The Oil Drum: Local

We all know that the United States is an importer of petroleum products. The United States is also an exporter of petroleum products, primarily to Mexico and Canada. Both of these countries send us crude oil, and we export refined products back to them. We often hear that Canada and Mexico are our largest sources of petroleum product imports, but is this really true if we net out exports? Canada remains number 1 when we net out exports, but Mexico drops to fifth place in 2008. (Mexico drops to third place in 2008, without netting out exports, because of its declining volume.)

When the weather in the mid-West gets hot and humid, as it does at this time of year, it is pleasant to have the chance to head up to Maine, (along I might note with two solid streams of traffic from Boston all the way North). Thus it was that I could get up, this morning, and pick fresh raspberries for breakfast from the bush outside the window. Raspberries are, like cherries, one of the transient crops that one savors each year when they are in season and then waits until they appear on the bush again next year.

In this way they are a food resource when they grow, but if we don’t put additional work into their condition, they cannot be considered as a reserve for the longer haul. Unless that is, we are willing to make the time and money investment, by canning them, or making them into jam, they don’t count much toward the family food reserve (and note that I have, in the past, helped make raspberry jam).

The difference between a reserve and a resource is a relatively important distinction that often gets overlooked in the debate about our energy future. Some sources of energy are fairly easy to describe and to understand. Place a wind turbine in an area with a recognized wind pattern, or a solar collector array in the American South-West, and we can run tabulated data through simple calculations to understand the value of the returning energy on the initial investment. It is however, the amount of heavy oil that can be justified as a reserve volume that drives today’s post, and with very heavy oil we have to go the other way - in other words turn the consistency from something closer to jam back into something closer to juice.

Ed note from PG: I am happy to announce that TOD:C is up and running again (and I believe overdue thanks are in order to Stoneleigh and Ilargi, now over at The Automatic Earth, for their efforts here). One of the new editors is benk (and I believe you already know Khebab!).

Ben is completing his Ph.D. in Chemical Engineering in Canada. His research focuses on the fine details of solid oxide fuel cells, dealing with ceramics and long equations. He attributes his initial interest in energy to the documentary "The End of Suburbia," which he first saw about 4 years ago. Since then he has felt a duty to get the good word out. Ben has been the host of theWatt Podcast talking about various energy issues, a capacity we are exploring bringing the TOD. Welcome Ben!

To get TOD Canada rolling again, I've written a refresher on Canada's energy situation. Canada can't be ignored when it comes to energy. We are a land of plenty. Lots of land, lots of weather, lots of consumption, lots of production. Plenty can easily become scarce though and it has to be managed, and managed well. Management of our resources will be Canada's challenge in the years ahead. Unmanaged, Canada's energy consumption is close to the highest in the world and stands at 350 GJ/person, slightly more than in the U.S. and Canada's energy intensity is the worst in the G7 at 10.6 MJ per unit GDP.

I had thought that the short thread that has run through my last few posts – relating to the imminence of a fuels crisis, and the lack of political perception of the problem, had run out. And then I read the piece from Salon that threadbot had as the top story on Drumbeat on Sunday. Taken with a conversation that I had with the Nurse (who lives in Ottawa) today, it led me to this additional comment. And to put that in context, for those who live further South, while Ottawa might get about 100 inches (250 cm) of snow in a normal winter, this year it has had more than 166 inches (421 cm) and the snows are not over. Part of the reason that I bring this up, in context of the Salon article, was the line in that article that said (and I recognize that I am taking it a little out of context)

And for that only one alternative fuel is even remotely plausible -- carbon-free electricity.

And my tiny mind asks, where, with a 20-inch (50 cm) snowstorm does one find this source to supply a city of 1,148,800 inhabitants in the short term.

This is a guest post by TOD reader Jon Friese. Jon is a software engineer living in Minneapolis and a volunteer with the Twin Cities Energy Transition working group, seeking a path to a low carbon future. Under his own initiative Jon tracked down literature on EROI methodology, contacted the Canadian Government and an energy consulting company for data, and came up with the following analysis on declining energy return on Canadian Gas. This draft analysis is provocative (backing into an EROI estimate using $/GJ suggesting possible energy break even for natural gas within a decade). However, in addition to the new info, I was inspired that a smart, engaged citizen chose to volunteer his time on the pressing issue of fossil fuel decline, and then shared it with others in the TOD forum for feedback. Thanks for your initiative here Jon.) (Editors Note: Jon is working on an update to this analysis incorporating feedback from the TOD community -please treat the information in this post as a work in progress.)

