Closer energy ties with U.S. urged

COMMENT: Ohmigosh! Here we have the top spokespeople for unrestricted, unfettered trade and investment in Canada, free market evangelists of the first order, suggesting that Canada should restrict investment in the oil sands based on who is doing the investing.

And how about the statement that Canada needs to follow the Fraser Institute line with who's in our energy game, to ensure "security of markets?" Right. Like the US doesn't already assume that Canada's energy gig is so integrated with American self-interest that extricating Canada from that market is as likely as, well, as if Wyoming tried to pull a similar stunt.

Review of foreign ownership rules also sought

Scott Simpson
Vancouver Sun
October 24, 2006

Canada should strengthen its energy ties with the United States if it wants secure oil and gas supplies, and stable markets for its own products, says a new report from the Fraser Institute.

Report co-author Alexander Moens, a professor of U.S. policy at Simon Fraser University, says closer American involvement in development of Alberta's oilsands would remove some of the risks associated with developing a comparatively expensive energy source.

The report, titled Achieving Energy Security through Integrated Canadian-American Markets, also urges the Canadian government to reevaluate its own foreign ownership and competition policies in consideration of nationalistic energy strategies in many other nations around the world.

State-owned foreign oil companies now control about 80 per cent of global output. The development of Canadian oil sources by state-owned foreign companies for offshore export should set off alarm bells in Ottawa, Moens said.

State-owned companies from China and Korea have invested in the Alberta's oilsands.

"We should consider whether that is a net benefit to Canada," Moens said in an interview.

He's also recommending that the Canadian and B.C. governments launch a task force to break the current impasse over development of B.C.'s offshore gas and oil reserves.

Moens says that while the U.S. priority is security of supply, Canada's priority is security of market.

Moens believes that U.S. investment in oilsands infrastructure, environmental costs -- and even community impacts in the Fort McMurray area -- would provide support for a product that costs six to seven times as much to extract as a $6 barrel of light Saudi Arabian crude oil.

"The sharing of the risk in terms of investment and technology by the Americans is really crucial to the health and long term prosperity of this industry," Moens said in an interview.

"It's difficult to see at the moment, especially as we come out of a couple of months where oil was $75 a barrel, but oil has historically been very cyclical.

"It's more than a matter of them buying our oil. They would essentially be direct partners in the whole exploration and development process."

Moens also believes that a joint effort to address carbon dioxide emissions is "absolutely" necessary.

Carbon dioxide emissions have been identified by the world's leading scientists as a cause of global climate change -- and the extraction and refining of Alberta's vast bitumen resource is destined to add significant volumes to those emissions.

Moens said rather than capping oilsands development as a means to curb emissions, governments in Canada and the U.S. should look at incentives that treat the problem as a technological challenge that rewards innovative solutions.

Moens noted that the Canada-U.S. relationship recommended in the report would conform to the existing pattern of cross-border energy trade that has evolved over the past several decades.

The two nations already share a transborder electricity infrastructure that sustains a vigorous power-trading industry.

For example, British Columbia is a net importer of U.S. electricity but ends up in a net profit position each year due to its ability to export hydro power during peak summer consumption periods in the U.S. southwest.

Meanwhile, Canada is the single largest foreign source of crude oil and oil products for the U.S. market.

Natural gas, similarly, is distributed on a transcontinental pipeline system, with market pricing structures that transcend national borders.

"If you look at conventional resources of natural gas in Canada, and actually in North America, they are quite modest," Moens said. "The United States and Canada may well end up importing a great deal of liquid natural gas from the three main sources in the world -- Qatar, Iran and Russia

"When that happens it's very important to think about the integrated pipeline and regulatory structure that we have built thus far."

LINK TO FULL PUBLICATION (560 KB): http://www.fraserinstitute.ca/admin/books/files/AchievingEnergySecurityRev.pdf