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Friday, February 14, 2014

Good Neighbours

We all know that rapid expansion of Alberta's economy has greatly accelerated the demand for skilled and highly qualified labour in numerous sectors. Our steel fabrication industry is particularly important for energy industry projects and is one such area where the labour shortage is pressing.

Port Alberta Director Don Oborowski, CEO of Waiward Steel, joined me on reciprocal trade mission to lay the foundations for a near-term deal between institutions of higher education in Idaho, Washington, and Alberta in order to develop a pipeline of qualified labour arriving with Alberta based curriculum and apprenticeship training. Preliminary discussions between American and Canadian institutions of advanced education have resulted in this exciting opportunity to put a real dent in a key labour shortage in our region. This opportunity is the result of a trade mission to encourage bilateral corporate investment between Alberta and neighbour states.

Between 2007 and 2011, Alberta's exports to Washington and Idaho were worth more than $10 billion. It's wise to have good relations with your biggest business partners. When Mexico voted to allow foreign direct investment into key elements of its energy industry, Alberta's intra-hemispheric trading relationships were set to expand faster than ever. NAFTA countries already account for approximately 25% of global GDP. Our intra-hemispheric economic growth, combined with abundant energy and stabilized hemispheric labour costs, will accelerate "nearshoring activity", meaning a mutually beneficial transfer of business to a neighbouring country.

These developments, combined with global economic recovery, will increase our hemispheric manufacturing capacity. Ameliorating labour shortages in our key industries will help our regional economy expand while enabling Albertans to export more products to neighbours and the rest of the world.

Tuesday, December 31, 2013

Port of Santa Marta, Colombia

Port of Santa Marta

The growing port of Santa Marta Colombia is a remarkable location for many reasons.  First, it sits on the Caribbean Sea at the northern tip of South America just at the base of the Sierra Nevada Mountains.  Santa Marta is a natural deep port, sheltered and basking in one of the best climates on the planet, this was the first city founded by the Spanish back in 1525 primarily because of the ideal port location.  The port iteslf has great capicity, it boasts post-panamax capability with a deepwater approach and >60 foot draft dockside in a natural seeing with no dredging required.  

Cartagena is the largest port in Colombia and is Colombia's main oil exporting port.  Intermodal traffic is being expanded and is expected to handle between 6 and 7 million TEU's within in two years. Cartagena is home to a variety of private ports including Dole, BASF, Cemex, Dow Chemicals, DuPont, and Reficar SA.

Santa Marta enjoys a different product mix.  Santa Marta a port authority that is a publlic/private parthership.  The largest export from Santa Marta is coal mined from the Sierra Nevada mountain range.  In addition, the port accomodates roll on roll off (ro-ro), grains and intermodal.  The port is ISO 14001 certified and has the distinction of being the first port outside of the European Union to be officially named an environmentally friendly port or a "green" port.  


Considerable capital investment was required to deliver the green port status.  Much of that has to do with how coal exports are handled.  Structures have been constructed to reduce wind impact, semi lifts have been installed, hydrochemical dust management systems prevent the excape of coal dust during the unloading process into a closed auger system that delivers coal to the bulk ships. This has preserved the undersea environment surrounding the port which is healthy and thriving.  In order to maintain the certification, the port is inspected including the undersea areas.


Closed Coal Auger
Santa Marta is blessed by a number of interesting geographical conditions.  Storage and shipment of dry grains is facilitated by the wind that sweeps down from the Sierra Nevada mountains out to the sea, this makes it relatively dry compared to many sea ports.  With nearly 600 plug in stacks in the intermodal yard, the refrigerated export capacity of Santa is ideal for exporting bananas and various tropical fruits.  Fyffes service calls at the port of Santa Marta and serves Antwerp in Belgium and Portsmouth UK and provides fresh bananas to the tables of Europe and the UK in addition to the port ro-ro, dry bulk, grains, and other reefer products.  Santa Marta also handles general cargo, typically moving oil and gas drilling equipment along with some dredging equipment.

Fyifes - Bananas headed to UK and EU

Barranquilla is a large port that enjoys fresh water shipping access via the Magdelena River and is a home to a large zona franca that confers tax benefits and exclusion from duties until point of export or after value add activities.  The zona franca of Barranquilla is very large in terms of industrial presence with the most important Colombian companies holding a presence in this particular port due the the large zona franca.  Santa Marta also has a zona franca, mostly utilized by ro-ro traffic.

Ro-Ro Load to Zona Franca
What's next?  It occurs to me that Colombia invested heavily in road networks prior to the strong emergence of intermodal traffic.  That road infrastructure investment resulted in moving a lot of ocean going exports not tied to a particular area of production, like coal, and shifted it to the Pacific port of Buenaventura.  After driving the mountains of Colombia, it occurs to me the value of lost time due to traffic congestions creates a negative impact to gross domestic product data, social impacts, and lost productivity directly resulting from traffic congestion throughout the national highway system. These matters are obviously compounded by environmental damage.

