U.S. looks to Canada for energy supplies

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SEATTLE POST-INTELLIGENCER http://seattlep-i.nwsource.com/national/20730_canada28.shtml

U.S. looks to Canada for energy supplies

Huge resources could stave off our fuel crisis in years ahead

Saturday, April 28, 2001

By COLIN NICKERSON THE BOSTON GLOBE

MONTREAL -- Even as the United States wrangles over a widely opposed scheme to drill for oil and gas in Alaska's Arctic National Wildlife Refuge, the energy-hungry eyes of America are turning toward Canada.

Thanks to advanced new recovery techniques making it possible to extract oil economically from Alberta's spectacularly rich "tar sands" -- together with the prospect of a natural gas bonanza in the Northwest Territories, plus the deep-sea oil and gas fields just coming into production off Newfoundland and Nova Scotia -- Canada is looking like America's great northern hope for averting an energy crisis in the years ahead.

Already the No. 1 foreign source of natural gas and hydroelectricity for the United States, the country is now muscling past Saudi Arabia, Mexico, and Venezuela to become the single most important supplier of crude oil and petroleum products. Of the 20 million barrels of oil that Americans burn every day, 8 percent already comes from Canada. That should double by decade's end.

President Bush, during the just-concluded Summit of the Americas in Quebec City, repeatedly emphasized his hope that Canada will become the centerpiece of his vision of unifying North America in a common energy market.

There are risks. America's increasing dependence on Canadian gas and oil could give the weaker neighbor a mighty cudgel in the infrequent but ugly trade disputes with the superpower next door. Hitherto, Ottawa has had little choice but to knuckle under to the will of Washington.

"Natural gas ... could be a vital bargaining chip," Thomas Axworthy, a Canadian lecturer on public policy at Harvard's John F. Kennedy School of Government, wrote in a recent opinion piece for Toronto's Globe and Mail newspaper. "California is in an energy crisis and energy security is a critical administration priority."

Nonetheless, Canada seems a more reliable and secure fount of fossil fuels than the fractious and often blatantly anti-American nations of the Organization of Petroleum Exporting Countries, or OPEC.

"There is some very good news in our hemisphere, at least as far as Americans are concerned," Bush told reporters in Quebec this week. "Because of technologies, the Canadians have developed vast crude oil resources. That is good for our national security. It's good for our economy."

At the same time, soaring energy prices are making feasible a plan to tap the vast Arctic reservoirs of natural gas under Canada's Mackenzie River Delta. American and Canadian oil companies are spending $75 million just to determine the best route for a mammoth pipeline running over frozen tundra, across soaring mountains, and in deep trenches beneath the Beaufort Sea.

One proposed 1,400-mile pipeline route would link Alaska's Prudhoe Bay, holding 20 percent of U.S. gas reserves, to the Mackenzie Delta -- which has 24 trillion cubic feet of proven natural gas and prospects of 170 trillion cubic feet -- then carry the clean-burning fuel through the Northwest Territories along the valley of the powerful northern river. The United States consumes about 21.5 trillion cubic feet of gas a year.

Such a pipeline would draw heavy fire from environmentalists, but the Inuit and Indian people of the territory -- including Premier Stephen Kakfwi, a Dene Indian -- say they want the economic development, lending the pipeline a sort of moral credence.

"This may be the last world-class energy project in North America," said Bill Gwozd, an industry analyst for Ziff Energy Group, a natural gas consulting firm with offices in Houston and Calgary, Alberta. "Canada is stepping to the forefront as the critical source of energy for the U.S."

A rival pipeline proposal, leading from Alaska through the Yukon Territory along the route of the Alaska Highway, is being promoted by the governments of Alaska and Yukon. But it follows a longer route, would be significantly more expensive than the $5.5 billion Mackenzie project and would bypass the Northwest Territories' enormous gas lode.

The White House insists that Bush still plans to push for opening a portion of the Arctic National Wildlife Refuge to oil drilling. But the plan has nearly no support outside Alaska and the oil industry. Environmental activists are plotting a massive opposition campaign, a tiny aboriginal band in the region is whipping up a huge fuss and Congress is hemming and hawing.

Even the president seems to recognize which way the political winds are blowing on this one.

"There's gas in our hemisphere, and the fundamental question is, 'Where is it going to come from?'" he said last month. "I'd like it to be American gas. But if Congress decides not to have exploration (in Alaska), we'll work with the Canadians."

The brownouts afflicting California have lent a sense of urgency to America's quest for "energy security." Domestic oil production in the United States has slumped 40 percent since 1970 as wells were pumped dry. Aside from the wilderness of Alaska, the United States has no new frontiers of oil, while Canada has barely scratched its potential.

"Energy is going to be the priority in our relations," said Paul Cellucci, the former Massachusetts governor who this month became U.S. ambassador to Canada.

He noted that the Sable Offshore Energy fields, which only started production last year, are now moving 500 million cubic feet a day from deep-sea platforms off Nova Scotia along 789 miles of pipeline to New England -- ending an anxious era of energy scarcity for the region.

Out west, Alberta has been pumping oil and gas for decades from traditional wells, but advanced recovery technology is turning the oil-soaked "tar sands" of the immense Athabasca deposits into the continent's biggest oil producing region.

Nearly $25 billion in oil investment is pouring into the wilderness surrounding the boomtown of Fort McMurray, on the Athabasca River in the rugged northeast of the province. Instead of using drills, companies such as Syncrude Canada dig into the earth with giant shovels, haul off the rich sand to crushers, where it is mixed with steaming water and moved by slurry pipe to oil extraction plants.

Only a few years ago, "synthetic oil" -- the industry term for oil not from wells -- was considered too expensive to recover. But rising oil prices and America's soaring energy demands have changed the equation, and the new technologies are actually knocking down production costs.

The Athabasca deposits contain 40 times more recoverable oil than the Arctic National Wildlife Refuge in Alaska -- at least 300 billion barrels, or 15 percent more than the entire proven reserves of Saudi Arabia.

Closer to New England, the 14-story Terra Nova floating production and storage vessel is scheduled to maneuver this summer into position 220 miles east of St. John's, Newfoundland, and start pumping from undersea deposits holding 400 million barrels of crude. When the Terra Nova project reaches full production in the fall, it will yield 100,000 barrels a day, most of it headed for markets in the northeast United States.

"We have fantastic potential and opportunities," Canadian Prime Minister Jean Chretien told an Alberta audience last month. "The United States needs Canadian energy."

© 1998-2001 Seattle Post-Intelligencer

-- Martin Thompson (mthom1927@aol.com), April 28, 2001

Answers

Ever heard of NEP? Trudeau paid dearly for that.

Long, interesting article at Guardian

Everything about the energy review is classic Cheney. Like the president, Mr Cheney is an oil industry man. Before returning to politics he was chief executive of Halliburton, the biggest oil service company in the world, which itself has given $1.5m to the Republican party in the past10 years. Wherever there is oil - Iraq, China, Alaska - Halliburton has interests. Every decision that Mr Cheney's team takes about access to new energy supplies will have a bearing on the company, which provided him with an income of $36.1m last year alone.

-- Rachel Gibson (rgibson@hotmail.com), April 29, 2001.


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