U.S. natural gas producers benefit from Canada’s retreat

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By Mark Milke
and Lennie Kaplan
Canadian Energy Centre

The United States has undergone an energy renaissance of sorts in recent years. After decades of importing significant volumes of natural gas, there has been a transformation in both the economy and policy on that source of energy in particular.

Mark Milke
Mark Milke

Americans began to produce and export natural gas in significantly higher quantities after technological changes (hydraulic fracturing or fracking) made extraction of previously uneconomic deposits easier to get at and bring to the surface. Supportive policy regimes that allowed for easier development of natural gas resources also helped.

Meanwhile, Canada has undergone a period of natural gas stagnation, partly the result of less supportive policies and regulatory constraints.

According to the U.S. Energy Information Administration, as of 2019, U.S. natural gas production hit nearly 34 trillion cubic feet annually. That’s up nearly 14.8 trillion cubic feet since 2000, an increase of 77 per cent.

In contrast, Canada’s natural gas production was down 2.4 per cent by 2019 from 2000, to 6.3 trillion cubic feet from almost 6.5 trillion cubic feet.

Lennie Kaplan
Lennie Kaplan

While there are multiple reasons for the diverging natural gas paths of the United States and Canada, one of them is not technology. Production companies in both countries generally have access to the same technology.

Also, it wasn’t the presence of reserves. Both had (and have) reserves that can be economically developed and from which additional natural gas can be extracted.

The diverging fortunes of natural gas in the U.S. and Canada can be explained in large measure by two things.

First, policy exists in some of the provinces and federally (since 2015) that’s more harmful than helpful to expanded natural gas development. It’s why Chris Bloomer of the Canadian Energy Pipeline Association told a parliamentary committee in 2018 that they could “pick their poison” in deciding which federal regulations and laws were most harmful to the oil and gas industry and went beyond reasonable regulation.

Second, anti-oil-and-gas advocacy, including against fracking in some parts of Canada, has had its desired effect. That includes preventing onshore development of natural gas reserves in the Maritimes and Quebec.

This isn’t universal. British Columbia’s NDP government, for example, opposes oil pipelines. But that same government has been generally supportive of natural gas development in the province.

A 2019 scientific review compiled for the B.C. Oil and Gas Commission found that B.C.’s regulatory framework for such exploration was “robust.” The B.C. government subsequently added modest modifications to the regulations but otherwise accepted the consensus of the panel.

Some American states have benefited from Canada’s natural gas stagnation. We looked at four states and tracked their production in 2019 relative to 2010:

  • West Virginia natural gas production was up seven-fold;
  • North Dakota was nine times higher;
  • Pennsylvania had a 12-fold increase;
  • Ohio natural gas production soared 34-fold.

These four states alone saw their oil and natural gas revenues (mainly the latter) hit C$2.3 billion in 2018-19. In Quebec and the four Atlantic provinces, oil and gas revenues amounted to just $781 million that year – almost all of it from Newfoundland and Labrador’s offshore oil royalties.

Perhaps the most dramatic example of how Canada and the United States have diverged on natural gas production is on U.S. exports to Canada. Those shipments reached 970 billion cubic feet in 2019 from just 73 billion cubic feet in 2000. That’s a 1,233 per cent increase.

Canada isn’t consuming less natural gas than it did two decades ago. While Canadian natural gas production fell by 2.4 per cent (between 2000 and 2019), consumption soared by 47 per cent. It’s just that American producers have increasingly filled Canadian demand.

Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by carbon taxes. They are authors of Missed Maple Leaf Opportunities: A Synopsis of Natural Gas Industries in Central and Eastern Canada and Key US States.

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By Mark Milke

Mark Milke, Ph.D., is a public policy analyst, keynote speaker, author, and columnist with six books and dozens of studies published across Canada and internationally in the last two decades. Mark’s work has been published by think tanks in Canada, the United States, and Europe, including the Fraser Institute, the Montreal Economic Institute, American Enterprise Institute, Heritage Foundation, and Brussels-based Centre for European Studies.

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