Port of Santa Marta from the beach
Rail in Colombia is not extensive and the major population centers are not well interconnected.  The wildcard in this is China's appetite for coal, and Colombia is one of the largest producers in the World. China is considering investing into a rail line between the Port of Buenaventura and Cargegena.  This would be a rail line that could compete with the Panama Canal in some respects. If a rail line between Cartagena and Santa Marta is built, there would be intermodal connectivity between Bogota, Medellin, Santa Marta, Cartagena, and Buenaventura.  Such a rail line would start transnational access with over 10 million TEU's in a post panamax environment while hosting a market space of over 15 million for imported TEU traffic.  Arguably, the easiest way to capitalize on Colombia's port infrastructure is to focus on P3 development of rail lilnes to link Buenaventura with Cartagena and Santa Marta to connect petroleum, dry bulk, ro-ro, grain, and intermodal traffic with major metropolitan areas.

Tuesday, December 3, 2013

¡Si! - The Mexican Senate and Energy Reforms in Mexico!


sourcefile: PEMEX
The Mexican government is currently engaged in a debate of ideology, and the winners and losers in this debate have a lot at stake.  From the outside looking in, it's evident that Petroleos Mexicanos (PEMEX) has operated without the benefit of private efficiency.  To compare PEMEX with Statoil, they both drive approximately the same sales figures, but PEMEX delivers these sales with 153,000 personnel compared to Statoil's 23,000.  While this is just a quick comparison of employee to sales, it underscores the well known issues of state run oil companies in general... they're not the most efficient entities around.

PEMEX has been boosting exploration budgets significantly since 2006 without a corresponding boost in production, in fact, the numbers have been deteriorating.  The larger picture, for our Mexican cousins, is the evolution of Mexico as a market with a rapidly advancing skilled workforce strategically placed with new land bridges connecting Atlantic and Pacific shipping lanes through powerhouse ports like Lázaro Cárdenas and Veracruz.

Mexico is growing quickly and Mexico needs to pay for infrastructure to underpin a rapidly growing economy.  The trend to on shore is gaining momentum and I see very bright days ahead for North American manufacturing.  Mexico's manufacturing sector is gaining steam and Nissan's CEO recently announced that Mexico would soon overtake Japan as an export base for Nissan vehicles.  The trade growth of Mexico has seen investments in rail, roads, and inland port infrastructure to support the rapidly growing economy.  A fine example that defines both economic growth and global integration of Mexico is their container traffic growth.

Port of Lázaro Cárdenas
Mexican container traffic, at the port of Lazaro Cardenas alone, handled about 43,000 twenty foot equivalents TEU's in 2004 and expanded to 270,000 TEU's by 2007, a 527% increase in three years. In 2012, five years later, it handled 1.24 million TEU's, a 359% increase, and has a capacity of 2.2 million TEU's annually, an expansion likely to be reached in a few years time.  The expansion was driven by the investment of Hong Kong's Hutchison Port Holding's Ltd. and the expansion created berths and channels that allowed Lázaro Cárdenas able to receive container vessels up to 12,500 TEU's. The expansion of Mexican port TEU capacity has been largely driven by these investments. Here's a comparison of the growth compared to Canadian TEU growth since the turn of the century.  It's obvious that Mexico is growing their capacity at faster clip than Canada.

Mexican & Canadian TEU Growth 2000 - 2011
source: Port Alberta
None of this should come a surprise as the port has direct rail connections to inland ports that service Mexico City's greater market, which boasts in excess of 20 million people.  The inland port initiative of Mexico has resulted in tremendous connections to the entire North American market place through rail connections and inland ports like the Guanajuato Interior Port (Puerto Interior Guanajuato).  The Guanajuato inland port, a.k.a. GTO, is an example of what a well thought out inland port can become for a region and an entire nation.  I have noticed the design, location, and relative advantages of GTO capture the infrastructure that parallels numerous other inland ports, including the advantages proposed by Port Alberta... but that's another story for another day.

Guanajuato Inland Port 
Crossing back to the privatization of Mexico's oil industry, we understand that Mexico requires billions to ramp up production.  Large shale plays like Eagle Ford exist in Mexico, but the financial and technological capacity to ramp up production on their side of the Eagle Ford shale play is limited by capital resources.  This, of course, is exacerbated by the ever pressing need to satisfy tremendous infrastructure requirements to support the scope and scale of Mexico's growth.

The dialogue in Mexico is not related to the ownership, per se, of the petroleum resources themselves, but rather, it is an accommodation that allows private companies to partner with PEMEX, which allows the private partners to declare reserves for the purpose of stock valuation while the citizens of Mexico retain their "ownership" of the actual hydrocarbons.  Sounds a bit complicated, but it's not complicated.  At the end of the day, the private interests that would invest heavily in Mexican oil are simply looking for a fair deal before they start pumping billions of dollars into Mexican investments.

