Charged Conversations - The American/Canadian Energy Union

Episode Transcript

(00:01):
You're listening to charged conversations, andI'm your host, Brigham Account. This
week, we're going to talk aboutenergy and the North American Energy Union between
Canada and the United States. Youmay be thinking, what energy union,
Well, yeah, and it's true, not an energy official union per se,

(00:24):
but through practice, Canada and theUnited States has been linked in very
many ways for a number of years. First and foremost, cross border trade
between the two countries has been natural. Canada's our largest trading partner, and
we are Canada's largest training partner.And that's the way it's been for a

(00:46):
long time. In fact, growingup as a kid, our family always
bought Chevrolets, and on the Chevroletcar if you looked inside, it would
always say body by Fisher and Fisher, by the way, was not a
US count, but it was aCanadian automotive entity just across the border from
Detroit and windsor a lot of goods, products and services flow back and forth

(01:11):
across the two countries, and whetherit is props, agricultural other agricultural products,
or wood, this has been thecase, which is one of the
reasons why the North American Free TradingAgreement came into play. In the nineteen
eighties and nineties, adding Mexico tothe mix to try to remove roadblocks and

(01:34):
ensure both fare and free trade betweenthe three North American countries. And while
this has probably been more successful withCanada, it has paved the way to
reducing tariffs and ensuring the greater movementof goods between all three countries. What
is fascinating about this, though,is that energy infrastructure is highly linked between

(01:57):
the two countries, and that maynot be something that we think about on
a daily basis. For example,numerous pipelines cross between the United States and
Canada. Through the US Midwest,we import oil and natural gas. Some
of that goes to distribution centers inIllinois for the Midwest and Chicago markets,

(02:22):
while other aspects travel down the trunklines down to the Gulf Coast where they
find where the brute oil finds itsway into refineries. Similarly, further east,
we see that the US actually exportsenergy products made from oil and gas
back into Canada, where Canada's pipelinesdon't necessarily connect the eastern markets from the

(02:46):
western markets. Similarly, we willalso see that the electric grids are interconnected
in parts and energy flows freely betweenthe two countries. When taken together,
Canada and the US resent not onlyan economic power house, but an energy
our house. Blessed with natural resourcesand raw materials. Canada and the United

(03:10):
States together are a formidable force andone that obviously ensures price stability and sharing
those concepts of freedom and democracy.Well, I had the very good luck
of traveling to Canada very recently toparticipate in a energy conference between two of

(03:38):
Canada's best known think tanks at thecd HOW Energy Conference and the HOW Organization
up in Canada. The Institute isthe number one awarded think tank in Canada
with three hundred plus trusted experts,and they trace their roots back to nineteen

(04:00):
fifty eight in Montreal. Also joiningthem was the McDonald Lwrier Institute. I'm
going to say that probably not quiteright in my apologies to anybody that knows
better. And these two entities togetherput on this energy conference where we heard
from world renowned experts and I hadthe pleasure of being on the energy security

(04:25):
panel and talking about what energy policiesthe United States and Canada should collaborate on
and how we can tweak our energypolicies moving forward. Like I said a
few minutes ago, it's amazing theamount of natural resources that we have between

(04:46):
the two country and the panel,which was hosted by the MacDonald Lwer,
Director for Canadian Studies, I amvery pleased that she invited me, and
I'll just without putting our whole nameout there, just say, Heather,
thank you very much. It wasentitled Canada's Opportunity. The world, especially

(05:09):
our friends and allies, wants ourenergy. What do they do and what's
holding us back? And what canwe do? We became pretty clear after
being in the room for a littlebit is there is a general consensus about
energy policy between the two countries.And one of the aspects that we took
a look about is are we inan energy transition? And this is something

(05:32):
that I've talked about previously a littlebit, and so part of my slide
deck to them was this notion ofare we in the midst of an energy
transition or are we in the midstof an energy expansion? And those of
you that tune in every week Ihave heard the dedicated episode on that point.

