US looks to Canada as savior on energy

By Colin Nickerson, Globe Staff, 4/27/2001

MONTREAL - Even as the United States wrangles over a widely opposed scheme to drill for oil and gas in Alaska's Arctic National Wildlife Refuge, the energy-hungry eyes of America are turning toward Canada.

Thanks to advanced new recovery techniques making it possible to extract oil economically from Alberta's spectacularly rich ''tar sands'' - together with the prospect of a natural gas bonanza in the Northwest Territories plus the deep-sea oil and gas fields just coming into production off Newfoundland and Nova Scotia - Canada is looking like America's great northern hope for averting an energy crisis in the years ahead.

Already the top foreign source of natural gas and hydroelectricity for the United States, the country is now muscling past Saudi Arabia, Mexico, and Venezuela to become the single most important supplier of crude oil and petroleum products. Of the 20 million barrels of oil that the United States burns every day, 8 percent already comes from Canada. That is expected to double by decade's end.

President Bush, during the just-concluded Summit of the Americas in Quebec, repeatedly emphasized his hope that Canada will become the centerpiece of his vision of unifying North America in a common energy market.

There are risks. America's increasing dependence on Canadian gas and oil could give the weaker neighbor a mighty cudgel in the infrequent but ugly trade disputes with the superpower to the south.

''Natural gas ... could be a vital bargaining chip,'' Thomas S. Axworthy, a Canadian lecturer on public policy at Harvard's John F. Kennedy School of Government, wrote in a recent opinion piece for Toronto's Globe and Mail newspaper.

Nonetheless, Canada seems a more reliable and secure fount of fossil fuels than the nations of the Organization of Petroleum Exporting Countries, or OPEC.

''There is some very good news in our hemisphere, at least as far as Americans are concerned,'' Bush told reporters in Quebec. ''Because of technologies, the Canadians have developed vast crude oil resources. That is good for our national security. It's good for our economy.''

At the same time, soaring energy prices are making feasible a plan to tap the vast Arctic reservoirs of natural gas under Canada's Mackenzie River Delta. American and Canadian oil companies are spending $75 million just to determine the best route for a mammoth pipeline running over frozen tundra, across soaring mountains, and in deep trenches beneath the Beaufort Sea.

One proposed 1,400-mile pipeline route would link Alaska's Prudhoe Bay, holding 20 percent of US gas reserves, to the Mackenzie delta - which has 24 trillion cubic feet of proven natural gas and prospects for 170 trillion cubic feet - then carry the clean-burning fuel through the Northwest Territories along the valley of the powerful northern river. The United States consumes about 21.5 trillion cubic feet of gas a year.

Such a pipeline would draw heavy fire from environmentalists, but the Inuit and Indian people of the territory - including Premier Stephen Kakfwi, a Dene Indian - say they want the economic development, lending the pipeline a sort of moral credence.

''This may be the last world-class energy project in North America,'' said Bill Gwozd, an industry analyst for Ziff Energy Group, a natural gas consulting firm with offices in Houston and Calgary, Alberta. ''Canada is stepping to the forefront as the critical source of energy'' for the United States.

A rival pipeline proposal, leading from Alaska through the Yukon Territory along the route of the Alaska Highway, is being promoted by the governments of Alaska and Yukon. But it follows a longer route, would be significantly more expensive than the $5.5 billion Mackenzie project, and would bypass the Northwest Territories' enormous gas lode.

The White House insists that Bush still plans to push for opening a portion of the Arctic National Wildllife Refuge to oil drilling. But the plan has nearly no support outside Alaska and the oil industry. Environmental activists are plotting a massive opposition campaign, a tiny aboriginal band in the region is kicking up a huge fuss, and Congress is hemming and hawing.

Even the president seems to recognize which way the political winds are blowing on this one.

''There's gas in our hemisphere, and the fundamental question is, `Where is it going to come from?''' he said last month. ''I'd like it to be American gas. But if Congress decides not to have exploration [in Alaska], we'll work with the Canadians.''

The rolling blackouts afflicting California have lent a sense of urgency to a US quest for ''energy security.'' Domestic oil production in the United States has slumped 40 percent since 1970 as wells were pumped dry. Aside from the wilderness of Alaska, the United States has no new frontiers of oil, while Canada has barely scratched its potential.

''Energy is going to be the priority in our relations,'' said Paul Cellucci, the former Massachusetts governor who this month became US ambassador to Canada.

He noted that the Sable Offshore Energy fields, which only started production last year, are now moving 500 million cubic feet a day from deep-sea platforms off Nova Scotia along 789 miles of pipeline to New England - ending an anxious era of energy scarcity for the region.

Out west, Alberta has been pumping oil and gas for decades from traditional wells, but advanced recovery technology is turning the oil-soaked ''tar sands'' of the immense Athabasca deposits into the continent's biggest oil producing region.

Nearly $25 billion in oil investment is pouring into the wilderness surrounding the boomtown of Fort McMurray, on the Athabasca River in the rugged northeast of the province. Instead of using drills, companies like Syncrude Canada dig into the earth with giant shovels, haul off the rich sand to crushers, where it is mixed with steaming water and moved by pipe to oil extraction plants.

Only a few years ago, ''synthetic oil'' - the industry term for oil not from wells - was considered too expensive to recover. But rising oil prices and soaring energy demands in the United States have changed the equation, and the new technologies are actually knocking down production costs.

The Athabasca deposits contain 40 times more recoverable oil than the Arctic National Wildlife Refuge in Alaska - at least 300 billion barrels, or 15 percent more than the entire proven reserves of Saudi Arabia.

Closer to New England, the 14-story Terra Nova floating production and storage vessel is scheduled to maneuver this summer into position 220 miles east of St. John's, Newfoundland, and start pumping from undersea deposits holding 400 million barrels of crude. When the Terra Nova project reaches full production in the fall, it will yield 100,000 barrels a day, most of it headed for markets in the Northeast.

''We have fantastic potential and opportunities,'' Canadian Prime Minister Jean Chretien told an Alberta audience last month. ''The United States needs Canadian energy.''

This story ran on page A01 of the Boston Globe on 4/27/2001.

© Copyright 2001 Globe Newspaper Company.

-- Anonymous, April 27, 2001