Canadian oil backgrounder

This is a 12-point energy backgrounder prepared by Brent Patterson of the Council of Canadians, for CBC's The National.

Where does Canada get its oil?
1. Most of the oil Canadians consume is imported. Overall Canada imports 58% of the oil we consume. (About 40% of the oil used in Ontario is imported, about 90% of the oil used in Quebec and the Atlantic provinces is imported.)

2. 25% of the oil Canada consumes comes from the unstable regions of the Middle East or North Africa. (This is a higher percentage than U.S. dependence which is at about 23% of their consumption from these regions.)

Where does the United States get its oil?
3. The U.S. is seeking to reduce its dependence on overseas oil (from unstable nations in the Middle East) within two decades by importing more oil from Canada. According to the U.S. Energy Information Administration, U.S. oil imports from Canada will reach 2.7 million barrels a day, with the majority of that coming from Alberta's oil sands. (The oil sands are expected to produce as much as 3 million barrels a day by 2020.)

4. Canada's oil exports to the U.S. are already steadily growing. In 2004, 70% of Canada's oil production went to the United States. In 1998 the figure was 60%. In 1990 the figure was 50%.

5. In real terms, Canada exports 1.6 million barrels a day of oil to the United States, compared to the 1.52 barrels of oil per day that Saudi Arabia exports to the United States, the 1.56 barrels a day from Mexico, and the 1.3 million barrels a day from Venezuela. (Overall, the U.S. imports 6 million barrels a day from the Middle East.)

What's significant about Alberta's oil sands?
6. Alberta's oil sands hold an estimated 175 to 311 billion barrels of recoverable oil, second only to Saudi Arabia in terms of overall reserves. (The oil sands hold an estimated 2.5 trillion barrels of oil, but most of this is not recoverable with today's technology.)

7. Testifying before Congress in 2002, U.S. Vice-President Dick Cheney declared that the "continued development" of the Athabasca tar sands in northern Alberta could be a "pillar of sustained North American energy and economic security." (Cheney's visit to northern Alberta was postponed because of Hurricane Katrina, but he is still expected to visit the oil sands at some point in the near future.)

What threatens Canada's energy security?
Foreign Ownership
8. By 2003, over half of Canada's oil-and-gas production was controlled by foreign companies, mostly Americans, and some analysts predict that foreign ownership in the Athabasca tar sands will reach 60% by 2010.

Trade Agreements
9. It's clear enough that the U.S. was seeking access to Canadian energy through the first Free Trade Agreement. As Maude Barlow wrote in Parcel of Rogues (1990): For the United States, the energy provisions of the agreement were crucial. A 1985 U.S. report on natural gas warned that the country was quickly running out of this key resource and that Canada would play an increasingly important role in providing it. The congressional study stated that the American government should make it a point of national security to ensure access Canadian sources, slamming the then more-heavily regulated export structure as being a direct restriction of American rights to Canadian gas...Ann Hughes, now the chief U.S. trade negotiator with Canada, was quite forthright about her country's wasteful energy habits and admitted that Canada's energy, secured by the deal, would forestall conservation practices in the United States. And Edward Ney, the U.S. ambassador to Canada, said recently that Canada's energy reserves were a prime motivation for the free-trade agreement: "The U.S. got access to the great resources which we need."

10. NAFTA limits the extent to which the Canadian government can act to reduce exports to the United States. Article 605(a) of NAFTA prohibits measures that would reduce these exports as a share of Canada's production to below "the proportion prevailing in the most recent 36-month period for which data are available." In effect, NAFTA prevents a reduction in the amount of oil or oil products going to the U.S. -- unless both Canadian production and consumption fall.

11. As a result of proportional sharing, the 65 per cent of Canada's oil and 61 per cent of its natural gas which is now exported to the United States cannot be reduced. But Canada is not producing enough oil to maintain these levels of exports to the United States. In order to fulfill its NAFTA commitments to the United States, Canada is now importing almost half the oil it uses, even though its production has grown by 64 per cent since the FTA was signed. (It should be noted that Mexico, another oil and gas producing nation, excluded itself from these NAFTA obligations.)

Deep Integration
12. The June 2005 'Report to Leaders' on the Security and Prosperity Partnership of North America includes a section on "Creating a Sustainable Energy Economy for North America." Highlights from this section include: "Creating a sustainable energy economy for North America is in the vital interest of all three countries. Reliable, affordable energy is critical to the prosperity and security of our peoples. We are taking action to create a policy environment that will promote the sustainable supply and use of energy in North America. To that end, we affirm our commitment in pursuing joint cooperation in the areas of: regulation, energy efficiency, natural gas including liquefied natural gas (LNG), science and technology, reliability of electricity transmission grids, oil sands production, nuclear energy, hydrocarbons and energy information, statistics and projections."

Brent Patterson
Director of Organizing
The Council of Canadians
700-170 Laurier Avenue West
Ottawa, Ontario
K1P 5V5
Tel. 613-233-4487 ext. 291
Toll-free. 1-800-387-7177
E-mail. bpatterson@canadians.org
Fax. 613-233-6776
Website. www.canadians.org