I believe the parties can come to a political settlement, but it won't be without some discussions and concerns.  To start with, there is a huge legacy where oil is concerned in Mexico.  Lázaro Cárdenas, the President who nationalized Mexican oil is considered a political and social reformer and is widely lionized as a hero of the Mexican people.  He occupies a very important part of Mexican history, and it is his legacy that is linked with land reform, the rights of industrial workers, unionization rights, and the nationalization of the railway.  Perhaps one of the most important legacies of President Cárdenas was the expropriation of equipment and declaration that the petroleum reserves of Mexico were nationalized.  Over seventy years later, PEMEX, the state run Mexican oil company, still stands as a legacy of President Cárdenas.

President Lázaro Cárdenas
The legacy of President Cárdenas still holds enormous sway in the history of Mexico and is greatly amplified by his own son, Cuauhtémoc Cárdenas, remains a political force in Mexico and is revered as a senior leader of one of Mexico's major political parties.  His voice, and the legacy of his father, will be part of the dialogue that shall come to a vote.  That vote shall have a long term impact of Mexico that can change the face of Mexico's economy, shift an entire hemisphere into high gear, and return manufacturing prowess to the North American continent at precisely the moment when the continent is becoming energy sufficient.  In short, the new structure allows the changes PEMEX needs in order to facilitate the expansion of Mexico's vast oil resources and Cuauhtémoc Cárdenas is leading the opposition to this reform by calling it a "privatization" of the industry.


Cuauhtémoc Cárdenas
The changes may create a more agile oil industry in Mexico, something that could bring great benefit to the country at precisely the correct point in history when it is needed most.  It won't be the sweeping "privatization" people think it is... instead, one might characterize it more as a sharing of risk and the ability to partner with external corporations and investors, but all while maintaining the purview of government approval for any contracts.  In short, the people of Mexico will not lose their control over hydrocarbons under President Nieto's reforms, but what they very well may gain will be summed up in economic growth, jobs, and a strong draw back to a great country that has lost so much intellectual capital over the last few decades as people have emigrated to find their way.

Senate of Mexico
If Mexico enacts these reforms, they may unwittingly encounter a different problem altogether... there could be a reversal of immigration issues on the U.S. / Mexican border as Americans seek to improve their ability to earn a decent living, have great weather, and enjoy all the richness of the amazingly beautiful Mexican culture.  Unfortunately for those Americans, they're likely to have to battle to get into Mexico once the race is on and the exploration starts to ramp up in Mexico's Eagle Ford shale and offshore in the Gulf.  Mexicans should keep in mind that if their citizen is undocumented in the United States, they are documented in Mexico and they'll be bringing back new skills, new jobs, the english language skills, and a rich appetite to earn good wages and live at home with families they left behind.
The Mexican oil and economic boom I sense could be right around the corner.  Before Christmas, Mexicans should know the type of reform their President will sign.

If there is any predictability in the stock markets, the Mexican Peso was up today almost 1% as we move into the decision time frame.  But even if the decision to reform the energy sector emerges and is signed by the President, the Mexican Senate was given 1.7 million signatures, a threshold dictated by the Mexican Constitution that would call for 2% of signatures of registered voters are required in order to bring public consultation.  And just as the role call was being taken on the debate, I lost my feed from the Senate that was streaming beautifully from the Canal de Congreso.  I thought the debate was very thoughtful, there was a minimum of emotion, and the leaders of the great nation are debating some of the most critical legislation I have ever, in my entire life, witnessed in the history of Mexico.  And as much as I would love to stay until the very end of the session... actually, they're voting now.  I'll stay.  If it's a yes vote, then the title of the article will be Si!  And I'm pleased to note that a few minutes ago, the legislation to reform elections, the main "political deal" that will allow energy reform to go forward, was passed by a vote of 106-15.

Citizens protest the reforms


Saturday, November 9, 2013

Alaska to Alberta : Rails to Resources

As I sit at my computer this morning going through some tweets, I see the former U.S. Senator and Governor of the Great State of Alaska, Mr. Frank Murkowski, has posted an article about the great opportunity for Alaska and Alberta and Canada.  The article is called "Canada's oil is Alaska's opportunity. Franks is, of course, absolutely correct that Alberta’s oil does represent a great opportunity for Alaska and vice-versa.  

I met with Frank and some other political and business leaders at the Arctic Imperative Summit in Anchorage back in the summer of 2012.  One of the ideas that was placed on the table was running a pipeline up the MacKenzie valley and turning left to cross the Yukon and link up with the Trans-Alaska Pipeline System (TAPS).  Another idea is for a rail connection, a direct link from Alaska to Alberta.  I think the rail link is very shrewd.