(05:53):
But I think it's really important becausewithout going through further details, but
please do go back and and checkout those previous episodes. The spoiler alert
is it really depends on who you'reasking, because the world has never used
less energy, only more, morepeople, more productivity, more goods are

(06:14):
manufactured, more people being risen outof poverty have the financial means to purchase
more. It's a good story.Interestingly, many parts of the world will
be the driver for this future energyexpansion as developed countries are developed while we

(06:38):
consume more. The thought is thatcountries that are still developing will take the
lion's share of new energy that's required. But this paradigm was questioned a little
bit, I think by our panelwho said, well, okay, wait
a minute. Developed countries like theWest, we've slowed down. But even

(07:04):
our own government projections out to twentyfifty say that the US will probably consume
fifteen to thirty percent more energy becauseour population is still increasing, which makes
us a little bit different than someof the countries in Europe where they are
expected, or Asia where they're likeJapan, where they're actually seeing a population

(07:25):
decline. Furthermore, although energy efficiencyhas increased and we'll save the washer,
dryer dishwasher, energy efficiency standards growand con for another day, we need
more energy, especially if some ofthe electrification policies prevail of converting away from

(07:48):
natural gas. But even if thatoutcome is unlikely in the near term,
and I think it probably is,data centers a artificial intelligence. Even if
things stayed exactly the way they were, and we just threw in the ever
increasing amounts of computer data, videos, online content that is stored and add

(08:16):
on to that artificial intelligence, it'spretty easy to see why our electric needs,
our energy needs are going to goup and up substantially. Well,
let's talk for a second about thethings that we were able to parse through
during this conference. We really talkedabout should we be talking in terms of

(08:39):
energy transition? Is that even theright term for this phenomenon, And we'd
agreed it may not be. Andbecause when we think about a transition,
we think about moving from A toB. We don't really think about,
oh, it's going to be Aplus B now and maybe plus C.
And I think that's because most ofthe people behind the energy transition movement are

(09:05):
more focused on how to end fossilfuel use in order to lower carbon footprints,
in order to help the environment,etc. And what we really talked
about was it's not a minus.It's an addition. If you look at
all of the scholars around the worldprimarily agree, some more vocally than others,

(09:28):
that the death of hydrocarbons has beengreatly exaggerated. And one of the
things we talked about in particular thatI brought out was looking at coal usage
around the world. And you've probablyheard a lot that where we're reducing coal,
we're eliminating coal. Coal's days arenumbered, and in fact, the
US is using about half as muchcoal as we used to. Hey,

(09:52):
good job on us. We haveremoved ninety five point six gigawatts of coal
coal fired power plants for base loadelectricity generation. That's what the grid needs
twenty four seven, whether people areawake rous sleep, just that that energy

(10:13):
that is constantly available for use,that electricity. Flipped the switch and it's
going to be there. Yeah,good for US. Germany they've taken twelve
gigawatts out. The UK is minuseighteen gigawatts. Even Spain has contributed with
a negative eight gigawatts of coal reductions, and our friends in Australia and Canada

(10:35):
about five gigawatts each. So wehave removed a fair amount of coal fired
power plants from around the world sincethe twenty fifteen Paris Climate Change Agreement.
Great, well, not great orgreat, depending on who you are,
I suppose. So even though we'vetaken over, we've removed if you add

(10:58):
all this up, about one hundredand thirty one hundred and fifty gigawatts offline.
You should know that China felt badlyfor us, and they have added
about two hundred and fifty gigawatts ofcoal fired power and totally offsetting everything that
the West has done. Oh,I forgot to say, Russia's down about
five and a half gigawatts two butthat's not because of a transition. That's

(11:22):
because of lowering economic output and quitefrankly, lack of population or economic growth.
Pakistan has added seven point six.Turkey's up five and a half,
and then Vietnam, Malaysia, Indonesia, even Japan, as it has turned
off several of its nuclear power plantswhich remain offline following the Tukushima reactor,

(11:48):
which was inundated with water during atsunami. Korea has added. Yeah,
everybody at South Africa, everyone elseis added. So coal usage has not
gone down, it has gone up. Twenty twenty three most coal used in
the world per year, ever,beating out the second best year of twenty

(12:13):
twenty two. Okay, fine,twenty twenty one and twenty twenty were lower,
but everything was lower. That wasduring the pandemic. The point is,
cumulative net worldwide coal power plant capacityis only increasing, not decreasing.
So that was one of the thingsthat we really struggled with. And one

(12:35):
of our panelists, and another reasonI'm not using the names. This was
under the Chathamhouse rules, which isthat you can talk about and you can
say, well, hey, thisperson said this. This person said that.
Because we're not officially on the record, I can waive that for myself,
but for the other panel members,I can't attribute it directly to them.

