Snap Summary: CUSLI Nexus, Day 2, Energy Panel - Shared Energy Resources and Strategies in the Great Lakes-St. Lawrence Region

A diverse group of energy experts shared presentations on the changing North American energy relationship.  The main takeaway: Canada-U.S. energy relations are changing, and whether its short-term energy development to meet current needs, or long-term shifts to green energy through coordinating North American power generation, sustained Canadian-U.S. engagement will be critical.

Julie Dill:  “Energy Is Good for the Region…[and building] a Strong and Sustainable Future”

Natural Gas Is Here, And With It Energy Will Flow to the Great Lakes Region Increasing Not From Alberta but from the Great Lakes Itself and the Northeast.

CNOOC’s Nexen Bid & “Net Benefit” Test: What the Legal Test Betrays About Canadian Politics and the Harper's Economic Agenda

By Eskor Edem, Staff Writer 

A Chinese state-owned company, CNOOC, wants to take a controlling interest in Canadian energy company Nexen. The hang-up? The bid must satisfy the “net benefit” requirement that Canadian law imposes on all foreign direct investments exceeding C$299 million. Critically, while the “net benefit” test is—on paper—a six-pronged legal test, a political figure—Minister of Industry and member of the Stephen Harper cabinet member Christian Paradis—applies the test. Thus, political, not the legal, factors will likely determine if CNOOC’s bid passes the net benefit test. CUSLI-Nexus staff writer Eskor Edem reviews the “net benefit” test, identifies the three political factors critical to Mr. Paradis’ decision, and concludes that CNOOC’s bid will likely pass the “net benefit” test. But that won't be the end of the story:  the CNOOC bid still has other administrative hurdles to clear.

“Net Benefit” Test

Although established as statutory law, the “net benefit” rule is really more a political test allowing the seating administration the block foreign investment injurious to its policy vision. Under the Investment Canada Act transactions are reviewable when they exceed the threshold of C$299 million. The final decision of whether a transaction is a “net benefit” is made by the Minister of Industry. As the Minister is an appointed political position, the economic policy of the governing party plays a prominent role in reaching an answer to the “net benefit” question. In determining whether foreign direct investment is a “net benefit”, the Minister of Industry considers a number of factors related the potential economic and cultural impact of the investment. The economic factors weighed range from the potential impact on domestic jobs, the participation of Canadians in the venture, and the impact on Canada’s global competitiveness. Cultural factors can be seen as a catch-all for a range of politically sensitive, non-economic topics—like a foreign investment’s impact on Canada’s indigenousness population, the First Nations. 

Lessons from Canada’s “Net Benefit” Rejection: BHP Billiton and Potash

In 2010, then Minister of Industry Tony Clement rejected BHP Billiton’s proposed hostile takeover of the Canadian mining company PotashCorp. The negative impact of BHP’s proposed takeover on Saskatchewan’s mining economy was the determinative factor in Minister Clement’s rejecting the bid on “net benefit” grounds. Saskatchewan is home to 1/3 of the global potash market. Naturally, this means that the government derives significant revenues from potash mining companies—15% in 2008. But the province also plays a critical role in potash pricing: with a Canadian industry body, Canpotex, the sole distributor for Canadian potash that is marketed outside North America. Canpotex’s exclusive control over the marketing of Canadian potash provides price stability on which Saskatchewan can rely in estimating its future revenue stream. 

PotashCorp. made up 54% of Canoptex’s output at the time of BHP’s bid to acquire it. As such, BHP’s insistence that it would take PotashCorp. out of Canoptex would have dealt a significant, if not fatal blow, to Saskatchewan’s influence on the price of potash on the international market. Opening up Canada’s potash market posed a serious threat to the Canadian economy and, perhaps more importantly, Saskatchewan’s finances. A law firm advising the Province on the matter in Jan. 2011, Jones Day found: 

[T]here was a risk of significant job losses by other Canadian potash manufacturers as a result [of] BHP’s plans to run its Jansen mine “flat out” and its threatened departure from Canpotex… Saskatchewan could [have] los[t]up to CAN $6 billion in tax revenues if BHP operated PotashCorp mines at full capacity.

Independent marketing could have potentially resulted in the (1) the loss of price setting abilities which the province had enjoyed to date; (2) a significant decline in the potash prices largely due to BHP’s level of production; and (3) a significant decline in tax revenue. 

Given the high level of public disapproval of the takeover, approving BHP’s bid carried significant political down side for the Harper administration. On top of public disapproval, Conservative provincial officials voiced their avid resistance to the transaction. In making their case against BHP, provincial officials argued that an “increasingly strategic” resource required maintaining Saswatchan’s influence over global potash prices. According to some, approving BHP’s takeover held the potential of reducing Canada’s food and energy security.

The “Net Benefit” Test’s Political Factors and Why CNOOC Passes the Test

A decision in CNOOC’s favor would provide credibility to Prime Minister Harper’s policy of strengthening Canada’s economic ties with Asia. Minster Paradis’ final determination will be guided by Prime Minister Harper’s goal of ensuring Canadian natural gas and oil producers get access to China's growing energy appetite. As such, application of the “net benefit” rule to CNOOC will likely diverge from the strict letter of the law. In reaching his decision, Paradis will likely consider three political factors:  (1) the nature of the targeted company; (2) The level of provincial support for the CNOOC’s acquisition; and, (3) the possibility of greater market access for Canadian firms operating in China.