3 Amigos
Former U.S. Senator & Alaska Governor Frank Murkowski in the center


When Frank was the Governor, his vision and that of others, led him to work on a study called “Rails to Resources” that suggested, years in advance of where we are today, that rail connectivity could provide both a connection for Alaska to the lower 48 and it could provide a bi-directional corridor for the flow of goods and services.  Wind the clock forward a few years and here we are today looking at former Governor Murkowski’s vision and wondering why we didn't see this sooner or do it sooner.  Alaska holds tremendous potential for Alberta insomuch as it is a natural port of exit for our crude, but with rail, it would create a cost effective rail corridor that could be leveraged for a lot more than just oil.

At peak output, TAPS flowed more than 2 million barrels of oil a day from the North Slope to the port of Valdez, this peak occurred around 1990.  Since then, there has been a steady decline.  The pipeline also incurs other issues with declining flow, but the available capacity in TAPS is estimated to be 1.4 million barrels of oil a day.  When TAPS falls below 600 barrels of throughput a day, it becomes necessary to mitigate the slower flow of oil and prevent ice formation issues with heat and insulation mitigation methods, below 500 barrels a day will require additional mitigation and when it falls below 400, additional mitigation measures will need to be developed.


The Senator and Governor takes another point of view that is interesting; such a project would create a direct rail link from Alaska to Alberta and the rest of the North American continent.  Easements exist from Fort McMurray to Peace River, but the really critical part is that all the first nations who would need to be part of an agreement have signed letters of support, even the Assembly of First Nations has signed.  

Rail has certain appeals that differ from a pipeline, the infrastructure may be used to ship cargo of other types and even tourists.  I’ve always thought that despite the greater greenhouse gas emissions from rail shipped crude and the slightly higher transportation costs, there will come a day when other forms of energy displace oil.  It could be a paradigm shift, there could be successful fast ignition fusion or any number of emerging energy research possibilities in conjunction with existing renewable technologies.  Likely, it will wind up being a matrix of solutions, but a pipeline is unlikely to be required for whatever the solution set is.  Whatever happens, we do know that tight shale plays are changing the economics of oil, in some ways that is to the advantage of Alberta and in some ways it is a disadvantage.

Most people hear the term West Texas Intermediate (WTI) and we think that's what a producer gets for a barrel of oil... not exactly.  There are many different types of crude oil.  We produce a lot of heavy oil in the oilsands and it requires special equipment to change it from the crude oil we produce into refined petroleum products, whatever they are.  Like any system of trade, there are places in the supply chain where oil is delivered, many of us have heard of "Henry Hub" which is one of those places where oil is delivered.  There are different areas in the United States where oil goes to be turned into refined products, and during World War II, the U.S. Government had a Petroleum Administration for War that established five districts to ration gasoline.  These areas are called Petroleum Administration for Defense Districts (PADD).


Pricing is derived from where the oil is being delivered and, of course, when it arrives at the destination in one of the PADD's where it is going to be refined, it goes into storage.  A price is paid based on supply and demand at that site.  In other words, if there is a large capacity for refining sour (meaning high sulfur content) or heavy oil, the refinery will want to have that kind of oil... it requires a coker or hydrocracker, fancy words for special technology that costs a lot to install, maintain, and operate.  Because it costs more than the equipment used to refine sweet light oil (WTI), there is a higher cost associated with the refining process.  In turn, the refinery has to account for that cost and the producer receives a lower price, assuming there are not imbalances in supply and demand, which also impacts price like any other commodity.

But there is an issue with supply and demand, and it's growing.  In the Gulf States, there is a capacity for heavy oil that has been supplied by areas like Canada with our oilsands, or Venezuela oilsands product, or Mexican Maya heavy.  The Gulf States these days, however, are awash in light crude oil from the tight shale plays in Texas, the most notable being the Eagle Ford play.  So much light crude is coming on the market that there is expected to be a supply imbalance within two years at the rate of new production being brought online.  That means there will be more of the light crude than refiners can handle and their heavy oil capacity will remain underutilized unless Canadian heavy oil can be delivered.


This is a figure that shows the expected growth of different types of oils in the five PADD areas of the United States.  After all that, it's important to realize that the pricing Alberta producers receive depends on the type of oil they sell, where they deliver it to, and the supply/demand conditions that exist at the point where the oil is going.  All of this means basically, in a nutshell, two things.  First, our heavy oil is selling way below the price of WTI, so when you hear 96 or 100 dollars a barrel, that's not what we're really getting, it can be 20 or 30 (and even more) dollars a barrel discounted.  That's a bad thing for our producers and for the government that derives a lot of revenue from the sale of oil.  

