This article was originally published by the CCPA Monitor and has been republished here with permission from the author and the Monitor.

Two years ago, when Gordon Laxer and I wrote Over a Barrel: Exiting from NAFTA’s Proportionality Clause  , we explored the possibility that NAFTA Article 605 could actually result in a shortfall in the petroleum supplies needed to keep Canadians from freezing in the dark. We tested various scenarios under which NAFTA’s proportional sharing clause might be invoked to force Canada to go on exporting oil and natural gas to the United States in the same proportion of total supply as was exported over the previous three years. Now, based on more recent data from Statistics Canada, I have concluded that the threat of domestic shortfalls is even more dire. For Over a Barrel, I calculated that, if NAFTA’s energy sharing rules were invoked in 2007, the U.S. would be entitled to import 64.2% of Canadian oil production. Two years later, that ratio rose to 66.3%

An increase in the export-to production ratio of around two percentage points may not sound like much, but the consequences are serious when one looks at how the NAFTA clause would actually work in practice. According to NAFTA rules, what counts is exports to the U.S. as a proportion of “total supply” (defined as production plus imports and inventory drawdowns) rather than production alone.

Over the years 2004 through 2006, Canada exported to the U.S. 47.5% of our total supply of oil. More recent data from Statistics Canada reveal that, by 2008, the proportion of total supply exported over the previous three years had grown to 48.6%, and in 2009 it stood at 50.5%. Thus the proportion of total supply we would be obliged to make available to the U.S. grew, not by two percentage points, but by three.

Over a Barrel used the hypothetical example of an attempt to reduce Canadian oil production by one-tenth as a conservation measure. Had this step been taken in 2007, application of the proportionality clause would have led to a modest shortfall in the supply available to meet Canadian needs equivalent to one-and-a-half days of domestic demand. If such a measure had been attempted in 2008, the domestic shortfall would have amounted to 18 days of Canadian demand. By 2009, the potential shortfall had risen to 32 days.

Our second scenario involves conserving 10% of natural gas production as feedstock for our petrochemical industries that employ 24,000 workers. The latest Statscan data indicate that the proportion of gas production we would be obliged to make available rose from 61.5% for the period 2004-2006 to 63.4% for the last three years — again at about one percentage point per year, just as had happened for oil. When I calculated the potential domestic shortfall from a decision to keep in reserve 10% of natural gas production, I discovered that the potential domestic shortfall also grew larger with each passing year — from 66 days of domestic demand for the first period to 97 days for the latest period.

A third scenario explored in Over a Barrel involved using more of the oil produced in Western Canada and offshore Newfoundland to reduce our reliance on imports. As Gordon Laxer has pointed out, Canada is the only OECD country with no strategic petroleum reserves, even though Quebec and the Atlantic provinces are dangerously dependent on imports from insecure suppliers.

In our initial study, we looked at the effects of reversing the pipeline that now carries imported crude west from Montreal to Sarnia, Ontario, to instead take Western oil to Quebec, as was the case when the pipeline was originally built in the 1970s, and of diverting exports from Newfoundland and Labrador to domestic markets. Once again we found that NAFTA’s proportionality clause would block such import substitution measures.

In our original study, based on 2004-2006 data, I calculated that fulfilling the requirement to supply the U.S. market over Canadian needs would leave a shortfall equivalent to 17 days’ worth of domestic demand. When I re-calculated the numbers for the period 2006-2008, there was a larger shortfall — 48 days of domestic needs.

The conclusion is clear. The longer we remain subject to NAFTA’s proportional sharing clause, the more vulnerable we become. It is well past time for Canadians to stand up and demand that the proportional sharing obligations imposed by NAFTA be eliminated once and for all.

(John Dillon is the Global Economic Justice Coordinator for KAIROS: Canadian Ecumenical Justice Initiatives .)

with Production, Consumption,  Population and CO2 Projections updated through mid-2009

My most current World analysis of energy consumption trends, forecasts and implications. All charts have been updated with energy production/consumption data through yearend 2008 to mid-2009, forecasts from the 2009 EIA International Energy Outlook and other organizations are included, as well as projections of regional population growth, growth in per capita energy consumption/CO2 emissions and implications going forward. This was presented in Ottawa to an investment group in September and to the New York State Energy Research and Development Authority (NYSERDA) in Albany during the same trip. A consensus emerged at the recent ASPO-USA meeting in Denver that peak oil arrived in 2008, and my recent communications with Colin Campbell, who brought the peak oil issue to widespread attention in the 1990’s, revealed that he is quite certain 2008 marked the all time high of world oil production. Notwithstanding this, the EIA and IEA, who are the  principal government agency forecasters, as well as heads of multinationals and OPEC, believe that global oil production can grow to more than 100 million barrels per day with sufficient investment, and that consumption of other fossil fuels can be expanded for the foreseeable future.
 
