Will NB curb energy growth?

Efficiency NB started work approximately roughly 15 months ago based on the model of Efficiency Vermont. The Vermont agency has been in operation since the year 2000 and seems to be well organized. The New Brunswick counterpart has a budget of $25 million per year, 16 people on staff and housing inspections are contracted out to four inspection companies.

The Liberal election platform indicated that they wanted an aggressive approach to conservation via this agency, and if I remember correctly, it was suggested that more than 10,000 houses per year might be done with a budget of $50 million. The promises have been scaled back.

In a recent meeting with the Minister of Energy Jack Keir and President of the Agency Elizabeth Weir, the goals of Efficiency New Brunswick were discussed. The new Liberal government has added a number of programs to better serve various sectors such as industrial, commercial, multiple unit residences in addition to single family homes.

It has processed 1500 housing efficiency evaluations since April 2007 but it is too early to say how many of these projects will go ahead.

Growing a new agency of this size always presents problems. There are training issues to be addressed, concerns about the size of the available contractor workforce to accomplish the renovations, monitoring and ensuring that the programs are the best fit, and getting the message out to the people that help is available.

One of the interesting programs is the subsidy for T8 fluorescents as a replacement for the standard T12 four-foot tubes. This newer technology will save between 7 and 22% on lighting energy based on the replacement wattage chosen.

The CFL program is based mainly on education and getting retail stores to stock larger variety of the compact fluorescents in anticipation of the Federal government introduction of efficiency standards in 2011. This will likely remove 95% of incandescents from the marketplace. While the Province was one of the early proponents of a virtual ban on incandescent bulbs, Minister Keir and I part company on the timing of implementation. The minister sees the private sector as leading the way to CFL promotion in a gradual way by 2011. I see this as “fiddling while Rome burns”.

Our difference in opinion is based on:

1) The timing of world oil production peaking. My guess would be approximately five years. He indicated that he believes it is probably more than ten years hence.

2) The severity of impact a shortage of oil will have on the economy and price of oil. The minister indicated that he expects a gradual adjustment of the economy as it becomes clear that oil is peaking. In contrast, my interpretation is based on the 1973 and 1979 oil embargo where the price of oil increased by a factor of four. Additionally, the ability of the world and New Brunswick to adjust to high oil prices on a continual basis will be difficult to achieve at high fuel prices.

It is said that 30% of the homes in New Brunswick were built prior to 1960. It is difficult to say how many have been already upgraded, but supposing that 50,000 required a substantial amount of work to come close to modern energy standards. Given the minister’s time frame to peak oil, up to 5000 homes should be upgraded each year. With a contractor doing one home upgrade a week, it would take roughly 100 contractors to meet this schedule. With new home construction, commercial work and the evacuation of the trades to Alberta, can this level be obtained?

If you believe my prediction of five years to peak oil, then 10,000 homes should be completed each year requiring 200 hundred contractors. This is a massive undertaking. Although improving the energy performance of homes is not a total fix to the extreme energy prices that are inevitable, do we have any choice but to lower the carbon footprint and energy usage of our housing stock?

I am going to make an unsubstantiated guess that Efficiency NB is not going to get anywhere near the 5000 housing upgrades that would be a promising level. A full annual report will be published in November 2007 and the public should know whether some measure of success has been obtained.

We agree there are big energy problems coming down the pipe. We disagree on timing and severity. We agree that Efficiency NB is very necessary for many reasons. What is unclear at this moment is whether the Efficiency NB plane has taken off or is just taxiing down the runway. Both Jack Keir and Elizabeth Weir have good intentions but by December we will have to seriously evaluate the program and make the necessary adjustments. Failure of this agency to thrive and fulfill its mandate is not an option.

Jack Keir has shown more leadership in the Energy field in one year than many of his predecessors. However, the Department is facing unprecedented challenges of enormous proportions. Many have suggested that a total re-engineering of our society is required to power down our economy to a level that will be required and is sustainable. The investment to accomplish this could be similar to that done in WWII. The danger to our personal welfare is just as great.

Sustainable + growth have been put into the same sentence by this government and that’s an oxymoron. Sustainability requires us to leave sufficient resources for coming generations but actively promoting population growth makes that considerably more difficult. The natural gas from the McCully field will likely be completely exported within 25 years successfully heating the homes of the Boston area. Does this sound like a self-sufficiency and sustainability program to you?

