Cross-Border Energy Trade in North America: Present and Potential

Cross-Border Energy Trade in North America: Present and Potential Paul W. Parfomak Specialist in Energy and Infrastructure Policy Richard J. Campbell Specialist in Energy Policy Robert Pirog Specialist in Energy Economics Michael Ratner Specialist in Energy Policy Phillip Brown Specialist in Energy Policy John Frittelli Specialist in Transportation Policy Marc Humphries Specialist in Energy Policy January 30, 2017 Congressional Research Service 7-5700 www.crs.gov R44747 Cross-Border Energy Trade in North America: Present and Potential Summary The United States, Canada, and Mexico in many ways comprise one large, integrated market for energy commodities. Canada, for example, is the single largest foreign supplier of crude oil to the United States, and the United States is Canada’s sole crude oil customer. Both Mexico and Canada are major buyers of petroleum products refined in the United States. A growing trade in natural gas produced in the United States is also increasingly important to the energy relationship among the three countries. Trade in the other energy commodities—electricity, natural gas liquids, and coal—is comparatively small, but regionally important. Altogether, the value of the energy trade between the United States and its North American neighbors exceeded $140 billion in 2015, with $100 billion in U.S. energy imports and over $40 billion in exports. The United States’ energy trade relationships with Canada and Mexico are increasingly complex. They have been undergoing fundamental change in recent years—largely due to technological advancements in the petroleum and natural gas sectors creating new competition for energy supplies and new market interconnections. Consequently, while energy policies in one country have inevitably affected the others, their cross-cutting effects in the future are difficult to predict. Nonetheless, a review of the recent trade data highlights several key market developments. U.S. crude oil imports from both Canada and Mexico dominate the energy trade, but they support U.S. supplies of refined products to both those countries—by far the United States’ largest energy export commodity to its two neighbors. U.S. development of shale gas resources has been substituting for Canadian natural gas imports and driving a rapid increase in natural gas exports to Mexico, where such supplies are in high demand to fuel that country’s growing electric power sector. Canada and, to a lesser extent, Mexico have potential to provide significant future supplies of renewable electricity to U.S. markets, which could help the United States meet environmental policy objectives. The expansion of cross-border energy transportation infrastructure—pipelines for oil and natural gas, and transmission lines for electricity—has been an ongoing enabler of increased energy trade. A number of new projects are currently under construction or proposed to further expand cross-border capacity, but their completion is not assured. To date, Congress has favored a growing North American energy partnership—but ensuring that this partnership continues to be as mutually beneficial as possible will likely remain a key oversight challenge for the next decades. Congress has been facing important policy questions in the U.S.-Canada and U.S.-Mexico energy contexts on several fronts, including the siting of major cross-border pipelines, increasing petroleum supplies from Canadian oil sands, exporting natural gas production from United States’ shales, and meeting commitments to increase renewable energy supplies and reduce atmospheric emissions of greenhouse gases. Legislative proposals in the 115th Congress could directly influence these developments. Congressional Research Service Cross-Border Energy Trade in North America: Present and Potential Contents Introduction ..................................................................................................................................... 1 Crude Oil and Refined Products ...................................................................................................... 3 Crude Oil Proved Reserves ....................................................................................................... 3 Crude Oil Production ................................................................................................................ 5 Crude Oil Consumption and Export Capacity ........................................................................... 6 Crude Oil Trade ......................................................................................................................... 8 Refined Petroleum Products Trade ............................................................................................ 9 Cross-Border Oil and Refined Products Infrastructure ........................................................... 10 Natural Gas .................................................................................................................................... 17 Natural Gas Trade ................................................................................................................... 18 Cross-Border Natural Gas Infrastructure ................................................................................ 21 Natural Gas Liquids ....................................................................................................................... 23 NGL Reserves and Production ................................................................................................ 23 Cross-Border NGL Trade ........................................................................................................ 24 NGL Transportation Infrastructure .......................................................................................... 25 Electricity ...................................................................................................................................... 27 Electric Power Resources ........................................................................................................ 27 U.S. Electric Power Import and Exports ................................................................................. 31 Prospects for Future Electricity Trade ..................................................................................... 34 Renewable Electricity Resources, Generation, and Trade ...................................................... 36 Coal ............................................................................................................................................... 43 Cross-Border Trade Volumes in Coal ...................................................................................... 44 Coal Trade by Mode ................................................................................................................ 45 Projections for Future Trade and Key Drivers ........................................................................ 45 Figures Figure 1. U.S. Energy Commodity Trade with Canada and Mexico—2015 ................................... 2 Figure 2. North American Crude Oil Proved Reserves ................................................................... 4 Figure 3. North American Crude Oil Production ............................................................................ 6 Figure 4. Crude Oil Production Net of Domestic Consumption ..................................................... 7 Figure 5. U.S. Net Import of Crude Oil by Country ........................................................................ 9 Figure 6. North American Crude Oil Trade by Mode ..................................................................... 11 Figure 7. Canadian Oil Export Pipelines and Selected U.S. Oil Pipelines ..................................... 11 Figure 8. North American Refined Products Trade by Mode ........................................................ 16 Figure 9. North American Natural Gas Resources and Reserves 2015 ......................................... 17 Figure 10. North America Natural Gas Production 2006-2020 ..................................................... 18 Figure 11. U.S. Exports and Imports of Natural Gas 2006-2020 .................................................. 19 Figure 12. North American Natural Gas Pipeline Border Crossings ............................................. 21 Figure 13. U.S. Natural Gas Cross-Border Pipeline Capacity to Mexico ..................................... 22 Figure 14. U.S. NGL Production 2006-2020 ................................................................................. 24 Figure 15. U.S. NGL Exports by Fuel ........................................................................................... 25 Congressional Research Service Cross-Border Energy Trade in North America: Present and Potential Figure 16. Annual Electric Generation by Fuel Type .................................................................... 28 Figure 17. U.S. Net Electricity Generation from Select Fuels ...................................................... 31 Figure 18. U.S. Electricity Imports from and Exports to Canada and Mexico .............................. 32 Figure 19. U.S.-Mexico Electric Transmission Interconnections .................................................. 33 Figure 20. Solar Energy Resources in North America .................................................................. 38 Figure 21. United States Wind Resources ..................................................................................... 39 Figure 22. Canadian

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