Figure 1 Canadian Natural Gas Energy Return on Investment, actual + trend line (Click to enlarge)

Apropos of yesterday's gas tax report and discussion, today we bring you Alan Drake's ideas on post-peak mitigation. Alan is an engineer, former accountant, and professional researcher based in New Orleans with best hopes for many. Alan would also like to thank the lovely and talented Wendi Berman for her editing skills and assistance.

Many proponents for public spending on Post-Peak Oil mitigation are attracted to gasoline and diesel taxes or more generic oil and/or carbon taxes. In an era of rapidly increasing oil (and all other energy) prices, passing such taxes will be politically difficult and take precious time.

I would like to propose an alternative tax for Phase I of Peak Oil mitigation that adheres to Sen. Russell Long’s famous dictum “Don’t tax you, don’t tax me, let’s tax that fellow behind the tree!”

World Trade Organization (WTO) rules allow for a specific exemption that will allow the United States of America to impose a non-discriminatory tariff (it applies to all goods and taxable services, with a specific exemption for essential goods) if the funds raised are used to reduce our structural trade deficit, i.e. our oil consumption.

Specifically, the WTO allows nations with a structural balance of trade deficit (which the USA certainly has) to apply a non-discriminatory tariff if the funds from that tariff are used to reduce the structural trade deficit (which reducing oil use certainly would do). A separate section of the WTO treaty allows the importing nation to exempt “essential” goods.

In 2006, the USA imported $1.861 trillion in goods (and exported $1.023 trillion). This allows for significant revenues from a small percent tariff.

Canada provides a quarter of all the gas produced in Canada and the U.S..  Ninetyeight per cent of Canadian production comes from the Western Canada Sedimentary Basin (WCSB), and almost all the rest from Atlantic Canada.

Since the year 2000, total Canadian production has been maintained at about 480 million cubic metres per day.  This has been achieved only by a very considerable increase in the number of wells drilled each year.  For details, see a posting I wrote in January.  It is evident that such increases cannot be continued indefinitely.  Under these circumstances, when drilling levels off, output begins to fall, and an actual decrease in drilling leads to even faster decline.  When gas prices were in the region of $15 per gigajoule in late 2005, there was considerable enthusiasm for drilling, but in the last year the price has wandered erratically in the range of $5 to $9 per gigajoule, and costs have been high. At $7 per gigajoule, drilling has been falling, and companies are laying workers off.

This is a guest post by Roger Blanchard, Assistant Professor of Chemistry, Lake Superior State University, Sault Ste. Marie, MI, and the author of “The Future of Global Oil Production”, McFarland & Company, 2005.

A recent article concerning the upcoming impact of Mexico’s declining oil production, “With Mexico Poised to Deliver World's Greatest Oil Shock Since 1970s, U.S. Seeks Canada's Help” stated the following:

"U.S. industry and government officials have been talking with Canada about a sharp increase in production from the Alberta oil sands region since at least early 2006, according to Canadian press reports. In response, Canadian oil output, nearly all of it from Alberta's oil sands, is forecast to be up 9% this year." (Actually only about half of Canada’s oil production comes from oil sands)

Often, when articles are written about oil supply issues, it appears that the author hadn't actually looked carefully at the data he or she is writing about.

Easy Come, Easy Go, or: The Incredible Disappearing 140 Tcf of Canadian Gas.

I posted an article "The Future of (Natural) Gas from the Western Canada Sedimentary Basin?" a few months ago, suggesting that the numbers suggested for Western Canadian gas in the NRCan report "Canadian Natural Gas Review of 2004 & Outlook to 2020" were exceedingly optimistic, basing that conclusion on both National Energy Board Scenarios and actual events.  I did not expect that the next NRCan report in the series would reflect this view, but it has since come out, and its contents prompted me to look further back in the series and then to look at how other official and unofficial assessments were changing.

The Western Canada Sedimentary Basin (WCSB) is one of the major gas-producing areas of North America.  It supplies about a quarter of all gas used by the US and Canada, and 98% of Canadian production.  Current production is 450 million cubic metres a day.  To put this into perspective, this volume is close to half a cubic kilometre, and the mass of this much gas is 330,000 tonnes.

The National Energy Board issues reports on various aspects of Canadian energy production and use.  This is the main entry point for natural gas reports on its web site, and this is the entry point for more general energy reports that include sections on natural gas.  It is instructive to study the evolution of scenarios put forward for the future of gas supply from the Western Canada Sedimentary Basin.