Addressing Ontario's Power Needs- ECSTF
click here to download file
The Ontario Reliability Outlook - IESO - Power to Ontario
click here to download file
Climate Change: Is the Science Sound? Special Report to the Legislative
Assembly of Ontario.
click here to download file
Joint Emissions Trading as a Socio-Ecological Transformation
click here to download file
Is it time to cool off the natural gas "gold rush fever" mentality?
Publication Date: December 04, 2004
Author: Trudy Beyak
Source: Abbotsford News
Is it time to cool off the natural gas "gold rush fever"
The energy-starved U.S. will drain B.C.'s natural gas resources within
12 years if the provincial government
doesn't start to protect its own
citizens, says Dale Marshall, a policy analyst with the David Suzuki
author of the report Running on Empty, Shifting to a
Sustainable Energy Plan for B.C.
Marshall said B.C. is quickly
headed for an "energy crunch" because
the province only has enough natural gas reserves to last for the next
currently ships about 50 per cent of its natural gas to the U.S.
via the Huntingdon-Sumas pipeline hub in Abbotsford.
Les, B.C. Minister of Small Business, however, discounts the
"doom and gloom" predictions. (See story below).
told the Abbotsford News on Tuesday that the upcoming energy
crunch does pose a serious and real problem.
everyone should be concerned about protecting B.C.'s domestic
supply of natural gas, and the government should maximize
benefits of this limited resource.
For one thing, Marshall said the provincial government shouldn't
natural gas so cheaply to the U.S. For another, the B.C. Liberals
ought to start looking after the province's future
"Oil and natural gas are non-renewable. When they're gone, they're
gone," he said.
Even with the
possibility of discovering a new natural gas supply, the
new fields tend to be small and the fuel is becoming harder to
and to extract, he said.
Despite that ominous fact, the B.C. government is focused on
extracting as much
oil and gas from the ground as quickly as possible
and shipping these non-renewable resources to the U.S., Marshall said,
the energy sector is unsustainable.
He thinks the B.C. Liberals are short-sighted, but the dilemma is that
just shut off the energy tap to the U.S., he said.
"The province can't decrease the amount of natural gas that is shipped
the U.S. because the North American Free Trade Agreement (NAFTA)
guarantees the U.S. will get the same level of natural
gas that was
sold on average during the past 36 months," Marshall said.
"The proportionality clause in NAFTA locks
us into the amount of
natural gas we send across the border."
With that in mind, Marshall believes B.C. should immediately
control any increase in the flow of natural gas sold to the U.S. and
the royalties paid to the province should
be bumped up to reflect the
fact that it is a finite resource and the province is running out.
"Even now we can't
even hold on to 50 per cent of our own natural gas
supplies even if we need it because NAFTA guarantees the U.S. share,"
"Increasingly, we are losing our sovereignty over our own resources."
Marshall questions the rationale of
B.C.'s energy planning.
The government plans to integrate B.C. into the U.S. energy market and
companies to produce power in B.C. which can
then be sold to the U.S., Marshall said.
U.S.-based multinational corporations,
such as Duke Energy and Calpine
Corporation, are starting to move in.
Duke Energy now owns the former Westcoast
Pipelines in B.C. which has
donated substantial financial contributions to the B.C. Liberal Party.
Calpine is one
of the largest power corporations in the U.S. and is
the operator of the Sumas Energy 1 (SE1) power plant in Sumas.
Sumas Energy 2 (SE2) is constructed next to the Canadian-U.S.
border and the natural gas hub, Duke Energy will transport
cubic feet of natural gas a day to be burned at the controversial
The amount of natural
gas that SE2 will burn each day is equal to 55
per cent of the total residential consumption in Washington state,
to evidence presented to the Energy Facility Site Evaluation
Marshall said the long-term goal of the B.C.
government must be to
assure energy security for its own citizens.
He is also concerned that B.C. is not creating
enough jobs from this
Although forestry employs 90,000 people, for example, the oil and gas
only employs 1,300 people, Marshall said.
In fact, employment in oil and gas decreased from 2,500 employees in
to 1,300 in 2003 due to productivity efficiencies.