(12:56):
And one of the panel members said, point blank, there is no
transition. This is all utter nonsense. What it is, however, is
an intentional policy choice to make usfeel good that we are doing something for
the environment which will or will nothave any effect on the environment no matter

(13:18):
what we do. Another member notedthat China's emissions are on a record on
a rocket trajectory toward outer space,and that China itself pollutes more than the
US Western Europe combined, and showsno signs of slowing down. With Canada

(13:39):
continuing to deploy new hydrocarbon and coalfired power plants on almost a weekly basis,
others have said, well, look, not so fast. Look I
want to be middle of the road. I've got a reputation be in the
middle of the road guy. Soothers have said, well, now,
wait a minute. It is truethat China's economy is growing, and it
is true that they're adding coal firedpower plants, but they're also adding renewables

(14:01):
at an outstanding clip. Almost fiftypercent of new energy being brought online by
China falls into the wind in solarand hydro camp that's how large their economy
is growing. Some of our friendsin Canada have pointed out it is necessary
to be good stewards to the environment, and that has a developed country,
we have this moral obligation or dutyto be a good fiduciary and a good

(14:26):
steward. I guess of the whatthey're saying is to the environment. I
agree with that, right, Imean, keep in mind that Teddy Roosevelt
built the National Park System, RichardNixon created the EPA. Yes, that
is a true one, and yeahwe should. I probably recycle more than

(14:46):
we throw out on a general weeklyaverage, and around town I drive an
ev Okay. But here's the thing. There isn't a one size it's all
policy. And one of the otherpanel members pointed out, well, take
a look at France. France hasabout eighty percent of its electricity generated from

(15:13):
nuclear power. They don't need solaror wind, and it's not intermittent like
solar and wind. In fact,they were fined by the EU for not
deploying enough solar and wind, atwhich point they said, well, we
don't need to because we have somethingbetter. Nuclear power works twenty four to

(15:37):
seven. Doesn't matter if it's sunnyor cloudy, and it doesn't matter if
the wind is blowing or not.Yeah, it's a conundrum. So we're
hearing different things from different people,and you're like me, I think it
can be kind of confusing. Sohow do should we best navigate this polarized
nature of energy and the climate discussion. Well, what I talked about during

(16:03):
my piece is that we need togo back to a very simple definition,
the definition of energy security. Andit's something I say a lot because it's
really important the uninterrupted availability of energysources at an affordable price. We're really

(16:26):
talking about concepts of reliability, resiliency, and affordability. Energy it's a source
and an instrument of power state power. It's wielded economically when you have it
and you have a strong economy,because energy is that fundamental element that is

(16:51):
necessary for a strong economy, pointblank. If you don't have it,
you're weak. If you have it, you can be strong, right along
with as long as your policies arealigned to promote economic development. So you
don't have it, you have weakness. You can wield that instrument either in
a benevolent manner, as the USis typically done, or in a putative

(17:17):
fashion, as Russia has done bypunishing people by withholding energy that other people
need. You know, energy isa very valuable export as well, just
like we export goods and products andservices and technology and innovation all over the
world. I think of energy inthe same line, in the same manner,

(17:41):
and Europe's economy would have absolutely crateredfollowing Russia's invasion of Ukraine in twenty
twenty two had it not been forAmerican natural gas compressed into a liquid form
LNG and transported to Europe. Sotaking a look at that, if we
look at the available raw materials,whether we're talking about hydrocarbons, critical minerals,

(18:08):
rare earth elements, that accessibility,that available supply that we can get
at affordable rates and that we cantranslate into an uninterruptible supply, gives us
that energy security. It's accessible,it's affordable, it's reliable, it's resilient.

