Canada, A Reliable Partner For Energy Needs, Energy Innovations

Sunday, September 22, 2013 - 15:36

The editor interviews The Honourable Joe Oliver, Canada's Minister of Natural Resources.

Editor: Minister Oliver, please start our discussion with an overview of the Canada-U.S. energy picture. How and to what extent are we fulfilling one another’s energy needs?

Oliver:  I don’t know that many Americans, or Canadians for that matter, understand the size and breadth of the U.S.-Canada energy relationship, which is by far the largest in the world. It builds on the largest commercial relationship in the world – some $2 billion in trade (apparently a truck crosses the Canadian-U.S. border every three seconds), so we benefit from an extensive and mutually advantageous energy relationship that’s extremely important for our respective economies. With a shared border, we have the opportunity to exchange not only goods, but we also have a completely integrated electricity grid, and, of course, Canada is a safe and cost-effective supplier of energy. We in Canada have vast energy resources. Our proven oil reserves are the third-largest in the world, and of the 172 billion barrels of proven reserves, some 168 billion are from the oil sands.

We are the biggest foreign supplier of oil and natural gas to the United States: we supply 3 million barrels a day of crude oil and petroleum products, and more than one quarter of oil imported by the United States, so we’re bigger than the next two combined. We’re also the world’s third largest producer of hydroelectricity, and all of our electricity exports go to the U.S. We’re the second-largest producer of uranium, which helps fuel U.S. nuclear reactors, and we have vast amounts of natural gas – some 1,300-trillion cubic feet of marketable resources – representing 200 years of domestic needs. These resources, as Americans would understand, are the result of technological improvements, and as the technology improves further, those resources numbers will likely increase, as they have in the United States in terms of shale gas and tight oil (oil found in reservoirs that are hard to access and require horizontal drilling).

Our countries share energy technology in the private sector. There are many affiliates of American companies operating in Canada. In addition, we have cooperative agreements with the United States.  I was just in Washington to meet with my counterpart, Secretary of Energy Ernest Moniz, to discuss a range of cooperative measures: we’re looking at energy and the environment, including creating a more modern energy infrastructure. The extraction of non-conventional energy, issues relating to global leadership, continental energy policy and energy efficiency – those are the four major topics we discussed and are working together on as governments.

Editor: Tell us about the benefits for Canada and the U.S. in reducing dependence on energy trade with countries outside North America.

Oliver:  Energy independence is something that American presidents have aspired to for decades, and it’s something that is achievable within the next 20 years. North American self-sufficiency is going to happen. Energy independence, which is to say, no imports from outside North America, would be the result of a political decision. There are clearly national security benefits that would flow from that, which is one of the potential advantages of the Keystone XL pipeline, which would transport oil from the Bakken region of North Dakota and Montana (a light crude representing at least 20 percent of the total supply), and the rest would come from the oil sands in northern Alberta, and all that oil would displace Venezuela heavy crude. Venezuela has threatened repeatedly to cut off supply to the United States, whereas Canada is a friend and an ally, a reliable source of energy, and that reality is what countries consider when they look at Canada as a supplier of resources, including China, India, Japan and South Korea. They know that if a deal is completed with Canada, it will be honored.

If we’re talking about Keystone, for the United States, the fundamental decision is whether to continue to import oil from Venezuela, which has the same or higher greenhouse gas emissions as the oil sands crude, or to move to crude oil from Canada. The U.S. State Department was very clear that if Keystone is not approved, there would be no net reduction in greenhouse gas emissions because the oil from Alberta would find other ways of coming to the United States, through rail, or as an export to other markets, including China. If Keystone is approved and built, there would be no increase in net emissions because it would be displacing a source of crude that has the same levels of greenhouse gas emissions.

Given the current geopolitical situation with Syria, the world is looking at reliability of supply, and in particular is moving away from the short term. Countries that are growing and have a long-term energy deficiency, like China and India and South Korea and Japan, need to enter into longer-term contracts. That’s the strategic imperative. The strategic issue for Canada is that we export 100 percent of our gas and 99 percent of our oil to the U.S.  The U.S. has found its own reserves of shale gas and tight oil, and yet the U.S. Energy Information Administration  is forecasting that the United States will still need to import 7.4 million barrels a day by 2035, so Canada will be in a position to help supply that and help ensure energy independence for North America. You in the United States have vast amounts of your own oil, but not enough to become self-sufficient.

Editor: I read that one of your responses to the environmental objection to Keystone, greenhouse gas emissions, is that you would work towards finding ways to reduce gases through technology in Canada.