The provincial government, however, maintains there are actually
people employed in the drilling and exploration industry.
Marshall said B.C. has only two small refineries and most
of the oil
leaves the province unrefined.
He is also disappointed with the Liberals' energy plan because it
for coal-fired power plants, which produce an unacceptable
amount of air pollution and greenhouse gases.
change is a critical global issue, he said.
To compound B.C.'s goal of encouraging more oil and gas development,
government has weakened the Environmental Assessment Act for new
projects, Marshall said.
by Andrew Nikiforuk
Eight wrong ways to think about the future of energy.
In 1976, Marion King Hubbert, the visionary U.S. geophysicist who once worked for
Shell, warned that North Americans would soon face a bigger problem than US$50-a-barrel
oil and astronomical gas prices. He defined the challenge as a "cultural" blindness to the
realities of resource depletion. Because North Americans have known nothing but "exponential
growth" in fossil fuels, Hubbert reasoned that we had become incapable of "reckoning with
problems of non-growth."
Hubbert, who in the 1950s accurately predicted when oil production would peak in
the United States (1970), also had a practical solution. He thought North Americans needed
to undertake a "serious examination" of oil and gas trends, and their formidable economic
implications, before shortages or price spikes made things really messy for ordinary business.
But a number of energy myths continue to smother, if not deter, the debate Hubbert
envisioned. The status quo in industry and government avoids the word depletion; most argue that technology, looser regulations, more drilling or price mechanisms will keep the hydrocarbons flowing. (Statistics show Canadians are producing, consuming and exporting more energy than ever.) The oilpatch can't imagine the end of affordable fossil fuels any more than cod fishermen could imagine the end of cod.
An increasing number of geologists and gas analysts, however, believe that a fact
does not cease to exist just because it is ignored. One of Canada's most serious examiners
of energy trends and forecasts is Dave Hughes, a calm, deep-voiced Calgary-based geologist
with Natural Resources Canada. Over the past two years, Hughes has put together (in his
spare time, no less) an exhaustive open file on oil and gas supplies. His detailed presentation
has surprised, alarmed and rankled bureaucrats, professional oilmen and CEOs alike. The
facts not only question the country's pervasive energy myths; they warn that Canadian business
will face crippling bills and shortages if the country takes
a business-as-usual approach to energy supplies. "We are facing an energy crunch," says
Hughes. "We can smoothly manage the transition to a more sustainable energy future, or the
transition will manage us."
Hughes and many other analysts don't think we will be able to manage anything well
until we reject the reigning assumptions and accept some disturbing realities. The world has lots of oil. The world may have lots of oil, but it is running out of cheap conventional crude. Since 1965, demand for oil has increased by 150% worldwide, and rapid economic growth is now driving the biggest yearly increase in world demand in more than 20 years. Given that remaining oil supplies largely lie in "volatile terrain (the Middle East, Russia and West Africa), the distribution of oil has become a massive geopolitical headache. China and India's humming economies have added to the strain.
The resource is also in a persistent, undeniable state of decline. As Hughes notes,
production has exceeded discoveries since 1983. In 2004, the BP Statistical Review of World Energy, the gold standard for real numbers on oil and gas, looked at 54 producing countries and outlined the disturbing face of oil depletion. Twenty-two nations, representing a third of the world's oil production, are in decline. Another 14 countries, ccounting for 42% of the world's output, are producing on average 22% below their peak. Only 18 nations, accounting for a quarter of the world's production, have yet to experience a peak--but they will soon. Iran peaked in 1974 and Nigeria in 1979. The United Kingdom's North Sea bonanza
peaked in 1999, and actually declined 9% over 2003.
Between 2008 and 2010, Hughes estimates world oil production will climb to 87 million
barrels a day and then falter. Supplies will tighten and prices will continue their steady
ascent. This collective peaking in deliverability simply means oil production can no longer
grow to meet future demand (or even to offset depletion). As Hughes notes, the oil left
"will be the hardest and most costly to extract." And much of it will require transportation
through hazardous political geography.