(18:29):
We have to start thinking in termsof energy security point blank, because
we can be better for the environment. But look, if nobody can live
because the energy is so expensive,it doesn't do us a being a being
of goods. Similarly, if wecut all of our carbon emissions, our
CO two, our methane or knox, whatever you know, alphabet soup of

(18:55):
emissions you want to use. Ifthe rest of the world is isn't on
board, if the global South isnot on board, those are the country
south of the equator looking to exploitto develop their own natural resources. If
China is not on board, ifIndia not on board, it's pretty much
useless. It's pretty darn useless.And one commentator suggested that taking all of

(19:25):
these climate goals and prematurely removing cheapenergy products off the market is tantamount to
unilateral disarmament. It's tantamount to weakeningour own economic security. It is tantamount
to then weakening our own energy security, putting us at a substantial disadvantage.

(19:49):
If you look at the fact thateighty percent of solar and lithium China,
seventy percent of rare earth elements China, sevent under the processing of rare earth
elements China, this will lead towhat one thing tank in Washington, d
C is called the Chinese handcuffs.Just today, out of Washington, d

(20:11):
C, the Heritage Foundation, withwhich I am not associated, has started
a new program called how China Hijackedthe Environmental Agenda. Opening comments, we're
talking about the fact that we're doingit to ourselves. We're abdicating our energy
security in the name of climate change. But they went on to say,

(20:34):
there's good news. We can writethe ship and we can take a look
at how to better balance our portfolioand talking about much the same things I
talk about about the energy mix changingover time, based on technology, based
on affordability, based on different factors, and the environmental aspects don't need to

(20:56):
be left alone either because again,we have the cleanest air on since the
EPA was formed, we have thecleanest water since the EPA was founded.
We're doing things right. And thereare other countries. Take Norway for example,
who sells a lot of well,they are doing things like us,

(21:17):
probably even a little bit better andthe most ecologically friendly manner possible, far
better than countries at Africa, CentralSouth America, Asia can do. But
while we're doing our part, wehave to ensure that everyone else is doing

(21:38):
their part. It's fair competition,right If somebody else has an advantage and
it doesn't work right, that's whatdisadvantages and advantages are when all the teams
aren't playing by the same rules,or worse, intentionally cheating a level playing

(22:00):
field. And that's not okay.And I think what we're going to see
is that China is intentionally shifting theenergy ballants. Sure they're in neediest they
are maybe the neediest energy consuming countryin the world. But the point is
it's not by accident. It isnot by accident that they have been collecting

(22:22):
and scouring the earth for all theseraw materials that either they possessed domestically or
that they have acquired rights and accessto worldwide and we should really be asking
ourselves why and why has China beenso helpful to the environmental movement and wanting

(22:45):
to move the needle from hydrocarbons togreen energy. May just because they corner
the market on all of these materials. And Okay, to be fair,
the Biden administration, the IRA theInflation Reduction Act, which spoiler alert has
absolutely nothing to do with reducing inflationbecause it's nothing more than a gigantic spending

(23:08):
spree for green energy, is tryingto develop these markets and trying to fund
and the research and development of domesticmarkets. This is where Canada comes in.
If we work together with Canada,we can further inoculate ourselves against geopolitical
instability the world over. We canshare what each one of us possesses,

(23:33):
and together our strengths are better thaneither of us standing alone. A North
American energy powerhouse could be in theoffing if policy leaders from both countries would
sit down, take a look atwhat each has to offer, and figure
out how to work best together.As we sit today, both countries are

(23:56):
run by very pro environmental heads ofstate, but both countries also have elections
coming up within the next year.It'll be interesting to follow this to see
where we go. But regardless whois in the White House or who is
in Ottawa, there's no need towait. We can start right now.
We can start right now by figuringout what we do best together. I'd

(24:21):
use the better together, but somebodyelse has already used that term. But
just say that collaboration is our bestopportunity to avoid the pitfalls that are lurking
with China's lock on a lot ofthe materials that is needed, and b
backs up both countries as a hydrocarbonpowerhouse able to supply the energy that we

(24:48):
need today, the energy that weneed tomorrow, and the appropriate mix of
hydrocarbons and renewables for centuries to come. You've been listening to Charged Conversations,
and I'm your host, Brigham McCown. This has been a Joe Strecker production,
and we'll see you next time.