A friend told me that the over $400 million dollars being spent by the province on new roads is part of the Linear Oil Strategic Reserve. You might recognize the acronym (LOSR). When we get short of oil, we can tear up the pavement and recover the oil. Just like the tar sands.

If Shawn Graham were to seriously re-evaluate the direction of his self-sufficiency mandate, he might look less like the captain of the Titanic. There is an iceberg out there in the future whether it is five or ten years away. And there is no time to lose in changing course.

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When Irish eyes are smiling!

Brian Mulroney’s legacy lives on. Our present day energy policy dates to his government. The bad new is that we are running out of natural gas and conventional oil. The good news is that it isn’t going to happen right away. If we set aside the serious pricing issues from a decline in world oil production in the coming decade, and concentrate only on the role of the federal government and the National Energy Board (NEB) in protecting reserves, the future looks quite difficult.

The NEB defines its role as “an active, effective and knowledgeable partner in the responsible development of Canada’s energy sector for the benefit of Canadians. The NEB’s purpose is to promote safety and security, environmental protection and efficient energy infrastructure and markets in the Canadian public interest within the mandate set by Parliament in the regulation of pipelines, energy development and trade.”

Normal wisdom would be to retain sufficient natural gas and oil for the benefit of future generations of Canadians. But the Auditor-general of Canada indicated in a report to Parliament that –
“Up to 1985, long-term gas exports were approved under section 118 of the NEB Act only after the NEB was satisfied that Canada would still have a strategic reserve. Since price deregulation in 1985, procedures for assessing long-term gas export licences have changed three times. In particular, the NEB Act was amended in 1988 to reflect the Canada-U.S. Free Trade Agreement (FTA). The FTA made it more difficult for the Board to intervene in the free flow of energy commodities across the Canada-U.S. border. Now the NEB approves export licences provided that Canadians have access to the oil and gas at competitive prices. In 1997, sales under export licences, typically lasting for 10 years, represented about 35 percent of total export gas sales compared with 78 percent in 1987. The balance of 65 percent represents exports under short-term orders, which apply for a period of up to two years and are renewed automatically upon request.”

It appears that the federal government has set the National Energy Board (NEB) into a straight jacket based on a trade treaty (NAFTA). I actually had the perception that the National Energy Board was looking after the energy security of Canadians. How foolish was that?

The NEB indicates that conventional oil production in Canada is declining but is more than offset by oil sands production increases. Conventional established oil reserves are 1600 million barrels with an ultimate recoverable figure at 4500 million, giving between 7 and 20 “years to depletion” at present day production levels of 219 million barrels per year. Unconventional oil (Oil sands) production is being ramped up to meet the shortfall but mostly for export. What is the cost in term of environmental and social damage of this gold rush mentality? The development of oil sands also uses up large quantities of natural gas to detach the oil from the sand.

The NEB prediction for conventional natural gas production shows a decline but suggests that coal bed methane production will make up the difference for the short term. From Alberta government figures, there are between 8 and 20 years of conventional natural gas left, given annual production at 5 trillion cubic feet (Tcf) per year, proven reserves at 40 Tcf, and ultimate reserves at 100 Tcf. The wild card is recovering natural gas by drilling into coal seams, called coal bed methane (CBM). This method is more costly and the ultimate production level is unknown at this time.
So, if roughly 53% of Canadian natural gas production and 65% of oil production is exported and we are faced with rapidly increasing costs of the replacement supply, wouldn’t it make sense to reduce our exports and defer that date with higher costs?

Oh, but wait a minute. That won’t work because our domestic price is the same as the world price since the 1980’s. Secondly, NAFTA trade rules don’t allow the reduction of export levels to the US unless we share in the reduction of supply.

So, we are locked into an integrated North American energy policy where we depend on roughly $70 billion of hydrocarbon exports a year to maintain our boiling economy in the west. This takes no account of its effect on climate change, the Albert environment or our children’s future in this cold land.

The NEB website contains some good information but they don’t talk a lot about the reserves of hydrocarbons and what levels are reasonable to ensure energy security in Canada. The NEB is just following policy direction and they do that well. The government of Canada develops our energy policy and they have made up their mind – full speed ahead. Why do I get the impression that Steven Harper’s eyes glaze over when people talk about conservation, energy policy and the associated environmental issues in Canada? Does his interpretation of Canada as an energy superpower bear any resemblance to the facts? Why will an energy superpower have to start importing LNG from other countries to meet natural gas demand beyond 2015?