There is a good story though, it's not all one sided.  As the Texas oil shale plays and plays nearby start to deliver more and more light crude, they may arrive at an imbalance within a few years time if the added production continues at current trajectories.  Less consumption due to greater fuel efficiency, oil replacement strategies, and a greater supply will eventually create a supply/demand imbalance such that the United States may need to actually think about exporting light crude.  The U.S. appetite for heavy and high sulfur oil will remain because that's not the kind of oil they produce.  This appetite has quantifiable limits in each PADD because of refinery capacity and types of refineries.  

It's safe to say that Canadian heavy will continue to be consumed primarily in PADD II because that's where the refineries are that have significant capacity to deal with this kind of oil.  It may also be delivered via Keystone to Texas where it would compete with Mexican Maya heavy.  But the largest and most equitable market for Canadian heavy is the World market which cannot be accessed without access to the ocean.  Because of the price discounts our producers have to take, the Province of Alberta has been losing billions of dollars every year.  Not a few million, not tens of millions, but billions in royalty revenue that the Government of Alberta simply does not receive due to this discount.

Alaska literally needs to have oil in their pipeline TAPS in order to prevent it from requiring mitigation to allow the lower production to flow.  Alberta needs to stop watching billions of dollars escape our treasury because we have no other customer except the United States. Our good friends in Alaska are willing to work with us and so are the First Nations between our heavy oil and the Pacific ocean.  There is nobody standing in our way along that corridor, it already has a deepwater tanker facility plus storage, there is nothing to do but build a railroad that would connect Alaska to Alberta.  Alberta would benefit to the tune of billions of dollars a year and Alaska would benefit financially as well plus there would be a rail connection that meets up with the shortest trans pacific trading shipping route.  This means cargo can be part of the equation as well, allowing all kinds of products to move via rail between Alaska and anywhere on the North American continent.  There is no doubt the State of Alaska and the Government of the Yukon and the First Nations will work with us.  


G7G First Nations


Our Government of Alberta has funded a G7G study being driven by the VanHorne Institute that will determine if it is viable and economically sound to establish such a rail corridor.  I have news... the answer is not only yes, but it is yes and as fast as we can please.  I am not prepared to wait years to hear results... every several billion dollars we lose because we can't take decisive action is a crime against our nation and our children yet to come.  We are condemning them to far less than we could give them.  I know some will argue that we should produce no oil at all... and they will get in their car and drive to the airport to board a plane to fly to a conference to learn about alternative energy.  They will consume products made from petroleum and think nothing of it, just as they will power their computers and lights with coal fired electricity... because they do not realize that we must pay for a transition to new clean energy.  How will we do that?  Please answer me because I cannot see a clear answer unless the World is prepared to go with nuclear power.  I don't think they are.


Proposed Rail Line to connect to TAPS and Alaska


Last week a train left China for Europe... it carried freight cargo.  I think there's room to think outside the box.  I have said on a number of occasions that one day there will come a paradigm shift, that we will not have to use hydrocarbons for energy.  Until that day arrives, doesn't it make sense for us to look for the most fuel efficient ways to move people, cargo, and yes... even energy?  Rail infrastructure has been lost in North America, now we are building it back.  A good friend who is a railroader said that "once you give up a line, you won't get it back", and he is right.  I remember seeing the old railroad tracks when I was a kid, you could find spikes and remnants of the wood here and there.  We used to go play there and make our forts out on "the old railroad tracks".  Well here's a chance for us to build a new railroad that would create not only billions of dollars of wealth that we could use to pay it out quickly, we could pile money into clean renewable energy research and have a rail line capable of moving anything from across North America to the closes deepwater port on our continent to Asia.  

Just the strategic benefit of having that rail in place is more than enough for me to think that ought to be a national priority.  Sure, I'd look at building a pipeline too, but I'd much rather have a rail line on that route.  Initially, we all talked about a pipeline... but now that I'm very keenly interested in all things transportation, I can see the clear and distinct advantage of a rail connection from the lower 48 through Alberta and into the Yukon and Alaska.  

Train from Zhengzhou to Hamburg
I believe that a rail connection solves about 4 million barrels a day worth of oil export capacity, neatly bypasses the opposition in British Columbia, although that seems to be fading fast as oil by rail starts shaping up to move in every other direction, and it also creates a strategic asset that a pipeline does not.  I advocate for both, but at the end of the day, I'd much rather take a high speed train from Edmonton to Anchorage than fly from Edmonton to Seattle and up to Anchorage.  I love Alaska, that's where all my halibut comes from and where some very dear friends live.  

