Amigos and NA Energy

In the wake of the North American Leaders' Summit in Toluca, Mexico last week, Monica Gattinger of the University of Ottawa had a great post on energy issues on the CIPS blog (linked here).  It's hard to think of anyone doing better work on these issues over the last 5 or 6 years. This post is spot on. In addition to the link, I've copied the text of her post below:


By Monica Gattinger

Shale Gale or Shale Fail? Will North America’s Leaders Miss the Boat on Energy?
At the North American Leaders Summit in Mexico this week, Prime Minister Harper, President Obama and President Pena Nieto committed to tasking their respective energy ministers to meet in 2014 to “discuss opportunities to promote common strategies on energy.” Observers and practitioners of things energy in North America would say it’s about time. We haven’t had trilateral talks on energy in years.

But is this too little, too late? North America is in the midst of an energy revolution. The twin technologies of hydraulic fracturing (‘fracking’) and horizontal drilling have unlocked the potential to profitably produce oil and gas from the continent’s vast shale resources.
For the moment, the ‘shale gale’ is mainly filling America’s sails, with U.S. oil and gas production surging to heights mainstream forecasters weren’t predicting a few short years ago. Then, concerns over the country’s energy security and mounting dependence on foreign imports dominated policy debates.


Now, focus has turned to discussions of American energy independence, with forecasts projecting the country will become self-sufficient in net energy terms in the coming decades. The U.S. has already outpaced Saudi Arabia and Russia to become the world’s largest oil and gas producer, and crude oil production is close to hitting the country’s historical high of some 10 million barrels a day—a level not seen since the production peak of 1970.
Needless to say, U.S. energy imports are on the decline. Between 2005 and 2012, the share of net imports of total U.S. consumption was chopped in half, from 30% to 16%. While some of this was due to declining demand and better vehicle fuel efficiency, the main driver was growing domestic production. The U.S. Energy Information Administration predicts the import share will decline to 4% in 2040.
 
The shale gale is good news for the United States. It’s strengthening U.S. energy security and balance of trade, stimulating economic growth, incentivizing fuel switching in the power sector, reviving industries like steel and petrochemicals long thought on the decline and filling government coffers with taxes. Yet political leaders are scarcely grappling with the bigger picture of what this all means for North America’s energy system now and into the future.
 
In that context, this week’s announcement is welcome news. But will it be enough?
In Canada, America’s ‘shale gale’ is perceived mainly as a threat—particularly in oil, where the share of U.S. consumption from petroleum imports has tumbled from 60% in 2005 to 40% in 2012, and is projected to decline to 25% in 2016. Not only is U.S. appetite for Canadian energy imports waning, but Canada’s largest energy customer may soon become its biggest competitor in global energy markets. This is particularly the case in gas, where the U.S. Energy Information Administration predicts the country will become a net gas exporter by 2018.
 
The multitude of major pipeline proposals to get Canadian energy (especially the oil sands) to ‘tidewater’ is testament to the changing energy marketplace in North America. Not since the 1950s have we seen this many pipeline projects on the table at once. All told, the historic north-south energy flows in North America may be giving way to more complex multidirectional movements, including east-west.
 
For Mexico, the U.S. ‘shale gale’ heightens uncertainty surrounding the country’s energy sector reforms. With the surge in U.S. supply clamping down on oil and gas prices, and shale deposits more readily exploitable in the U.S., the full potential of President Pena Nieto’s energy liberalization program may be left unmet. Simply put, capital, technology and know-how will flow to lower-hanging American fruit.
 
If the ‘three amigos’ are viewing their energy futures as a zero-sum game, it’s unsurprising we’ve seen such limited engagement on energy between them.
But this is where North America runs the risk of a ‘shale fail’.
 
Each country has its own complex energy context, objectives and preoccupations—and in the U.S. and Canada, this includes the interests and policies of states and provinces. (Canadian provinces are the owners of the resource, after all). But the North American energy boat will miss the shale gale opportunity if leaders focus their attention on the domestic to the exclusion of the continental.
 
Our energy systems are interconnected and interdependent, and infrastructure decisions taken now will lock us in for decades—even generations. Energy is an essential driver of competitiveness, quality of life, security and standards of living. In an increasingly competitive and regionalized global economy, strengthening the efficiency, reliability, and sustainability of the continent’s energy system is essential.
 
Will the three leaders’ commitment this week be sufficient?
 
Energy occupies but a single brief paragraph in a Joint Statement of close to twenty. Agenda items are said to include ‘energy efficiency,’ ‘energy trade’ and the ‘development of relevant technical studies’. This is small change compared to the scope of the energy revolution before us. While facilitating trade and developing a shared evidence base are important, these are backstage technical matters in comparison to the questions on central stage.
 
What is the optimal energy mix for North America? How can we best develop the continent’s energy resources to contribute to its competitiveness, standards of living, and sustainability? How should we collaborate around fundamental shared challenges like climate change? What does our energy labour force look like, and are there opportunities for joint training or enhanced mobility for energy workers, functionaries and students? What can we learn from one another when it comes to the promise and pitfalls of unconventional resource development? What are the respective roles of civil society, the academy, industry, government, and others in this energy revolution?
 
These are the sorts of big-picture questions we should be pressing North America’s leaders to grapple with in their talks. Let’s hope they reach out to industry, civil society and the academy in the process. We’re all in North America’s energy boat together.