U.S. Pivot to Natural Gas Unlikely to Pique Interest of Canadian Producers

Natural Gas Vehicle


May 22, 2014

As the United States turns towards natural gas, Canadian producers will be watching.

Such a shift — away from coal, toward natural gas — is at least one major plank in U.S. President Barack Obama's new raft of Environmental Protection Agency regulations, expected to be released early next month. Obama is expected to instruct the agency to step up regulations in coal fired power plants and offer incentives for wind, solar and natural gas generated energy. Estimates peg the potential carbon reductions at 27 percent below 2005 levels.

Some have referred to the new executive orders, which bypass the gridlocked legislative branch, as the "most dramatic anti-pollution regulation in a generation," representing Obama's last shot to give his legacy a green sheen.

Despite being a fossil fuel, natural gas is considered far greener than existing oil and coal fired plants, which are the largest greenhouse gas emitters. According to the EPA, natural gas generates less that half the greenhouse gases of other fossil fuels.

It's unlikely new incentives for U.S. gas plants will be of much interest to Canadian producers, though. According to the National Energy Board, Canadian gas exports have been steadily declining since 2007 in part due to the glut of gas unlocked using hydraulic fracking techniques. According to the NEB, "exports of natural gas in 2012 were the lowest in over a decade, and 19 percent lower than in 2007."

The shift for natural gas exports has been towards Asian markets. Natural gas in North America is much cheaper. In January, 1 million BTU of natural gas was selling for U.S. $3.71, while in Japan and South Korea, that amount went for U.S. $16.45. British Columbia's natural gas dream is currently firmly focused on Asia. Five major gas pipelines are currently proposed in northwest B.C., which would carry gas to Prince Rupert and Kitimat to Asian markets.

A rush toward natural gas stands to nudge North American prices upward. But the most obvious Canadian benefit of Obama's orders may simply be that they help keep the planet slightly cooler.