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Listed below are articles and resouces that can be downloaded.

Energy Probe in the News: Friday, March 23, 2007

Our web site is www.energyprobe.org

Energy Probe warns of hikes

by Carmela Fragomeni, The Hamilton Spectator, March 23, 2007

It's happening in Toronto and Energy Probe says it will eventually happen here and in the rest of Ontario.

"There is a long-term trend among gas and electricity consumers to conserve. That's the good news," said Tom Adams of Energy Probe. The bad news is some utilities must charge more to recover revenues lost because they are selling less. Toronto's hydro company wants to increase its distribution rates by 6.3 per cent on May 1, to cover a $10.4-million loss because of energy conservation programs.

Hamilton's Green Venture EcoHouse manager Pete Wobschall acknowledges someone has to pay for such losses and it's no doubt going to be the consumer. "Unfortunately, it's a catch-22." Conserving energy, even if it costs you more, must remain a priority, he said. "We are not doing it to save bucks. We're doing it to clean the air.

"Here in Hamilton, we have 100 people die from air pollution (a year) and some of that comes from burning coal for electricity."

Michael Buonaguro of the Public Interest Advocacy Centre said higher distribution rates, which are only one section of hydro bills, don't automatically increase costs to consumers, if they continue to conserve. Higher distribution rates can be offset by lower usage, he said.

This doesn't necessarily work for low-income families as they can't afford new energy-efficient appliances and other energy-saving devices.

Hydro companies must find ways to economize to prevent the hikes, said Adams of Energy Probe. He said Union Gas is experiencing a decline in usage but hasn't raised rates. That shows utilities can find efficiencies equal to revenue losses. "Most (hydro) utilities aren't smart enough to figure it out yet, and the regulator doesn't push them hard enough to do it."

The Ontario Energy Board, the rate regulator, is considering compensating utilities for such revenue losses.

Hamilton Hydro users have saved 29 million kilowatt-hours of electricity, enough to power 3,250 homes. Burlington users have cut 1 per cent to 2 per cent of overall consumption. But customers in both cities face little or no increase because of enough growth producing new customers to offset losses.

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

 

 

Article

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" mentality?

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
Foundation and 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
12 years.

B.C. currently ships about 50 per cent of its natural gas to the U.S.
via the Huntingdon-Sumas pipeline hub in Abbotsford.

John Les, B.C. Minister of Small Business, however, discounts the
"doom and gloom" predictions. (See story below).

Marshall told the Abbotsford News on Tuesday that the upcoming energy
crunch does pose a serious and real problem.

He said everyone should be concerned about protecting B.C.'s domestic
supply of natural gas, and the government should maximize the economic
benefits of this limited resource.

For one thing, Marshall said the provincial government shouldn't sell
natural gas so cheaply to the U.S. For another, the B.C. Liberals
ought to start looking after the province's future supply.

"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 find
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,
noting the energy sector is unsustainable.

He thinks the B.C. Liberals are short-sighted, but the dilemma is that
we can't 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
to 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 try to
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,"
Marshall said.

"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
encourage independent 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.

If Sumas Energy 2 (SE2) is constructed next to the Canadian-U.S.
border and the natural gas hub, Duke Energy will transport 115 million
cubic feet of natural gas a day to be burned at the controversial
power plant.

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,
according to evidence presented to the Energy Facility Site Evaluation
Council.

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
industry.

Although forestry employs 90,000 people, for example, the oil and gas
sector only employs 1,300 people, Marshall said.

In fact, employment in oil and gas decreased from 2,500 employees in
1992 to 1,300 in 2003 due to productivity efficiencies.

The provincial government, however, maintains there are actually
11,000 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
allows for coal-fired power plants, which produce an unacceptable
amount of air pollution and greenhouse gases.

Climate change is a critical global issue, he said.

To compound B.C.'s goal of encouraging more oil and gas development,
the government has weakened the Environmental Assessment Act for new
projects, Marshall said.

 

Mythoilogy

by Andrew Nikiforuk

Eight wrong ways to think about the future of energy.

2005-01-17

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 into lead.

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 flat?"

Rising gas prices in the United States have already shut down one-fifth of its nitrogen fertilizer industry.

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 oronuk.

"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 supplies.