With the world's oil production machine now fully deployed--production is at 99%
of global capacity--energy security is now walking a tightrope. A snap cold spell or a hurricane
in the Gulf of Mexico (not to mention bombs in Iraq) have already sent prices flying northward
and will do so again. Energy vulnerability (what the media has dubbed "the fear factor")
has arrived in our living rooms for a long stay. Canada's oilsands can make up for declines in world conventional oil production No way. Like most big energy projects, Alberta's oilsands will deliver more hyperbole
than oil. The Alberta government claims the prolific sands hold as much as 311 billion barrels
of recoverable oil--a prize greater than all of Saudi Arabia's oil wealth. True or not,
this figure conveniently masks some key limitations--namely, says Hughes, "at what rate
this oil can be produced and what the capital, energy and other limits to production growth
are." After the Alberta Energy and Utilities Board and the Houston-based Oil & Gas Journal
reported that 175 billion barrels of the tarry goo were proven reserves in 2002, the New
York Times challenged the numbers as wishful thinking. In contrast to Alberta's figures,
the ever-prudent BP Statistical Review lists only 16.9 billion barrels as recoverable and
under active development. As Hughes notes, the 311 billion and 175 billion barrel figures
just don't reflect economic, environmental and engineering constraints. The costs present operational obstacles--and highlight that the oilsands are both an energy and a money pit. Hughes estimates that recovering 175 billion barrels over a 60-year period would require capital infrastructure costs of more than $400 billion, based on the current cost of extracting a barrel of oil from the sands. Such a gargantuan venture would yield an average
of less than eight million barrels a day. (The United States consumed 20 million barrels
a day in 2003, and the world is heading toward 82 million barrels a day in 2004, according
to recent estimates.) Citizens might want to see that $400 billion go elsewhere.
The Rocky Mountain Institute, a Colorado non-profit agency devoted to market-based
solutions for resource conservation, recently calculated that the United States could end
foreign oil imports with a number of measures--including buying up gas-guzzling vehicles--that would cost about US$180 billion over 10 years.
Another brick wall for the oilsands remains natural gas. Today, the oilsands consume
nearly 5% of Canada's natural gas supply. It is being burned to extract bitumen, a tarlike
mixture of hydrocarbons that is cooked into synthetic crude. By 2025, given a four-to-fivefold
expansion in production, that gas addiction could account for 20% of national consumption.
By then, the oilsands will burn nearly two billion cubic feet of gas a day--the entire predicted
output of the Mackenzie Valley pipeline. "You could just direct that pipeline into Fort
McMurray," says Hughes, referring to Alberta's oilsands capital, "unless alternative fuels
such as petroleum coke are substituted for gas." Just a year ago, Thomas Driscoll, an analyst
with Lehman Brothers Inc. in New York, issued the same warning.
Most analysts regard the burning of gas to make oil a process akin to turning gold
The highest-value uses for natural gas are home-heating, fertilizer production and
petrochemical manufacturing. Given that nearly 80% of Canadians use
natural gas in their furnaces, politicians may have to
decide whether the resource will be used to keep Canadians warm, exported for electrical
generation to keep Americans cool or burned to cook up bitumen. No Canadian politician has
sounded this alarm but, fortunately, Alan Greenspan, chairman of the U.S. Federal Reserve
Board, has taken up the cause. In June 2003, he told Congress that Canada "has little capacity
to significantly expand its exports [to the U.S.], in part because of the role that Canadian
gas plays in supporting growing oil production from [its] tar sands."
In addition to tight gas supplies, the oilsands face critical shortages of water
and condensate, a thinner derived from processing natural gas used to dilute the bitumen.
It takes on average between one and two barrels of makeup water to produce a barrel of oil
and, at forecast production growth, University of Alberta water ecologist David Schindler
estimates the Athabasca River could be seriously compromised by 2020. As well, the National Energy Board predicts shortages of condensate needed to liquefy bitumen for pipeline transport as early as this year.
The National Energy Board's happiest scenario at the moment concludes that the oilsands
could mine three million barrels of oil a day by 2025. "If this happens, Canada will produce
a little more than 4% of forecast 2025 world demand," says Hughes. "It's no big thing in
the world's scheme of things." But that resource will keep Canadian cars running.
