NAFTA paves U. S. route to energy from north
Pipelines may let area share boom
By Jerry Zremski NEWS WASHINGTON BUREAU CHIEF
Beneath the forests of Alberta, 2,300 miles miles northwest of Buffalo, you’ll find the latest black gold: a mix of sand and oil being mined as a new kind of gusher.
And Alberta’s Athabasca Oil Sands are just part of a petroleum boom that has made Canada the world’s top supplier of oil to the United States.
The boom could make its way to Buffalo through two proposed pipelines that would carry Canadian oil through Western New York to refineries in the Philadelphia area.
The boom also serves as a backdrop for two of the big issues in the U. S. presidential race between Sens. Barack Obama and John McCain: the future of the North American Free Trade Agreement and the U. S. oil supply.
NAFTA became a punching bag during the Democratic primary battle between Obama and Sen. Hillary Rodham Clinton. But the treaty is one reason why the United States buys more oil from Canada than from Saudi Arabia, Iraq, Kuwait and the United Arab Emirates — combined. The trade deal prohibits Canada from hoarding its oil reserves in these times of tight supplies and high prices, which might explain why Obama, the presumptive Democratic nominee, has backed away from his harsh rhetoric about the agreement.
But he has not backed away from questioning Canada’s mining of the carbon-laden heavy crude that it gets from the oil sands — which environmentalists consider a far greater contributor than traditional crude to global warming.
Thousands of U. S. jobs
Add it all up, and the next energy debate may not be about the oil the United States gets from the Arab nations in the Middle East, but the oil it gets from its neighbor to the north.
“Thousands upon thousands of jobs in the U. S. rely on that oil,” said Christopher Sands, a senior fellow at the Washington- based Hudson Institute think tank who specializes in
U. S.-Canadian relations. “And 25 percent of all of our untapped resources are there. That’s a big deal.”
While Congress has been mired in never-ending debates about drilling in Alaska’s Arctic National Wildlife Refuge and, more recently, off the U. S. coasts, Canada outstripped Saudi Arabia in 2004 as the top U. S. oil supplier.
Canada still pumps plenty of oil the traditional way, but now nearly half its output comes from the oil sands. Found beneath a vast forest the size of Florida, the sands contain an estimated 170 billion barrels of oil — the second largest reserve in the world, after Saudi Arabia.
For decades, the oil beneath that forest appeared too expensive to extract. But as oil prices have increased and supplies have dwindled, oil companies are expected to invest $100 billion in the coming years in the oil sands.
They’re mining near the surface — or more often, drilling deep underground — to extract an oil as thick as peanut butter. Once it’s processed to resemble traditional crude oil, much of it goes to refineries in the West and Midwest, then on to gas stations and to other uses.
‘Proportionality clause’
With daily production projected to rise over the next decade to 4 million barrels from 1.3 million barrels, oil and pipeline companies have proposed 36 new pipeline projects — including two that cut through Western New York –to get that oil to potential customers.
Sunoco has proposed a 24- inch pipeline to carry Canadian crude from Buffalo to its Philadelphia refinery, possibly as soon as 2012. The pipeline would use the same right of way as the pipeline that brings gasoline to the Buffalo area from Philadelphia, said Thomas Golembeski, a Sunoco spokesman.
Enbridge, Canada’s leading pipeline company, has proposed a 30-inch pipeline using the same route.
The proposal is one of the company’s three alternatives for bringing crude from the oil sands into the Northeast, said Jennifer Varey, a company spokeswoman.
“We’re always looking for ways to expand our system,” Varey said. “And we’re seeing tremendous interest in getting Canadian crude into the Philadelphia market.”
Refineries there now rely on overseas imports that are increasingly being tapped by China and India. That can’t happen to the same degree to Canadian crude — all because of NAFTA.
The trade deal includes a “proportionality clause” that bars Canada from reducing its oil and gas shipments to the U. S. while increasing its domestic supply.
“We looked at whether Canada could reduce exports for the sake of conservation or environmental policy . . . or even for household heating. We cannot,” said John Dillon, co-author of a report on the issue published by the University of Alberta’s Parkland Institute and the Canadian Centre for Policy Alternatives.
But Canada might want to change all that if American politicians insist on renegotiating the trade deal.
Perhaps not surprisingly, Obama — who called NAFTA “devastating” and “a big mistake” during his campaign against Clinton — softened his criticism once he clinched the Democratic nomination.
“Sometimes during campaigns, the rhetoric gets overheated and amplified,” he told Fortune magazine in June, saying he was simply interested in “opening up a dialogue” with Canada and Mexico “and figuring out how we can make this work for all people.”
Campaign aides to McCain, the presumed Republican nominee, did not respond to a request for comment, but others suggested that, for Obama, a more careful approach to NAFTA only made sense.
“The Canadians might look for other options if we became difficult customers,” said Sands, of the Hudson Institute.
Yet while easing off his aggressive anti-NAFTA rhetoric, Obama remains likely to be a difficult customer for the Canadian oil industry. A strong proponent of developing alternative energy sources, the likely Democratic nominee appears concerned about a possible overreliance on the Canadian oil sands.
The oil from the sands contains more carbon, which makes it a bigger contributor than traditional sweet crude to global warming. Alberta, therefore, plans to spend $2 billion to capture and store the carbon removed from the oil.
“If it turns out that these technologies don’t advance, and the only way to produce these resources would be at a significant penalty to climate change, then we don’t believe that those resources are going to be part of the long-term . . . future,” Jason Grumet, Obama’s senior energy adviser, told reporters in June.
Environmental issues
Obama is not alone in worrying about the potential environmental cost of oil from the oil sands.
The U. S. Conference of Mayors passed a resolution in June encouraging mayors to refrain from buying higher-carbon fuels for municipal vehicles.
And Liz Barratt-Brown, a senior attorney at the Natural Resources Defense Council, said: “There is a huge infrastructure investment being made in a fuel that, in our view, is taking us in the wrong direction. It’s making it more difficult for us to fully address the global warming issue.”
Environmentalists say Alberta’s “dirty oil” contains three times as much carbon as sweet crude, and they note that its production essentially involves strip-mining Alberta’s boreal forest and disrupting, if not destroying, all the wildlife there.
Oil industry officials and Alberta provincial leaders counter by saying they are doing everything they can to reduce the oil sands’ carbon footprint and protect the environment.
“Yes, it’s a heavier oil,” said Greg Stringham, vice president of the Canadian Association of Petroleum Producers, who, nevertheless, disputes the notion that it has three times as much carbon than light sweet crude.
Taking into account transportation and production impacts, the carbon footprint of the sands oil is only about 10 percent greater than that of oil from other parts of the world, Stringham said.
He said he was confident that the Canadian oil will be seen as clean enough to be used in the United States for decades to come. And with the U. S. facing a dwindling oil supply from the Middle East and troublesome suppliers like Venezuela and Nigeria, some say it may have no choice but to look to Canada to provide a bridge to an oil-free future.
