which is all smoke and mirrors and built on a huge mountain of debt.

Our energy resources are not ours to do with as we please. We do not control them. Control over Canada's energy resources were put on the table in the NAFTA negotiations. They were quickly and gratiously grabbed off the table. In those negotiations Canada's negotiators accepted the inclusion of a proportionality clause into the NAFTA agreement. That proportionality clause requires Canada, in perpetuity, to make available to the US an amount of oil and natural gas equivalent to our own domestic usage. As Gordon Laxer writes in Will federal parties secure Canada's energy future?, "But, even the best environmental policies will not help much as long as Canada is locked into exporting 70% of its oil and 56% of its natural gas to the US. Under NAFTA’s proportionality rules, we must continue exporting at least the same proportion of energy to the US, even if we face shortages. If Canada conserves energy, as it must, we will export more of our dwindling supplies so that Americans can maintain their SUV ‘fix’." In fact, we are reducing our domestic natural gas usage. As Tom Adams reports in his Globe and Mail article, Natural-gas policy, "Average natural-gas use per Ontario household has dropped by about 10 per cent over the past 10 years." Canada alone, of the three participants in NAFTA, fell into that proportionality trap. As Gordon Laxer points out, "Mexico’s independent policy ensures public ownership and first access for domestic needs."
Both of our two primary energy resources, natural gas and conventional crude oil, are already in decline and that decline is escalating. To replace the reducing oil supply more and more of Canada's oil production is now coming from the tar sands. But, Laxer points out, "Alberta’s tar sands have plenty of oil, but it comes with horrific environmental damage." The extraction and processing of tar sands material requires a tremendous amount of fresh water, in excess of 1,000 litres per barrel of oil. The impact on the sensitive ecology of Northern Alberta will be a terrible price to be paid by many future generations of Albertans.

More important from an energy perspective, however, is the amount of natural gas, production of which is already rapidly in decline, used in the processing and distribution of tar sands oil. According to an article in, "an industry rule of thumb is that it takes 1000 cubic feet of natural gas to produce one barrel of bitumen. The demand for mining recovery is a more modest 250 cubic feet per barrel. Current natural gas demand for upgrader hydrogen amounts to approximately 400 standard cubic feet per barrel. Future hydrogen additions for upgrading into higher quality SCO [synthetic crude oil], may reach another 250 cubic feet per barrel. In addition to this, if no coke burning is taking place, yet another 80 standard cubic feet of barrel for upgrader fuel is to be added. Therefore, a future barrel of in situ produced high quality SCO may require more than 1700 standard cubic feet of natural gas...."
Canada is already building several LNG (Liquified Natural Gas) plants, most thus far in the Maritimes, in order to facilitate the importation of natural gas to make up for our own declining supply. A proportional amount of that imported natural gas, however, is also destined for pipeline shipment to the US.
That use of natural gas to process tar sands oil presents Canada with a double whammy under the terms of NAFTA. All of that NG usage for tar sands processing (already 11% of our total NG usage) is counted in our domestic usage figures. NG usage for tar sands processing has been increasing by about 10% per year. And all of that increase requires us to make available to the U.S. a proportional additional amount of natural gas. Not only are we selling the bulk of our tar sands oil to the U.S. but that very activity further increases the amount of natural gas, an increasing amount of which we are importing, that we must make available to the U.S.
If we continue to allow ourselves to be obliged to increasingly deplete our energy resources to satisfy the insatiable energy appetite of the U.S., we will soon, as Colin Campbell suggested in the ASPO country review of Canada, "be freezing in winter while our natural gas runs the hair dryers in Houston."


Malcolm said...

Is there any way out of this idiotic energy policy?

locard said...

Is there any way out of this idiotic energy policy?

locard said...

Do you see any way out of this idiotic energy policy?

Richard Embleton said...

It would take some very major changes;
1) Removing ourselves from the NAFTA agreement (which we can do if we wish but that is more a political and economic issue than a legal one);
2) A complete realignment of where control over energy and minerals rests in this country. The last time a government attempted a national energy policy it almost split the company apart. If anything I would say that is even more likely today;
3) Nationalization of our oil assets or imposing a "sovereign needs first" requirement on their exploitation.
In short, I don't see it changing in time to prevent a very serious energy crisis in the country.

Anonymous said...

Both the Liberals and the NDP seem to be in a state of policy impoverishment and, moreover, have little to lose in Alberta. There is some pressure to put NAFTA on the table in the U.S. A proposal of NAFTA renegotiation could revive the flagging fortunes of centre and/or left and/or green and/or Canadian nationalists (i.e., most of the country) much more than a carbon tax, which has the same divisive effect with no great effect on fundamental problems.