The world has lots of natural gas.That's true. "The bad news is that most of it is not in North America," says Hughes. Places like the Middle East, Russia and Venezuela hold close to three-quarters of the world's
remaining gas reserves and will soon become the new gas czars.
North America consumes nearly one-third of the world's production (thanks in large part
to industrial use, residential heating and electricity production), but the continent holds
only 4% of reserves.
Canada, which boasts just 1% of global reserves, boosted production by 127% between
1986 and 2003 to feed domestic consumption growth and the expanding U.S. appetite for gas, and became the world's No. 2 gas exporter by the late 1990s, after Russia. Yet no federal or provincial government ever stopped to question the logic of rapidly disposing of a declining non-renewable resource at mostly rock-bottom prices.
Now production throughout the Western Canadian Sedimentary Basin is in a freefall
(some say gas production peaked in 2001), while costly offshore drilling has come up dry.Canadian exports to the United States fell by 21% between 2001 and 2003. As a consequence, at current production rates Canada has less than a nine-year supply of discovered gas left. (Nearly 80% of Canada's estimated conventional gas endowment
has yet to be discovered, according to the National Energy Board.) True, one-quarter of
the world's drilling rigs are in Canada. Yet despite record drilling in 2003 (or what one
analyst calls "brute force"--there were close to 14,000 successful gas wells drilled), production
dropped by 3.6%. In 1997, the initial production of a typical new gas well was about 700
thousand cubic feet per day. Today, the average initial production of a new gas well is
about 350 thousand cubic feet a day. That means many more wells must be drilled to offset
natural production declines, which in Canada now total 21% a year. "What happens if that
trend continues?" asks Hughes. "How many wells will we have to drill to keep production
Rising gas prices in the United States have already shut down one-fifth of its nitrogen
The gravity of the natural gas crisis is just beginning to hit the public radar.
At a recent National Energy Board conference, even ever-optimistic industry types noted
"the gas supply situation is unsettling" and "we have crossed the Rubicon." Julian Darley,
the author of High Noon for Natural Gas, says the situation is so serious "that it is too
late to panic. It is time to plan." If Canadian politicians were sensible,
they would recognize that this is a cold country, says Darley. "They would cut production
and exports and work out depletion rates."
Yet Canada has had no debate about the crisis. Replacing low-cost conventional gas
with high-cost unconventional sources will be "an extreme challenge," according to Hughes.
If current production declines continue and growth in demand forecast by the U.S.
Energy Information Administration is realized, a continental shortfall equivalent to 13
trillion cubic feet per year (about 42% of demand) could occur by 2025. Hughes predicts
the crunch will arrive much sooner than that, unless as-yet-unproven windfalls result from
unconventional gas sources. Banking on such things as gas hydrates or liquefied natural
gas to offset declines in conventional production, says Hughes, "is akin to planning your
finances on the assumption you will win the lotto in 12 or 15 years' time."
Coal-bed methane will avert a natural gas crisis.Don't bet on it. In the United States, the practice of removing methane from
ancient coal seams has proven to be a controversial and emotion-laden issue, given aquifer
depletion, contamination and other problems. To date, Canada's coal-bed methane industry
has drilled nearly 3,000 wells, but its political and economic future remains uncertain
amid heavy public and government consultation. Despite 20 years of conflict-laden pumping,
the United States has yet to coax more than 8.5% of its natural gas from coal seams. Yet
the National Energy Board predicts the industry could somehow milk between 13% and 23% of
Canada's supply from coal-bed methane by 2025. Right now, about 0.5% of our gas comes from
coal-bed methane seams in farm country northeast of Calgary.
According to a recent paper by the National Energy Board, coal-bed methane production
can grow only with mind-boggling feats of intensive drilling. Projects in central Alberta
between Calgary and Edmonton could further industrialize the landscape with up to 50,000
wells, and turn rolling prairie into "a manufacturing process," says the report.
Coal-bed methane production is already proceeding at a rapid pace in the West, but
few analysts expect it to make up for conventional declines. "If we are going to meet the
NEB prediction," says Hughes, "we have a lot of work to do."
