North American Energy, 2000–2007: What a Difference Those Years Make!

Notes

• I have chosen to focus only on these three categories because continental coal trade is relatively minimal and Canada's supply of uranium to the United States for nuclear reactor fuel is entirely a one-way proposition (which strays from my basic theme of interdependence).
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• Calculated from volumetric and average price data available in various publications of the U.S. Department of Energy's Energy Information Administration (EIA).
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• Some of these issues were addressed years ago by the North American Commission for Environmental Cooperation in a report that is worth reexamining. See Environmental Challenges and Opportunities of the Evolving North American Electricity Market (Secretariat Report to Council under Article 13 of the North American Agreement on Environmental Cooperation), June 2002. It is available at www.cec.org.
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• USDOE, EIA, International Energy Outlook 2006, Table A2 (based on interpolations from final data for 2003 and reference case projections for 2010.
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• For example, North America: The Energy Picture II (issued by the trilateral North American Energy Working Group in January 2006) notes on p. 28 that the emergence of geographically dispersed trading points for natural gas “increasingly make use of auction prices rather than long-term contracts.” Futures markets might accomplish the same thing for oil within North America if it were not for the fact that oil prices are set globally. Marginal cost competition for electricity sales can take place in any integrated network—which in North America means that at least some cross-border economic competition exists.
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• The reference case in International Energy Outlook 2006 projects a continental requirement by the three countries for 30 mmbd of oil by 2020, but combined production (conventional and unconventional) of only 19 mmbd (Tables A4 and El). Sensitivity analyses that postulated higher or lower rates of economic growth and higher or lower world oil prices did not materially affect such a huge disparity. I believe that EIA has underestimated the potential of unconventional recovery and hope to see this putative gap diminish in IEO 2007's projections, but it seems too large to close entirely in such a relatively short time. Even a rapid shift to more fuel-efficient vehicles (while highly desirable) would probably fall short of making up the difference.
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• Sidney Weintraub et al., Energy Cooperation in the Western Hemisphere: Benefits and Impediments (Washington, D.C.: Center for Strategic and International Studies, 2007), chap. 3.
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• Energy Information Administration, U.S. Department of Energy, Monthly Energy Review, December 2006, Table 11.1b. Unfortunately, publication in “hard copy” of this venerable and invaluable document (referred to hereafter as MER) ceased at the end of 2006—undoubtedly for budgetary reasons. Its data will continue to be collected and issued regularly in the same general format on the EIA website at http://www.eia.doe.
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• MER, Tables 3.3e and 3.3f.
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• Molecules of Canadian gas do not travel all the way to Mexico, but purchases can be handled through book-entry displacement of gas originating in the United States. As far back as 1989, the Technology Assessment Division of the Louisiana Department of Natural Resources reported in its Natural Gas Outlook that the state's gas production was meeting “head-to-head” competition from Canadian gas “in certain market areas in the Midwest and Northeast”—and that one deal even involved the purchase of Canadian gas for use in Louisiana via substitution.
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• See pp. 349—359 in that issue.
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• See p. 357.
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• MER, Table 4.3.
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• Natural Resources Canada, Natural Gas Division, Petroleum Resources Branch, Energy Policy Sector, Canadian Natural Gas: Review of 2004 & Outlook to 2020 (January 2006), p. 47 and Fig. 47.
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• USDOE, EIA, U.S. Electricity Trade with Canada and Mexico (Washington, D.C., January 1992), p. vii. For a fuller description of how the broader continental energy market evolved—especially during the 1990s—see Joseph M. Dukert, The Evolution of the North American Energy Market, Policy Papers on the Americas, Center for Strategic and International Studies (CSIS), MI. X, study 6 (Washington, D.C., October 19, 1999).
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• MER, Tables 3.3f and 4.3.
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• The significance of the far-reaching energy chapter in CUSFTA (Chapter 9) has not been appreciated adequately It became the model for the same agreement's Chapter 4, applying to commodity trade overall. For a description of personal and political factors in this “tail that wagged the dog,” see pp. 152 162 of my 2004 dissertation at the Johns Hopkins University School of Advanced International Studies: Creation and Evolution d North America's Gas and Electricity Regime: A Dynamic Example of Interdependence. This section grew out of an earlier, unpublished manuscript cited in my Autumn 2000 article for ARCS.
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• In its initial format on the Internet, Energy picture included maps of energy infrastructure within the United States; but in the spirit that prevailed shortly after the attacks on the World Trade Center, concern about additional terrorism prompted their removal. They do not appear in printed versions.
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• A more comprehensive critique of Energy Picture II can be found in Joseph M. Dukert, “North American Energy—2006: Three Governments Offer a New Self-Portrait,” William E. Simon Chair in Political Economy, Occasional Contributions (March 2006, no. 3), Center for Strategic and International Studies, Washington, D.C.
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• North America: The Energy picture (June 2002), p. 7.
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• North America: The Energy Picture II (January 2006), p. 11.