TAPS in the Winter

I just don't think it's much of a choice really.  How in the heck am I going to get to Alaska on one of these pipelines?  But rail... well that's a very different story.  It's time for us to unlock our wealth and put it to good use.  Why not open our Arctic up to rail and give the Yukon and Alaska a great ride in the process?  It won't take long before people figure out that it's not going to be just for oil, there will be tourists and cargo.  The economic boom will completely invigorate the far northern communities in Canada and it will put a jolt of economic boom into Alaska.  I think that's almost a no brainer... but I'll wait to see the economics.  That said, somehow I think it all comes back to good old fashioned common sense.  My friend Frank has plenty of it.  The brightest economists from the Yukon and Alaskan governments thought this was a good idea without the oil money on the table... but with it.  I'd be willing to bet my house on this one.

Lt. Governor Meade Treadwell

Oh, and yes I did get to know Alaska's Lieutenant Governor Meade Treadwell and I can tell you that he is a great guy, easy to get along with, and I think that he is emblematic of the great people of Alaska... he's the kind of person you can have a straight up honest conversation with.  Just the kind of person somebody from Alberta would like to do business with.  

To all my friends in Alaska and the Yukon, I support you and I have been advocating for this for quite some time.  Seeing Frank's article this morning enthused me to write about this.  I really like big thinkers like Frank and Meade.  Come to think of it, every person I have ever met in Alaska has been awesome!  Having a direct connection to Alaska would be incredible and profitable.






Friday, October 11, 2013

NASCO : North American Strategy for Competitiveness



The North American Strategy for Competitiveness (NASCO) is a fascinating organization. The economic trading partnership represents nearly a quarter of the global Gross Domestic Product (GDP). We are blessed with strong connections in terms of land, people, culture, and economies. This was my first time as the newly minted President and CEO of Port Alberta attending the NASCO 2013 conference in the Great State of Texas. I pushed a number of things off my plate to meet with industry and government leaders from across Canada, the United States, and Mexico in San Antonio.

My thoughts quickly drifted back to a time when I lived only 25 minutes from the Mexican border in Arizona when my home was the Sonoran desert. We all shared the same desert, the same weather, the same food, and the same culture. There was an international border, but it wasn't difficult for us as we could drive to "la frontera", grab a parking spot, and just walk across the line. For us, it was like walking across the street. Not much changed except for the number and type of stores set up at the border for the tourists. 

I knew there would be plenty of Mexicans at the conference and looked forward to meeting them and speaking Spanish.  One of the first orders of business was to register for the conference.  While looking for the registration desk, I was greeted by very some nice people from Mexico speaking Spanish.  We immediately engaged in conversation and a lady from the State of Michigan joined the group. I grew up near the Windsor/Detroit border, so we had a lot to talk about.  Having spend most of my life 15 minutes from the Canadian/US border or the Mexican/US border, I was in my element.

As we continued to chat, I was graciously escorted into a room with a couple dozen people. We all exchanged business cards and I noticed these people represented their respective governments at a pretty high level. After a quick reference to the event schedule on my iPhone, I realized the seat I occupied was for "invited only" government leaders for the NAFTA countries!  Inadvertently, I wound up at the meeting of ministers.

I thought to myself, “maybe this is meant to be”, after all, I have the heart of a Latino and the citizenship of Canada and the United States.  My participation and opinions were welcome in the discussion on how the three NAFTA countries might best move forward on a variety of levels. It was a thrill to observe and collaborate with such brilliant international thought leaders instrumental to the fate of the NAFTA region.

Canada, the United States, and Mexico account for nearly a quarter of the global GDP.  That fact, in and of itself, is staggering.  The United States imports nearly twice as much oil from Canada than Saudi Arabia.  Canada has invested over $230 billion in NAFTA partners and our trading relationship has blossomed to over a trillion dollars.  The combined GDP of Canada, the United States, and Mexico was about $19.2 trillion last year.  The Government of Canada has been keenly aware of a shifting multi-polar world and what that means for Canadian trading and competitiveness.  

Mexican reforms seem to be gathering momentum as indicated by considerable capital starting to pivot from Latin American markets into Mexico.  Initial Public Offerings (IPO's) and add-ons seem to be shifting capital from Brazil towards Mexico. Over 10 billion in IPO's have been racked up this year to date. While the Asian IPO's have retracted, North American IPO proceeds have gained.  Mexican President Enrique Peña Nieto is considering changes to the Constitution of Mexico, in particular, articles 25, 27, and 28 of the Constitution. 

President Enrique Peña Nieto
The potential reforms in Mexico would radically change the Mexican economy and shift foreign investment back into high gear.  It is thought that Petróleos Mexicanos (PEMEX), the state run oil company, could ramp up exploration in dwindling oil fields.  But the alteration of the Mexican Constitution requires a 2/3 vote, and it is unlikely to pass unless President Neito's PRI party can secure the support of the conservative PAN party which is not entirely opposed to the idea, but in order to secure their support, they are asking to have electoral reform which would allow a run off between first and second place candidates in Presidential elections according to Jose Maria Martinez, deputy leader of the PAN in the Senate.  

