Canada-United States energy, trade, security, and policy.

• Author: Newcomb, R. Richard
• Position: PROCEEDINGS OF THE CANADA-UNITED STATES LAW INSTITUTE CONFERENCE on An Example of Cooperation and Common Cause: Enhancing Canada-United States Security and Prosperity Through the Great Lakes and North American Trade: Cleveland, Ohio April 2-4, 2009

Session Chair--R. Richard Newcomb

Canadian Speaker--Michal Moore

INTRODUCTION

MR. UJCZO: It is my-great pleasure to introduce to you the chair of this session, a member of our Executive Committee, and longstanding supporter of the Institute, Rick Neweomb. (1) Rick is with DLA Piper Rudnick, LLP, United States in Washington D.C., (2) and I invite you, Rick, to now introduce our keynote luncheon speaker.

MR. NEWCOMB: Thank you, Dan. It is my pleasure to be here this afternoon at the twenty-fifth Annual Canada United-States Law Institute Conference, and to introduce Dr. Michal Moore, Professor of Energy Economics and senior fellow at the Institute for Sustainable Energy, Environment, and the Economy at the University of Calgary in Alberta. (3)

Michal is the former Chief Economist at the National Renewable Laboratory in Golden, Colorado, (4) where he led a research team engaged in examining over-the-horizon issues for the Department of Energy and developing new methods for crosscutting analysis. (5) He is the former commissioner of the California Energy Commission, (6) where he held the position of Designated Economist. (7) In that role, Michal oversaw market structure issues, pricing of electricity and natural gas, and data collection for the commission as presiding member of the electricity and natural gas committee. (8) He directed the two billion dollar United States' program to maintain and expand renewable energy industry in the state (9) and presided over many complex siting cases for new fossil-fired generation. (10)

Dr. Moore received his Bachelor of Science degree in Geology at Humboldt State University, (11) a Master in Science from the Ecology Institute at the University of California at Davis in Land Economics, (12) and obtained a Ph.D. at the University of Cambridge in England in Economics, (13) where he is a member of Darwin College. (14) Dr. Moore is an active researcher in the areas of urban open space and agricultural land conversion, local government fiscal impacts, and the structure and rules of energy markets. (15)

Today Dr. Moore will address policy priorities in Canada and the United States for energy and their impact on environmental quality. As the policies of both nations seem to be in a state of flux, a unified outcome is uncertain. (16) Although innovative, the results have been uneven, inconsistent, and sometimes conflicting. (17) Dr. Moore will outline several initiatives that he believes can be productive and unify and strengthen the common Canadian United States policy goals in this area. I am pleased to introduce Dr. Michal Moore.

(1) See Rick Neweomb, Biography, DLA Piper, bttp://www.dlapiper.com/global/people/ ajaxfreeseareh.aspx?LastName=N&p=2 (last visited Nov. 8, 2009).

(2) Id.

(3) See Michal Moore, Biography, Institute for Sustainable Energy, Environment and Economy, http://www.iseee.ca/node/218 (last visited Nov. 8, 2009).

(4) See National Renewable Energy Laboratory, http://www.nrel.gov (last visited Nov. 8, 2009).

(5) Id.

(6) See Michal Moore, Biography, The California Energy Commission, http://www.energy. ca.gov/eommissioners/moore.html (last visited Nov. 8, 2009).

(7) See id.

(8) See id.

(9) See Michal Moore, Biography, Sigma Xi The Scientific Research Community, http://www.sigmaxi.org/meetings/annual/program.energy.bios.html (last visited Nov. 8, 2009).

(10) See id.

(11) See id.

(12) See id

(13) See id.

(14) See id.

(15) See id.

(16) See Kristin Bluvas, A Step Forward in United States Energy Policy, 70 ALB. L. REV. 1589 (2007); see also Judith Hanebury, Smart Regulation--Rhetoric or Reality, 44 ALBERTA L. REV. 33 (2006).

(17) See, e.g., id.

CANADIAN SPEAKER

MR. MOORE: Thank you. I am honored to be here today, and flattered that you are entertaining the observations of an economist, considering some of the effigy dolls that I see swinging from Main Street these days; we may be on the verge of being officially declared an endangered species or absolute fair game. I want to tell you, as I start my remarks that I really do not care about energy. I care what it can do. I do not consume it to have it, because in many ways I cannot have it, store it, get it and use it, or put it out on display as they have with the fine ears outside. But I love what it can do for me. In fact, I cannot do without it.