Liquefied natural gas is a knight in shining armour It might be in Camelot, but not in the real world. Taking gas from the Middle
East, cooling it, pumping it onto a tanker and shipping it around the world to terminals
where it can be unthawed into a gaseous state is already a major business. In fact, the
world's 150 liquefied natural gas (LNG) tankers can now move enough gas to satisfy 6% of
world consumption (more than five trillion cubic feet per year).
But LNG has powerful drawbacks. It requires costly infrastructure that takes about
five years to build. An entire production and delivery system costs anywhere between $3
billion and $10 billion. The process of cooling, transporting and warming up the gas is
energy-intensive, consuming 15% to 30% of the resource transported. And not many communities
want an LNG terminal in their backyards. An accidental conflagration at one in Skikda, Algeria,
in January 2004, killed 27 people and injured another 74. Terrorists have also targeted
the highly flammable facilities. Public opposition has already killed eight North American
proposals for LNG terminals over the past two years.
As president of WestPac Terminals Inc., a Calgary-based LNG company, Rob Woronuk
has proposed a terminal for an island 11 kilometres off the coast near Prince Rupert, B.C.
Unlike many projects, it would run on a quasi-utility model, so consumers wouldn't end up
paying inflated prices. "Producers will get their share, but there will be a balance," says
"LNG is going to be crucial." Still, everyone agrees it is no silver bullet.
Coal can't help us. Not true. Coal is already experiencing a resurrection for the simple
reason that it is the one hydrocarbon resource the world
still has in abundance. In fact, 90% of North America's remaining hydrocarbons are coal, which is one
resource the Middle East does not possess.
Coal boasts a much lower heat cost than gas or oil, is easier to transport, and provides
the lowest electricity costs on the planet. But coal also comes with toxic side effects:
it produces twice the greenhouse gas emissions of natural gas. "The key to coal is better
and cleaner technology," says Hughes. The best technologies now on the market can reduce
greenhouse gas emissions and other pollutants by 30%. Even without expensive new technology, coal has became the world's fastest-growing hydrocarbon fuel source in 2002 and 2003.
With better technologies we will squeeze more fuel out of our fossil heritage.We can hope, but technology's track record is not inspiring. In the 1970s, fusion
was going to solve our woes, and Richard Nixon even promised "hydrogen-fueled vehicles."
But North Americans are still waiting for any meaningful application of either innovation.
In fact, hydrogen looks more and more unlikely. It makes little sense from an efficiency
perspective-- the energy needed to crack the hydrogen for a fuel cell is greater than the
energy produced-- and many analysts conclude that simple conservation measures would be
cheaper than any transition to hydrogen.
The promise of better technology often becomes nothing more than the delivery of
greater force. Right now, more technology means more drilling rigs in the field. "That's
not a technological innovation," says Woronuk. "That's just high prices and brute force."
Nor is anyone really investing in the future. According to Statistics Canada, R&D related
to energy fell to about $900 million in 2001 from $1.3 billion in 1983.
It is also instructive to note that the Ford Model T got better fuel mileage than
most of its modern counterparts. Don't worry, the market will take care of things The
National Energy Board believes higher prices will solve our natural gas woes by encouraging
fuel switching and conservation. Yet as Houston-based Matt Simmons, the world's foremost
private energy banker, has noted, "free markets and energy security do not mix." Deregulation
in the 1980s did not expand supply options and only temporarily reduced costs. With no long-term
guidelines and no surplus capacity, the only thing the market can deliver is "volatility,"
argues Simmons. Longtime gas analyst Woronuk agrees that volatility and price shocks don't
make a plan. "Economics 101 will solve the mess, but the trouble is it will do so with a
machete," he says. "It will hurt."
In November 2003, a number of energy specialists wrote in the British science magazine
Nature that almost all forecasts on oil prices have a dismal track record for accuracy--yet decision makers still believe the market will yield enlightened policy. "We view this as recipe for disaster and it is enhanced by the failure of science to be used as fully as it should be," concluded the authors. Hughes draws similar conclusions. He notes business as usual is "not a sustainable option," and argues "a longer view is required than the lifespan of a typical government."
Given Hughes's forecasts, Canadian businesses have three choices:
they can demand an energy plan from our political leaders, pray
for a technological fix or a world depression--or prepare for a wild ride with energy