The government we deserve?

It has been said that we get the government we deserve but there is only a grain of truth in that old saying. By assigning the responsibility equally to everyone, those most responsible for the dysfunctional aspects of our government escape scrutiny.

We believe that we live in a democracy but it has all the characteristics of an oligarchy with crony capitalism mixed in.   An oligarchy is rule by a small elite group.

Certainly, this starts with the complexity of modern government where the decisions are often vested in bureaucrats and the difference between political parties is minor indeed. How often do we see a government elected with a promise to change directions, only to see them continue with more of the same?

Steven Harper, with his populist roots of the democratic Alliance party, has become the “undemocrat” holding all power very tightly in his hands, as Garth Turner and Bill Casey have realized. As Trudeau used to say, “an MP is a nobody 50 feet from Parliament Hill”.

Many of us swallow the spin that we are fed, and we vote for a mirage. New governments are elected when a former government self-destructs. This is related to the “best before date” of roughly 8 years unless the leader is an exceptionally gifted showman in responding to the moods of the general populace.

When devising an election platform, it may be necessary to include programs with the knowledge that some will be totally ineffective, or will have to be put on hold once the “real state of government finances” is discovered.

Once elected, the party in power responds to the demands placed on them from corporations, also known as “political entrepreneurs”. In New Brunswick, the political entrepreneur class is well developed and regularly influences governments to subsidize industry, or to enact beneficial legislation or regulations. (LNG tax break, Bill 55 on Rockwood Park, shortline railway Act, Gas distribution act, etc.)

Political parties have fund raising dinners. After all, it takes money to run a political party and prepare for the next election. Who has more money than a road builder who wants the road construction boom to continue? When party fund raising dinners are sold out at $5000 a table, the admission ticket buys more than a meal that is worth perhaps $75 a plate. It buys access to political decisions.

Some of our political leaders have found that the salary allowed is not high enough and ask the party for a top up fund to make ends meet. Shawn Graham indicates that $135,000 a year is enough but David Hay of NB Power makes roughly $360,000. Would it be fair to say that David Hay is doing the work of 2.6 Premiers or could we say that Shawn Graham has 37% of the value of David Hay?

Both are management jobs of considerable responsibility where the key component is the ability to lead strategically. When either individual actually starts doing that, there should be no objection to a very attractive salary.

There is a good argument that can be made for paying excellent wages to attract the very best leaders. In addition, public financing of that salary reduces the needs of political parties to seek financing with strings attached.

What concerns me is not pocket lining that exists, has existed in the past and will likely exist in the future. This is part of human nature that could be reduced but never totally eliminated. The influence that the business as usual crowd has on government policy and expenditures is a lost opportunity to set a change in course to meet the word oil decline expected to begin in the next decade.

Let’s imagine our lives as a bus trip with the Premier being the driver and we are the passengers, along with a group of self-absorbed businessmen huddled around the Premier doing the navigation. A few passengers are talking about CO2 emissions, peak oil, and sustainability of our society, but most of the people are just enjoying the scenery. When questioned about the cliff and the sharp corner just ahead, the businessmen are dismissive and talk about jobs, profits, shouting “Pedal to the metal, Shawn.” When the bus runs off the cliff and crashes, many will be hurt seriously. The Premier will have a surprised look on his face, “How could we have known?” Unfortunately, this story is about the lack of a strategic vision to lead us to a safer sustainable energy environment.

Let’s take a look at several recent examples: The first is an investment of $1 million in government funds for the development of standard bred horse exports and increasing purses at races. One could understand if the investment was in the development of workhorses for the farming or the forestry industry that will be useful as fuel becomes very expensive and agriculture has to change.

Have you noticed how money spent on new highway construction is always linked to self-sufficiency and improvement to economic performance? This reminds me of the way that George Bush linked al-Qaeda with Iraq even though there was no proof. Repeat a lie often enough and people will buy it.

With transportation fuel poised to become extremely expensive, money spent on new highway construction is like buying an obsolete product. We will never get full value for this money. These hundreds of millions each year could be better invested in getting off oil, in supporting high-tech industries, in conservation or anything but new highways.

But don’t worry, you have only four more years of oligarchy before your 12 hours of democracy at the ballot box.