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• See Joseph M. Dukert, “Yellow Alert for North America on Natural Gas,” William E. Simon Chair in Political Economy, Occasional Contributions (March 2005, no. 1), Center for Strategic and International Studies, Washington, D.C.
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• The full list of categories and “benchmarks” is displayed at http://www.spp.gov
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• All of the statistics come from publications of the U.S. Energy Information Administration, although (because of the spread of years) they had to be pieced together from several different publications, including the MER and the Annual Energy Review. Older EIA documents, which often contain more detailed data, can be accessed via http://www.archive.org. These include the “Country Analysis Briefs” (CABs) issued periodically by EIA for numerous nations around the world. At least 10 CABs for Canada over the past decade make an interesting history of the period.
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• The incumbents then were Ralph Goodale (Canada), Ernesto Martens (Mexico), and Spencer Abraham (United States).
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• Oil sands development especially raises many issues, including land disturbance, effects on groundwater, CO2, emissions, “boom town” transformation of hitherto remote communities, and large consumption of natural gas in some extraction techniques. The “right” balance between these negatives and the positive results of continuing production growth in the oil sands will be decided upon by Canadians (Albertans in particular), and that determination will dictate the slope of the future growth curve.
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• This was a production target set earlier by the Western Canadian oil industry to achieve “over the next 25 years,” as cited in EIA's “Country Analysis Brief” of June 16, 1997. By the time a CAB appeared in February 2002, EIA was citing Canadian government sources as saying that “synthetic oil and bitumen production is expected to reach 1.2 million bbl/d by 2010.”
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• In its review and outlook document (see cite below, p. 30) NRCan pegged Alberta's use of natural gas in its oil sands operations at 21 percent of the province's total demand for that fuel, but rising gas prices and new efforts at technological efficiency promise to limit the requirement for gas per barrel of product.
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• Natural Gas Vision, pp. 52–53
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• These figures were drawn recently from an EIA table on the Internet site http://www.eia.doe.gov/cneaf/electricity/epa/epat6p3.html, which was based on the latest Electric Power Annual.
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• Personal communication from Paul Connors of the Canadian Embassy in Washington, D.C. (December 7, 2006), supplemented by Internet searches of the projects.
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• Ibid.
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• A PowerPoint slide provided to me by J. Kyle Keith, Director of Operations for CEPA, in December 2006 shows a crossover point based on the growth in exports forecast by Purvin and Gertz, headed “Oil Pipeline System Near Capacity: New Pipeline Capacity Urgently Needed.”
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• The Alliance pipeline extends from Western Canada to the environs of Chicago, and originally interconnections were planned to carry its reach all the way into Central Pennsylvania—thus providing multi-source competition from several directions to supply much of the U.S. East Coast.
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• Accessed via the Internet at http://www2.nrcan.gc.ca/es/erb/prb/english/View.asp?x=447&oid=672.
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• Natural Resources Canada, Natural Gas Division, Petroleum Resources Branch, Energy Policy Sector, Canadian Natural Gas: Review of 2004 & Outlook to 2020 (January 2006), p. iii.
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• I have used here the numbers from p. v of the preceding NRCan document and p. 19 of Canadian Natural Gas: Review of 2005 & Outlook to 2020 (December 2006) because they are the most recent figures published, even though their listings of Canada's reserves are considerably below the 87.8 cited in Energy Picture II (p. 11). EP-II was also issued in 2006, but was completed during the preceding calendar year. The size of the discrepancy between these two official sources is troubling, but the points made here are valid in any case.
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• Of course, there are exceptions. The Millennium gas pipeline project received a FERC certificate in 2002 but construction was not actually authorized until the very end of 2006, due to delays by route opponents in New York state.
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• The remarks are paraphrased here, as I recall them, since I do not believe they were ever transcribed.
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• NERC was established in 1968 and has had reasonable success through peer pressure for what have heretofore been voluntary standards.
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• On October 6, 2006, an article by Ian Austen in The New York Times, “Conoco and EnCana Plan Oil Sands Venture,” reported that the two companies would combine ownership of two Conoco refineries in Texas with oil sands properties controlled by EnCana. The article added that “the decision to send more of that material to the United States for processing may prove unpopular in [EnCana's] home province, Alberta.”
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• In June 2006, the National Energy Board released Canada's Oil Sands: Opportunities and Challenges to 2015: An Update, superseding a similar document it had published two years earlier. Analyzing pluses and minuses in light of the fact that “conditions surrounding oil sands development have changed significantly,” NEB said that it expected rapid development to continue but that [t]he rate of development will depend on the balance that is reached between the opposing forces that affect the oil sands.” NEB concluded that annual production by 2015 would reach 3 mmbd, more than EIAs International Energy Outlook 2006 had projected for 2020.
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• Since this was written, the North American Competitiveness Council has made a similar suggestion to the SPP?
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• In light of its free-market stance, the United States might be chided for maintaining economic sanctions that make it difficult for Iran to develop its oil production and its potential to become a major player in international natural gas trade; that is a case where geopolitical strategy (Prudent or not) has trumped economics.
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