Over 11,000 trucks move across the border crossing between Laredo, Texas and Nuevo Laredo, Tamaulipas every day.  If you're going to cross the US/Mexican/Canadian border, here's a handy link for real-time data that shows the best time to cross for passenger and commercial.  Between Canada and the United Stated, over 1.4 million worth of goods and services cross the border from the United States every minute of every day. That's a $710 billion dollar market between the U.S. and Canada alone.  It's no wonder the Government of Canada is going to build a new bridge across the Detroit river because it is Canada's largest trade corridor with over 25% of U.S. and Canadian trade.

New Bridge from Windsor to Detroit - designed by Ted Zoli
Canada will pick up the tab for the construction of the bridge at several billion dollars (estimated between 3 and 4 billion).  That bridge represents what every person from the Detroit / Windsor corridor knows... the trading relationship sends more value in cargo across the Detroit river every day than we trade with many countries all year long.  In short, it's the single largest trading corridor in North America and it's growing.

The bridge in Laredo is also tremendously important too.  The Laredo bridge is called the World Trade International Bridge, and it carries about 10,000 (or more) trucks a day delivering cargo between the United States and Mexico. This Laredo bridge spans the Rio Grande. You can check out the bridge cams at this link.

World Trade International Bridge - Laredo

When people start talking about NAFTA, I have a whole new perspective of just how important it is for our three countries.  NAFTA matters and the key relationships we have with Mexico, Canada, and the United States are incredibly important to our economies and to our people.  Suffice it to say, I've always believed in free trade and I've always felt the relationship between Mexico, Canada, and the United States is enormously important.  Between the three countries, we can claim continental energy independence.  There are many reasons why the trading relationships of NAFTA are critical to all three countries, but the sheer size and velocity of goods and services are simply unmatched anywhere else.

Mexico, the United States, and Canada represent about a quarter of the World's GDP, over 14 million jobs depend on this relationship, and it is a 19 trillion dollar market, larger than the European Union and twice the size of China.  The message I gave the meeting of the leaders was very simple. The problems for the supply chain and logistics between Mexico, the United States, and Canada began on one particular date, September 11, 2001 a.k.a. 9/11.  That's when the borders started to become difficult to negotiate.  Only I was able to say that in no uncertain terms. Everybody else had to be restrained in their choice of words because they were high level political representatives... I was the guy representing industry and was not bound to the same requirement to dance around the heart of the issue.  Naturally, I put it right out there on the table and I think very much to the relief of the government officials present.

We must leverage our advantages as technological leaders and thought leaders to make make our borders easier to cross for our trade, and we can do it by leveraging technology for more intelligent border systems, cooperating more closely on these matters, and focusing on our ability to leverage these things while approving energy infrastructure, like Keystone, to create a strong energy security policy that benefits all three nations.  These recommendations, in a slightly different form, were put forth on my birthday, October 3rd, from the Canadian Council of Chief Executives and addressed to President Obama, President Nieto, and Prime Minister Harper.  

I believe President Nieto is leading a visionary change that will bring increased prosperity to Mexico.  The Eagle Ford shale play extends into Mexico and there is so much more.  But PEMEX will require the kind of expertise Canadian and U.S. companies can bring to the table in order to unleash the enormous potential of Mexican natural resources.  The United States must also consider the importance of completing the Keystone project, which in and of itself does not create a complete solution to the breadth of North American energy security that all of us want, but it will certainly help.  And to be clear, the majority of U.S. citizens want Keystone to move forward.


We recognize that business leaders and the United States Congress join the majority of the people in their desire to see Keystone move forward.  North American energy independence allows us to apply our own technologies and innovation in our marketplace instead of pushing global energy production into the hands of nations where environmental controls are nowhere near our environmental control standards.  Democratic stability and decades of harmonious relations across the NAFTA countries support continued policy development that will benefit North America.

President Nieto and President Obama


President Nieto and Prime Minister Harper
If we apply our technologies and make a genuine attempt to work more closely to harmonize our security and enhance the flow of goods and services across the North American supply chain, we will advance our economies and move forward together.



Monday, July 15, 2013

The Siberian Methane Burp

Eastern Siberian Arctic Shelf Carbon Deposits of methane and carboniferous materials on Arctic coastal areas also represent a considerable store of materials that have potential to release greenhouse gas emissions that will continue to accelerate the rate of climate change.  The Eastern Siberian Arctic Shelf (ESAS) covers approximately 7,000 kilometers with significant outcroppings of complex ancient ice deposits rich in carboniferous materials in addition to substantial quantities of shallow sub sea permafrost.  This exists throughout the entire Arctic region, but the ESAS is by far the most proliferous area.


