As oil prices continue to slide, what North America really needs is a common energy strategy
Colin Robertson The Globe and Mail Wednesday, Dec. 10 2014, 3:00 AM EST
A North American energy strategy to help kickstart continental competitiveness. It is a tall order for our energy ministers who meet in trilateral discussion next week in Washington.
The Canadian, American and Mexican ministers – Greg Rickford, Ernest Moniz and Pedro Joaquin Coldwell, respectively – meet as followup to the leaders’ summit held last February in Toluca, Mexico. Their assignment: to promote common strategies on renewables, energy efficiency, infrastructure, innovation, and trade.
They chart a course against a turbulent international backdrop.
First, there is the economics of increased supply and diminishing demand. The price of a barrel of oil has dropped by a third to levels not seen since 2009. As energy expert Daniel Yergin observes, the demand for oil by China and emerging economies is “no longer the dominant factor”.
Rather it is the surge in U.S. (now the largest oil producer) and Canadian production that is decisive. But less demand has significant implications for Mexican and Canadian development and lower prices undermine governments’ revenue projections.
Second, there is the shifting energy geopolitical chessboard. Europe would like to wean itself off Russian and Middle East dependence but the logistics of getting oil and gas from North America to Europe are still years away. Nonetheless, the recent fall in oil prices demonstrates that OPEC is divided and no longer calls the shots and that Russia’s influence is falling along with the value of the ruble.
Third, there are the pressures of climate change. The World Meteorological Organization projects 2014 to be the hottest on record. Fourteen of the fifteen warmest years on record have occurred in the 21st century.
With these developments in mind, the energy ministers need to declare their intent to plan and collaboratively implement a North American energy strategy.
We live in an age of austerity and there is no appetite for yet another government body, so the first step should be to identify our existing centres of energy excellence and innovation.
The U.S. Energy Information Administration does a superb job in providing and presenting information in a comprehensible, comprehensive fashion. A stronger alliance with like agencies in Canada and Mexico could produce a “continental energy outlook” that would help guide investment decisions and smart choices on vital energy infrastructure.
Collectively, we need to define our vital infrastructure – pipelines, transmission lines, shipping, rail and trucking– and connectivity, that needs renovation (much of it is aging) to improve reliability and harden it against climate or cyber-assault.
We need a simpler approach to energy regulation.
For advice on the mechanics of energy regulation, the newly created Alberta Energy Regulator (AER) is well on the way to meeting its aspiration of becoming “best in class”. Mexico’s energy regulator, the Comisión Nacional de Hidrocarburos signed an agreement with AER in June to work collaboratively on regulatory best practices in the development of hydrocarbon resources.
We need sharing between companies on best practises in improving the environment..
An obvious model for continental adaptation is Canada’s Oil Sands Innovation Alliance (COSIA). It was established in 2012 as a collaborative consortium of the major companies in environmental stewardship. With investments of almost a billion dollars, COSIA’s 13 members have shared 777 distinct technologies and innovations reducing greenhouse gas emissions, water and land usage, and accelerating reclamation.
We need sustainable approaches to big development especially in terms of social license.
Quebec’s Plan Nord, the creation of Jean Charest, now resurrected by Premier Philippe Couillard, blends private-public partnerships with equity stakes for the aboriginal population. Covering 72 percent of Quebec – the equivalent of France and Texas combined – it will generate jobs and development. The Pew Trust describes Plan Nord as demonstrating global leadership in conservation and climate change and it is an obvious model for Mexico’s large-scale development projects.
In terms of deliverables, the energy ministers should encourage the North American energy industry to draw on best practices and establish common continental fracking standards. Our leaders could table them at the UN Climate Conference in Paris next December.
They also should look for opportunities to collaborate on promising areas of research and development related to renewable and low-carbon energy technologies.
North American leaders titled their February communiqué: ‘Building the Most Competitive and Dynamic Region in the World’. Presumptuous, perhaps, but Mexico’s ambitious reforms, the energy industry’s commitment to innovation, and shifting geopolitics create new opportunities. A North American energy strategy would be a great leap forward in continental economic integration.
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