I come to you as a product from a land of total optimism. A land built on hope, on the irrepressible base conviction that anything is possible; that if you willed it to be done, worked hard, tossed in a bit of clever innovation, a dash of capital, then wonderful inventions and progress were just around the corner.

Given those remarks, you may have suspected that my last sentence was a slip into a tired soliloquy about California. You may have been waiting for the irony that surrounds the sixth largest economy in the world mired in debt, (18) in diminished status when it once led the world, (19) but I am not. I came here today from my home of academe in Alberta, which is still a proud bearer of the new energy economy, emblematic of a strength and diversity of the Canadian spirit, despite the cataclysmic upheavals in the energy economy; where even Alberta is struggling to unravel the intricacies of the new energy economy.

There cannot be any question or doubt that we are in a troubling time of contraption. (20) However, as the President and the Prime Minister have both intoned recently, this period of instability will pass, not casually, not without a great deal of structural and collateral damage, but it will pass. (21) The other end will be a recovering economy, a hungry population, a capital-starved universe, and a series of countries facing a panoply of common problems that never go away. Not recession, not depression, war, or bright and expansive periods of unrestrained back-thumping confident periods of growth. What are they? They are basic, common, and undeniable: shelter, food, water, and energy. They will be waiting when we open the door from this storm, and I think we can use two of them as icons for how to rebuild in the coming years and create not only a stronger network of capital facilities but a tighter, securer geopolitical bond that reflects the resource in human capital-rich characteristics of North America.

The Annual Canada-United States Law Institute Conference concerns itself with the cross-border issues between Canada and the United States, (22) two great countries linked by more than proximity. (23) We have common languages, (24) we depend on common products, (25) and we have common challenges. (26) A few of those challenges, including food security, (27) the need for stable fisheries, (28) common industrial standards, (29) someone mentioned the softwood lumber dispute, effective response to climate change, (30) water quality, (31) and one day perhaps water quantity, (32) and energy security. (33)

On that last point, we have discovered that the prodigious energy resources located at various points along this divide are absolutely critical to the economic success and the so-called energy security of both countries. (34) In short, we both have significant and important shares of critical goods that each country must have, to survive and prosper. (35) We know how to acquire, process, move, and sell these commodities. (36) In most cases we even know how to price them appropriately. (37)

I would like to focus on two of these common goods: energy and water. Both satisfy non-negotiable human needs; however, neither come without costs. They are abundant, but not free; and widely, but not uniformly, distributed in every compass direction. (38) Elsewhere on Earth, wars are and will be fought over both. (39) In North America, the political and capital facilities compound and complicate a meta-regional distribution network that grew up in response to, rather than in anticipation of, the demands for these core resources. (40)

Canada, arguably the United States' most important trading partner, (41) is a source for much of the United States' demand for energy in all its forms. (42) Take natural gas. Canada had 57.9 trillion cubic feet (TCF) of proven natural gas reserves in January 2008. (43) The country produced 6.5 TCF of natural gas in 2006 while roughly consuming only half of that at 3.5 TCF. (44)

After the United States, Canada is the second-largest producer of natural gas in the Western Hemisphere, (45) and is a critical source of the United States' natural gas supply. (46) In 2006, it exported 3.6 TCF of natural gas to the United States, which represents eighty-six percent of all the United States' natural gas imports that year. (47)

In terms of electricity, the networks in Canada and the United States are heavily integrated. (48) In 2006, Canada exported 41.5 billion kilowatt hours of electricity to the United States, (49) but at the same time, Canada imported 23.4 billion kilowatt hours. (50) Over the last ten years, Canadian imports of electricity from the United States increased tenfold, while its exports remained relatively constant. (51)

In 2007, $41.6 billion worth of crude oil was transported to the United States (52) along with $31.4 billion worth of natural gas (53) and $3.1 billion worth of electricity. (54) The United States can acquire or replace much of this energy by denying Canadian sources, and turning to someone else, (55) but at what cost?

Twenty years ago acquiring oil from the oil sands of Alberta was only a dream largely held in two universities and a handful of boardrooms, (56) Today, although constrained due to the economic recession and a diminished demand for transportation fuels and some derivative products such as plastics, the oil sands represent a significant well of future supply for the United States and for Canada, as well as a mainstay of the drive to remain energy independent. (57) In my notes, I put "energy independent" in quotes just to remind myself what an oxymoron that is, and I hope that at the end of this talk...