The refusal of governments to acknowledge the risks of peak oil in their planning brings to mind one of the requirements to avoid potentially catastrophic ramifications to critical resource shortages pointed out by Diamond in his famous book Collapse : "one of the choices has depended on the courage to practice long-term thinking, and to make bold, courageous, anticipatory decisions at a time when problems have become perceptible but before they reach crisis proportions." It would appear that for now at least, mainstream world leaders will continue to pursue the growth paradigm until the bitter end, which unfortunately is doomed to failure on a finite planet, and wastes precious time and resources for an orderly transition to a lower impact, steady state paradigm which, given the finite nature of fossil fuels, we will get to whether we like it or not.

The Energy Sustainability Dilemma: Powering the Future in a Finite World 

David Hughes is a geoscientist who has studied the energy resources of Canada for nearly four decades, including  32 years with the Geological Survey of Canada as a scientist and research manager. He developed the National Coal Inventory to determine the availability and environmental constraints associated with Canada’s coal resources. As Team Leader for Unconventional Gas on the Canadian Gas Potential Committee, he coordinated the recent publication of a comprehensive assessment of Canada’s unconventional natural gas potential. Over the past decade, he has researched, published and lectured widely on global energy and sustainability issues in North America and internationally. He is a board member of the Association for the Study of Peak Oil and Gas – Canada and is a Fellow of the Post Carbon Institute. He recently contributed to “Carbon Shift”, an anthology edited by Thomas Homer-Dixon on the twin issues of peak energy and climate change, and his work has been featured in Canadian Business, Walrus and other magazines, as well as through the popular press, radio, television and the internet. He is currently president of a consultancy dedicated to research on energy and sustainability issues. 

Here’s an updated talk on North American natural gas including an in depth consideration of shale gas and its potential. Certain groups, in particular the American Clean Skies Foundation http://www.cleanskies.org and the newly formed American Natural Gas Alliance http://www.anga.us would have us believe that natural gas is so abundant it can replace US oil imports and we should be looking at replacing the vehicle fleet with natural gas.

The hype surrounding this is premature in my opinion, as 90% of shale gas production comes from the Barnett shale in east Texas (80%) and the long declining Antrim shale in Michigan (10%). The hype would have us believe that all other shale plays, which so far are producing little, will ultimately match the performance of the Barnett. The attached presentation critically examines this and some of the statements that have been made pro and con.

I was asked to present this by the Capital Region Energy Forum in Albany New York in part as a counter to a talk presented before me by an attorney at the same meeting from the American Clean Skies Foundation (I have also provided expert testimony in Colorado recently countering some of the statements made by this organization). There is a lot of misinformation on gas out there (Canada’s gas production is now falling at nearly 6% per year and NEB is forecasting it will be down 17% by 2011, yet Enbridge is talking of building a pipeline to the west coast to export Canadian gas!).

Natural Gas in North America: A Panacea to Replace Imported Oil?

David Hughes is a geoscientist who has studied the energy resources of Canada for nearly four decades, including  32 years with the Geological Survey of Canada as a scientist and research manager. He developed the National Coal Inventory to determine the availability and environmental constraints associated with Canada’s coal resources. As Team Leader for Unconventional Gas on the Canadian Gas Potential Committee, he coordinated the recent publication of a comprehensive assessment of Canada’s unconventional natural gas potential. Over the past decade, he has researched, published and lectured widely on global energy and sustainability issues in North America and internationally. He is a board member of the Association for the Study of Peak Oil and Gas – Canada and is a Fellow of the Post Carbon Institute. He recently contributed to “Carbon Shift”, an anthology edited by Thomas Homer-Dixon on the twin issues of peak energy and climate change, and his work has been featured in Canadian Business, Walrus and other magazines, as well as through the popular press, radio, television and the internet. He is currently president of a consultancy dedicated to research on energy and sustainability issues.

I thought I'd point out a new book that we've added to our recommended reading section. Why Your World Is About to Get a Whole Lot Smaller by Jeff Rubin.

Jeff Rubin was the Chief Economist at CIBC World Markets for almost twenty years. He was one of the first economists to accurately predict soaring oil prices back in 2000 and is now one of the world’s most sought after energy experts. He lives in Toronto.

I can see that the book is getting good reviews and recommend that you pick one up.

The Financial Times of London has a review on their website.

Dave Hughes’s guide to the end of the fossil fuel age

The Walrus has a great piece about ASPO Canada's very own J. David Hughes in their June issue. Written by Chris Turner, the article can also be found here at The Walrus website.

David continues to travel the country presenting "The Talk." If you get the chance, don't miss the opportunity to see why Dave has become such a sought after presenter and remember to pick up June's issue of The Walrus.