Oliver: We are doing that irrespective of the decision the President makes on Keystone, and we would do that for two reasons. First, it’s the responsible thing to do as global citizens, to address the issue of global warming by trying to contain the environmental footprint, and specifically greenhouse gas emissions coming from the development of our resources. The second reason is to get public acceptance of the development because there’s a focus on these issues. It’s important to understand this issue in context. The oil sands represent 1/1000th of global emissions (0.1 percent). That does not relieve us of the responsibility to do everything we can to reduce the impact. In fact we have decreased the intensity of emissions from the oil sands by 26 percent on a per-barrel basis between 1990 and 2011 through technology, and that effort continues. We are encouraged by Imperial Oil’s Kearl project in northern Alberta, a new technology that eliminates a step in the production process, which they believe can actually eliminate the CO2 differential between oil sands crude and the average crude that’s imported into North America. It’s an improvement. The life-cycle difference between oil sands oil and the average oil imported into the United States is about 11 percent, according to Dan Yergin of IHS CERA, a respected analyst of oil issues; our objective is to reduce that 11 percent differential and ultimately eliminate it. We have the same overarching objectives as the U.S. – to reduce our greenhouse gas emissions by 17 percent from 2005 levels by 2020. We have the identical fuel standards for vehicles, and in some respects we’re well ahead of the U.S. and other countries, particularly in terms of coal. We’re not permitting the construction of any new coal-fired electricity plants using traditional technology, and we’re phasing out the existing ones, unless they meet a stringent performance standard. Coal is a big CO2 emitter, and coal-fired electricity in the states is more than 32 times as emitting as the oil sands. So we’re working with the U.S. and pursuing our own initiatives to address that issue.

I should mention that we also have rules that require remediation of all the land after the mining is completed to bring it back to its original state. I visited the oil sands, and I saw that for myself.

Editor: Please talk about the collaboration between our countries with respect to increasing our reliance on clean and renewable energy sources.

Oliver:   Canada is one of the cleanest countries in the world. More than 77 percent of our energy comes from non-emitting sources, mainly hydro, and about 15 percent from nuclear. There’s a lot of movement on the electricity side. The most recent development is that the New York Public Service Commission last spring approved a plan to build the Champlain-Hudson transmission line, and that would move 1,000 megawatts of hydro power from Quebec to New York and supply up to 10 percent of the power used in New York City, so that’s non-emitting power coming into the United Sates. And we share an integrated electricity grid. As far as initiatives for reducing emissions, we’ve spent over $10 billion on green energy, alternative energy, and reducing the impact of conventional and non-conventional energy, and we’ll continue to do that. We believe that science and technology can make a difference.

Recently, I made an announcement that we’ll funnel money into Sustainable Development Technology Canada (SDTC), a government-funded, not-for-profit organization that selects clean energy companies that are at the pre-commercialization stage to help move them forward. One small company believes it has come up with a technology that could eliminate the tailings ponds at the oil sands, and that would be a major step toward reducing energy use in extracting oil sands oil by 50 percent and reducing the use of water. Another is a solar company innovation that relates to storage; one of the issues about solar power is that it can’t be stored effectively, and the same issue applies to wind. These green technologies are exciting, but they need more technological advancement to be economically viable.

We will invest $325 million into SDTC over an eight-year period, which will in turn be providing grants to promising technologies. The program is designed to achieve real market results. That’s how you progress. Ideas are important, but they’re not sufficient.

Editor: How is Canada addressing environmental issues relating to the Energy East Pipeline?

Oliver: The Energy East project is converting pipeline that was used for carrying gas to oil. Most of the pipeline is in place but would require construction at the beginning and the end of the line. The National Energy Board has the authority to make a recommendation after an objective, scientific review, and it will address the safety and environmental issues. We’re not going to go ahead with any project that isn’t safe for Canadians and safe for the environment.

This project would move some 1.1 million barrels a day of crude from northern Alberta to refineries in Montreal, Quebec City, and St. John, New Brunswick. Initially the pipeline would be moving lighter crude, but it could move heavier crude, in which case there would need to be some upgrading of the facilities. The refineries are very keen there; it’s a tough business, and there have been five refineries closed in Montreal in the last five to ten years. There’s another project, the Enbridge Line 9, that’s under regulatory review. It would reverse the flow of oil to go east rather than west, because that’s where the demand is. On the East Coast we’re importing oil from the North Sea and North Africa and the Middle East, yet we have lots of oil in the west. It was more economical to do it that way, but now economics have changed. Once again we’re talking about energy independence.

Editor: Is there anything you’d like to add?

Oliver: I’d just like to reiterate that we’ve got this very important relationship that is clearly in the interest of both countries and we want to see it enriched. The fact that the U.S. has recently discovered vast amounts of its own resources is a good thing for energy independence, but there will still be a need for the United States to look to Canada and a need for both of our countries to work together on a host of these energy and environmental issues.