As climate change creates larger open water areas in the Arctic for longer periods of time, erosion of these shelves increase the release of these carboniferous materials into the ocean.  Microbial consumption of these materials produces carbon dioxide and methane.  The release of carbon dioxide and methane vent to the atmosphere.  Massive deposits of methane hydrates are also known to exist in the form of methane hydrates are trapped in a frozen state beneath the Arctic tundra. Coastal erosion due to increased tidal activity combined with warming will bring these coastline and sea based deposits to the mix.  Since methane has approximately 20-23 times greater impact on warming, meaning it traps much more heat, the ramifications of large scale emissions of methane into the atmosphere further exacerbate the positive feedback loop effect.  

Because methane dissipates relatively quickly, the overall impact of methane release may not have enormous impact on overall global average temperatures in and of itself, taken together with other components in a planetary scale positive feedback loop, the impact could be magnified significantly.If technology existed to easily capture methane from the Arctic tundra, the sheer quantity of deposits might help to accelerate the economic viability of methane production.  Because methane is a very efficient fuel, there is little doubt that an economic model to capture methane would be of serious interest to various stakeholders in the Arctic, especially those who would be in a position to benefit from profitable resource development. 


Capturing the methane before it escapes into the atmosphere would prevent a greenhouse gas some 20+ times more potent than CO2 from contributing its effects to climate change.  But the numerous challenges of getting to the resource and then fielding the technology to capture it present challenges that may render this option uneconomic.  Nevertheless, it's something we continue to ponder and think about... after all, if we're not paying attention to it, we might find out one day we were ignoring a vast sources of greenhouse gas.


Could methane be a tipping point greenhouse gas that forces extraordinarily expensive adaptation strategies to be implemented at a greatly accelerated pace?  If it does become a tipping point gas, it's safe to bet it could impact climate change faster than most policy analysts would ever be willing to publicly admit.

Sunday, June 30, 2013

Alberta Floods and Arctic Amplification : Is There A Correlation?


The theory of Arctic Amplification, simply stated, suggests that as sea ice melts, more moisture is available for precipitation and that as the far northern latitudes warm, the jet stream's oscillation patterns tend to elongate, creating larger ridges and troughs that have the net effect of decreasing the rate of storm movement from west to east.  This essentially slows the storms down causing them to linger in place longer.  As storms linger longer and have more precipitation available to them, it follows that severe weather impact, such as flooding events, droughts, snowfall, or other consequences of strong weather related events could be more likely to occur.


As Alberta sets about learning how we could have improved our ability to forecast the recent flooding event, the one certainty we have is that more time would have been beneficial as outlined in this article in the Calgary Herald.  Also, here is an excellent primer video on Arctic Amplification and Rossby Wave elongation.


Rossby waves move storms from west to east, as they move slower due to elongation, it's evident that storms tend to persist.  In addition,the elongation of Rossby waves tend to create larger ridges and troughs which have the effect of shifting weather patterns further to the north and to the south.  As it turns out, when the storms were forming that caused the recent flood events in Alberta, I happened to be at latitude 60 experiencing hot sunny days with high temperatures in excess of 100 degrees farenheigt in the region while latitude 50 - 52 running through southeast BC and southwest AB were experiencing a jet stream ridge that may have caused precipitation to linger in the eastern range of the rocky mountains, washing away snow pack and distributing large amount of precipitation into the headwaters of the river systems that later generated large scale flooding events.

Without a doubt, this is not certain... and there are a lot of other circumstances involved to be sure.  But at the very least, this may be a like a red flag for scientists that the theory of Arctic Amplification affecting Rossby waves may be worth a hard look.  From a layman's perspective, it appears that elongation of the Rossby waves in the jet stream from 17-19 June, followed by a return to a more normal Rossby wave, may have contributed to the flooding events.









Heavy rain in the mountains, no doubt, exacerbated melt rates of high snow pack and these forces combined with rain moved into the watershed and were sufficient to create the flooding events.  If the Rossby wave elongation did contribute to the overall impact, it is certain that nothing could have been done to prevent the flooding, but perhaps a meteorological integration of the understanding of Rossby wave pattern elongation combined with precipitation analysis from satellite imagery may be enough to extend predictive capability.  Any additional amount of forewarning may have proven valuable to those responsible for emergency planning.  It is important, however, to keep in mind these theories are only now getting widespread attention.

Still, if there is anything this story should tell us it's that there should be attention paid to changing jet stream patterns and alteration of the Rossby waves.  That science has been gaining momentum over the last couple of years.  One of the more interesting videos I've seen on this was a lecture given by Dr. Francis of Rutgers University.  She explains the elongation of the Rossby waves and then goes on to analyze large storm events over the last couple of years and checked to see if there was a Rossby wave elongation over those areas.  In the storms she analyzed, Rossby wave patterns were elongated... much like the pattern we saw in Alberta.

A more extensive video on extreme weather events by Dr. Francis may be viewed here:


What do you think?