CANADA NEEDS U.S. TO BE ENTHUSIASTIC ON ENERGY: IVISON

Suggests oilsands tour to bring him up to speed

The American ambassador's suggestion that the U.S. is “not really in the market” to expand its oil and gas links with Canada have been called “ill-informed” and “unproductive” by Alberta's energy minister.

David Cohen has been sent north to reassure Canadians that the U.S. is back as a reliable, steadfast ally. But the new(ish) ambassador to Ottawa has just found out the hard way that you can't please all of Canada any of the time.

In an interview with the National Post on Wednesday, Cohen was asked if the U.S. is interested in increasing energy links with Canada.

“Yes, there may be interest in expanding the relationship. But, given climate change imperatives, the United States is not really in the market for expanding its dependence on fossil fuels,” he said. “We'd have a lot more interest in expanding our hydro-power relationship with Canada and expanding our access to cleaner energies.”

Sonya Savage, Alberta's energy minister, took exception to the implications of the ambassador's comments.

“Alberta has been, and always will be, a reliable energy partner and ally to the United States. The recent comments made by the new ambassador to Canada were ill-informed and unproductive at a time when we must work together to create longterm energy security for North America,” she said.

Cohen said America's “primary policy objective” is to achieve net zero emissions by 2050, implying that any expansion of the energy relationship would make that goal less attainable.

But Savage said oilsands producers have pledged to reach net zero. “There's nowhere else in the world that has committed to that carbon footprint,” she said in an interview.

She said the alternative is supply from places like Venezuela, Saudi Arabia or Russia.

She said there is pressure in Washington to form a North American energy alliance because of the spike in prices at the pumps. “That probably concerns the Biden Administration because that is not their narrative. Their narrative is net zero,” she said.

Savage's contention is that the invasion of Ukraine has complicated the picture and highlighted that, as the world seeks to lower emissions, it also needs secure, affordable and reliable energy.

Cohen said in the interview with the Post that Canada could only supply an additional 300,000 barrels of oil a day. “There is no shortterm advantage that Canada can provide to the energy crisis because there is just not enough capacity in existing pipelines to meaningfully move the needle on oil supplies from Canada to the United States,” he said.

Savage said that is “factually wrong.” In addition to the extra 300,000 barrels a day that could be shipped through unused pipeline capacity, a further 200,000 barrels a day could be moved by rail. “In the mediumterm, an additional 400,000 barrels per day can be available through pipeline optimization projects and 590,000 barrels a day when the Trans Mountain expansion comes online,” she said.

“Alberta energy is part of the long-term solution for the world. Replacing foreign imports with responsible Canadian energy is not a threat to the environment. Alberta has some of the highest ESG (environmental social governance) rankings in the world and the fastest-growing renewable energy sector in Canada,” she said.

She said it would be helpful for Cohen to visit Alberta, “to tour the oilsands, see the research and understand the industry better.”

This is not some picayune war of words. The world is facing an energy crisis, as the invasion of Ukraine has raised issues of energy security, alongside affordability and climate change.

Canada could be part of the solution, but North American energy markets are so integrated, it requires political will on both sides of the border.

In a speech to the Canadian Club in Toronto last week, Enbridge chief executive officer Al Monaco said the climate goal is non-negotiable but the world needs all sources of energy to increase production — conventional and low carbon.

He said that natural gas is part of the answer — something recognized by Europe, which has amended its clean energy definition to include natural gas, and the U.S., which has expedited liquefied natural gas export permits.

Monaco said gas was the single biggest factor in emissions reductions in the U.S. and in Ontario, which replaced coal-fired generation with natural gas plants, renewables and hydro. He said the formula can be replicated in China, where there are 1,100 coal plants.

Monaco said emissions from Canadian LNG are already lower than its peers and Enbridge is piloting its first green hydrogen facility in Markham, Ont., with the intention of blending it with natural gas.

Canada has some natural advantages when it comes to LNG — a break even price of $6-8, compared to $30 or more in Asia and Europe.

But, other than the LNG Canada project on the West Coast (due to start production in 2025), Canada has been unable to capitalize on its advantages because of challenges building infrastructure. “We missed the first LNG window — we are behind,” said Monaco.

There are high hopes for new LNG projects on Canada's East Coast but they are constrained by existing pipeline capacity.

Industry sources say gas could be brought to the Maritimes from Alberta or from shale production in Pennsylvania, by reversing an existing pipeline operated by Enbridge. But that pipe would probably have to be expanded to justify construction of a new liquefaction terminal in Nova Scotia, or the refitting of the existing Repsol plant in New Brunswick.

Federal Natural Resource Minister Jonathan Wilkinson, speaking from Berlin, where he was attending a G7 climate, energy and environment ministers meeting, said that Canada is talking to European countries about helping them get off oil and gas, but that LNG projects have to be producing within three or four years, and have to have an ability to transition from LNG to low carbon hydrogen over time.

He said the Repsol project in New Brunswick has the advantage of having existing LNG infrastructure. “I have met with (Madrid-based) Repsol, both in Canada and during this trip to Europe. They are obviously going through their own process of assessing what they would need to move this forward,” he said.

Any new project would require federal and sub-national governments north and south of the border to get involved at the front end of the regulatory process.

Which brings us back to the political will — or in the case of the White House, the political won't.

Europe and Asia need gas. Canada has gas. Proponents argue it is more reliable, sustainable and lower cost than anywhere else. But the energy system is heavily integrated. If Canada is going to take advantage of the second LNG window, it is going to need an enthusiastic partner in the U.S. That does not seem to be the case right now.