ENERGY SECURITY FOR CANADA: A COMPARISON OF THE SELF- SUFFICIENCY AND CONTINENTAL STRATEGIES Taymaz Ras tgardani B.A., Simon Fraser University, 2005 THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS In the Department of Political Science O Taymaz Rastgardani SIMON FRASER UNIVERSITY 2007 All rights reserved. This work may not be reproduced in whole or in part, by photocopy or other means, without permission of the author. APPROVAL Name: Taymaz Rastgardani Degree: Master of Arts, Department of Political Science Title of Thesis: Energy Security for Canada: A Comparison of The Self-Sufficiency and Continental Strategies Examining Committee: Chair: Dr. Lynda Erickson, Professor Department of Political Science Dr. Alexander Moens, Professor Senior Supervisor Department of Political Science Dr. Anil (Andy) Hira, Associate Professor Supervisor Department of Political Science Dr. Stephen Easton, Professor External Examiner Department of Economics Date DefendedIApproved: September 7th2007 SIMON FRASER UNIVERSITY LIBRARY The author, whose copyright is declared on the title page of this work, has granted to Simon Fraser University the right to lend this thesis, project or extended essay to users of the Simon Fraser University Library, and to make partial or single copies only for such users or in response to a request from the library of any other university, or other educational institution, on its own behalf or for one of its users. The author has further granted permission to Simon Fraser University to keep or make a digital copy for use in its circulating collection (currently available to the public at the 'Institutional Repository" link of the SFU Library website ~www.lib.sfu.ca> at: <http://ir.lib.sfu.ca/handle/1892/112>) and, without changing the content, to translate the thesis/project or extended essays, if technically possible, to any medium or format for the purpose of preservation of the digital work. The author has further agreed that permission for multiple copying of this work for scholarly purposes may be granted by either the author or the Dean of Graduate Studies. It is understood that copying or publication of this work for financial gain shall not be allowed without the author's written permission. Permission for public performance, or limited permission for private scholarly use, of any multimedia materials forming part of this work, may have been granted by the author. This information may be found on the separately catalogued multimedia material and in the signed Partial Copyright Licence. While licensing SFU to permit the above uses, the author retains copyright in the thesis, project or extended essays, including the right to change the work for subsequent purposes, including editing and publishing the work in whole or in part, and licensing other parties, as the author may desire. The original Partial Copyright Licence attesting to these terms, and signed by this author, may be found in the original bound copy of this work, retained in the Simon Fraser University Archive. Simon Fraser University Library Burnaby, BC, Canada Revised: Summer 2007 ABSTRACT While the topic of 'energy security7has attracted considerable public attention in recent times, the various issues of relevance have been poorly conceptualized within a policy framework for the Canadian people. Arguably, Canada has lacked an energy security strategy in recent years even as the country's energy security environment has been rapidly changing. This study takes a strategic view of energy security in the sense that it treats the issue as a matter of national interest. Paradoxically, by relying on the analysis of sectoral developments over the last two decades, it is hypothesized that energy 'self-sufficiency' -even if not impractical - has severe and sobering implications for Canada's intrinsic national interests. This study examines the long-standing chasm between the 'continental7 and 'self-sufficiency' perspectives against updated criteria for assessing Canada's current energy security situation. Keywords: Energy Security; Energy Policy Subject Terms: Energy industries - Canada; Energy Policy - Canada Call Number: HD 9685 A2 D63 2003 DEDICATION To my parents and sister ACKOWLEDGEMENTS It has been my profound fortune to count on my professors Alexander Moens and Andy Hira throughout the preparation of this study. I am grateful for their balanced approach in providing me with the benefit of their criticisms, while at the same time allowing me latitude to pursue my vision. Apart from having been my senior supervisor, Professor Moens has been a great mentor over the years. He has made a deeper impression upon me than any other person who I have met during my career at Simon Fraser University. Professor Hira has been the primary influence of my understanding of how to dissect political economic issues. His book, Ideas and Economic Policy in Latin America, is my favourite political economic study. fis criticisms and encouragements have always been a source of motivation. I am honoured and thankful for having had Professor Stephen Easton as my external examiner. I also owe special gratitude for Professor Douglas Ross' general influence and encouragement over the years. His broad strategic perspective has reinforced my inclination to adopt a multi-disciplinary approach towards complex issues. TABLE OF CONTENTS . Approval ............................................................................................................................. 11 ... Abstract .............................................................................................................................. 111 Dedication .......................................................................................................................... iv Ackowledgements ............................................................................................................... v Table of Contents ............................................................................................................... vi . List of Tables .................................................................................................................... vll ... Abbreviations ................................................................................................................... vlll 1 Defining Energy Security ........................................................................................... 1 1.1 Threats to Energy Security .................................................................................. 5 1.2 Strategic Issues for Canadian Energy Security ................................................... 9 2 The Evolotion of Canadian Energy Markets and Regulations ............................. 16 2.1 Natural Gas ....................................................................................................... 18 2.2 Oil ..................................................................................................................... 23 2.3 Electricity .......................................................................................................... 31 2.4 Evaluating Contemporary Political Economic Issues .......................................35 3 . The Self-sufficiency Stragegy .................................................................................. 39 3.1 Security of Supply ............................................................................................. 49 3.2 Market and Regulatory Stability ....................................................................... 56 3.3 International Bargaining Position ..................................................................... 62 4 . The Continential Stragegy ........................................................................................ 73 4.1 Security of Supply ............................................................................................. 78 4.2 Market and Regulatory Stability ....................................................................... 87 4.3 International Bargaining Position ..................................................................... 96 5 Conclusions ............................................................................................................. 107 Bibliography ................................................................................................................... 113 LIST OF TABLES Table 1 .Classification of Energy Security Issues ............................................. 6 Table 2 -Threat Comparison of Energy Security Events .................................. 108 vii ABBREVIATIONS ATC Average total costs BCUC British Columbia Utility Commission CAPP Canadian Association of Petroleum Producers CCGT Combined cycle turbines CERA Cambridge Energy Research Associates CERI Canadian Energy Research Institute CHP Combined heat and power equipment CUFTA Canada-United States Free Trade Agreement EMR Ministry of Energy, Mines and Resources EUB Alberta Energy and Utilities Board FERC U.S. Federal Energy Regulatory Commission FMA Fair market access GHG Greenhouse gas GWh Gigawatthours IEA International Energy Agency IPCC Intergovernmental Panel on Climate Change LNG Liquefied natural gas MBP Market based procedure NAFTA North American Free Trade Agreement NEB National Energy Board NEBA National Energy Board Act NEGP North European Gas Pipeline NEP National Energy Program NOP National Oil Policy NYMEX New York Mercantile Exchange OPEC Organization of Petroleum Exporting Countries