Attacks lend heft to Alberta's gas role
Sept. 11 events heighten need for safe energy channels
Diane Francis -- Financial Post
CALGARY - Premier Ralph Klein will speak in New York City next week to assure utilities, businesses and leaders that extraordinary security measures have been put in place to keep oil and natural gas flowing from Alberta.
"Alberta natural gas lights up all of Manhattan. The first thought that came into my mind after I saw the attacks was the security risks here. Our oil and gas industry here is huge and the Americans depend on it. I met with the RCMP and CSIS right away and we have extra security since Sept. 11 at sensitive areas," he said in an interview in his office.
Alberta, on its own, supplies 19% of all natural gas in the United States, and Canada has surpassed Mexico as that country's largest exporter of oil. Projects in the oil sands that are underway will double production in a handful of years.
"We have a task force and are looking at sensitive areas like petrochemical, tar sands and pipelines that feed California, Chicago, New York and most of Canada. I never thought about the significance of Canadian energy as it relates to the U.S., but it's critical," he said.
Mr. Klein was to have gone fishing with Vice-President Dick Cheney a couple of days after the attacks but the trip was cancelled. Another reason for his trip south of the border is to sell the idea of more investment in Alberta's oil sands in addition to the $50- billion already underway.
"There is a need for a co-ordinated and cohesive approach to North American energy supply. A continental energy policy," he said. "We are stretched to the limit now in terms of oil sands development but we are open for more business."
Alberta's oil sands hold as much bitumen, or tar that is mined and cooked into crude oil, as all Middle Eastern oil reserves. The break-even cost of doing so is less than US$10 a barrel, which is why there are several new plants and additions under construction. Oil production from the sands alone should reach 1.5 million barrels daily in short order. That's as much as the Americans buy now from Saudi Arabia.
"It's huge," he said.
Fortunately, Premier Klein has usurped the role of Ottawa by going directly to the United States because the province owns the resource. Ottawa has mishandled energy policy in this country for decades, from allowing Quebec to block hydro development at Churchill Falls to blowing $12-billion to create Petro-Canada, worth a fraction of that to its nasty treatment of Alberta.
Premier Klein, who gets along with Jean Chrétien, was "disappointed" at the Prime Minister's behaviour during and after the crisis.
"Canadians want to feel secure and need to know that the government is doing something about terrorism," he said.
Alberta staged a minute's silence the following day and set up condolence books for residents to sign that were sent to New Yorkers.
"There should have been a statement about extradition and how that would be co-ordinated and immediate even when dealing with a state that has capital punishment," he said.
"There should have been a statement immediately that we were going to strengthen immigration laws."
The Prime Minister should have assured Canadians that important assets, and potential targets, would be protected and safe from attacks, said Mr. Klein.
"I'm just waiting for the other shoe to drop," he said. "We're in for a long time of turbulence. It's so dramatic, so terrible. It shows how volatile the economy is. Ever since then, oil is down 15%, gas 30%. We have revised our price estimates to US$22 a barrel and US$2 per thousand cubic feet of gas."
These estimates will mean Alberta will lose $1-billion in revenue. By law, Alberta's provincial government must earmark 75% of any surplus toward debt repayment and cannot run a deficit. So $1-billion in cuts must be made.
However, Alberta's medium to longer term prospects are greatly enhanced, tragically, by recent events. In May, Washington unveiled an energy policy that aimed to develop more supplies from Canada and other friendly nations to reduce dependence on the Middle East.
"This is the safest country for them to invest in and foreign ownership is not an issue," said the Premier. "The majors, with the exception of Petro-Canada, are already foreign. That already happened. But there will still be hundreds of junior and intermediate oil companies, plus hundreds more suppliers from mud companies to seismic, engineering and others."
The events of Sept. 11 also make it vital to bring natural gas down from Alaska and the Canadian Arctic. There are two routes -- one through Alaska and the other from Alaska, underwater to the Mackenzie Valley -- and Alberta supports either route.
"We just want to make sure that these lines converge in Alberta where we can strip the gas liquids and add value with the plants we already have in place," he said.
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