Unlike Potash, Nexen is not uniquely dominant in Canadian industry. Nexen only ranks as a middling player in Canada’s oil and gas sector. John Manley, a former Liberal Minister of Industry, made clear if a larger Canadian oil and gas company was at stake, the government would be likely to block a takeover bid on “net benefit” grounds, in this Bloomberg Sept. 2012 article:

‘[If Suncor were the target company]…you would have a different set of questions being asked, simply because of [Suncor’s] scale and…importance in the Canadian context,’…Suncor is Canada’s ‘biggest independent, and that puts it in a somewhat different category.’

CNOOC’s takeover of Nexen does not threaten Alberta’s finances. Unlike the Potash market, in which Canoptex plays a price setting function, factors inherent to the oil and gas markets prevent any single player from determining market prices. In the oil and gas market prices are largely set by supply and demand, with spontaneous political events playing an influential role in short-term price volatility. As such, Alberta does not have the ability to set the market price its oil and gas producers get for their output. Hence, in this regard CNOOC’s acquisition of Nexen will not affect Alberta’s royalty stream; thus, CNOOC’s bid avoids a major point of contention in BHP’s bid.

Furthermore, unlike the Potash bid, the provincial government of Alberta supports CNOOC’s bid. During a recent interview, Alberta’s Premier Alison Redford spoke favorably of CNOOC’s acquisition of Nexen, stating:

At the end of the day, our view is that if this is in Alberta’s interest, it should go ahead. And we think there’s a lot of benefit for Alberta and Canada in this deal.

And in discussing CNOOC’s bid, public commentators have stressed a potentially large up-side for Canada if the bid is approved: If Canada grants China market access within the energy sector, other Canadian companies may find it easier to get access to the burgeoning Chinese marketplace. As reported by the Wall Street Journal, DBRS debt rating agency has found:

‘This transaction would dramatically improve Canada-China relations, which could in turn provide greater economic trade between the two countries.’…add[ing] that approval could also open the door for Canadian businesses in China.

And, obviously, CNOOC’s Nexen bid would strengthen energy ties between China and Canada. Given Canada’s unease with the Obama administration’s reluctance to approve the Keystone XL project, laying the foundation for substantial growth in Sino-Canadian energy trade has become a major policy objective of the Harper administration.

Conclusion

The CNOOC bid, albeit not without some belly-aching, is very likely to pass Canada’s “net benefit” test. First, while superficially a 6-pronged legal test, the “net benefit” rule is really more a political test: giving the Canadian government a way to block foreign investment that may compromise core Canadian economic interests. And as BHP’s failed bid shows, the political variables at play are: (1) the size and scope of the targeted Canadian company, (2) support on the provincial level for the acquisition, and (3) the economic rewards of approving the bid. With Nexen a relatively small player in the Canadian oil and gas industry, Alberta’s support of CNOOC’s bid, and the Harper government’s eagerness to open up the lucrative Chinese marketplace to Canadian firms, CNOOC’s bid for Nexen is very likely to clear the “net benefit” hurdle.

North America's Natural Gas Binge: Canada-U.S. Natural Gas Race Is On--But New York-Based Nymex Is the Clear Winner

By Keith Edmund White
Editor-in-Chief

The United States and Canada seem to be racing to see who can export more natural gas—particularly liquefied natural gas (LNG)—to Asia first.  CBC reports on the five natural gas plant projects in B.C. up and running, and then exporting to Asia.  Of particular note:  these projects  aren’t getting the opposition faced by plans for a B.C. Northern Gateway pipeline—which, according to a Globe and Mail article yesterday, is opposed by 60% of B.C. residents. 

(For fans of regulatory news:  check out this elegant breakdown of Canada's regulation of natural gas on pages 4-6 of a 2010 Natural Resources Canada presentation.)

And Risk.net reports on U.S. firms developing natural gas projects:

There are currently more than half a dozen projects to build LNG export terminals in the US, which are in various stages of the regulatory approval process. The one that appears to be furthest along – Cheniere Energy's proposed $5 billion LNG facility in Sabine Pass, Louisiana – is scheduled to begin exporting cargoes in late 2015 or early 2016, according to the company.

There are two drivers for the North American gas rush according to Risk.net:

(1) Price. Natural gas is much cheaper in North America than Asia, by a lot:

“…the price of the Henry Hub front-month contract has dropped from more than $13 per million British thermal units (/MMBtu) in 2008 to less than $3/MMBtu today. By comparison, spot natural gas prices in Japan were as high as $18/MMBtu earlier this year. “

(2) Simplified natural gas international marketplace. While the international trade of natural gas has been hampered by the lack of one market for natural gas (for a backgrounder, check out this previous CUSLI-Nexus posting). But Risk.net contends that the NY is now becoming the global place to trade futures contracts on natural gas, lower barriers for Canadian and U.S. exporters. The one big exception: China.

From the Risk.net article:

"Given the growth in LNG, and the creation of an international market in natural gas, we assume that the oil price link will gradually have less importance," the analysts from Citi write. "Instead, we see Europe as sourcing its natural gas in the international market, with the long-term driver of natural gas prices in Europe being the Henry Hub benchmark."

…

Similarly, Henry Hub pricing will become more prevalent in Asia, the Citi report said. "In Asia (excluding China), the key markets of Japan and South Korea are dependent on LNG imports, and so already purchase natural gas on the international market. Again, we see the long-term driver of this market as being the Henry Hub benchmark," the report says, adding that Chinese natural gas prices will be less linked to Henry Hub because China will eventually tap its own abundant shale gas reserves.

…

Henry Hub is named after a pipeline interconnection point in Louisiana that serves as the physical delivery location for natural gas futures contracts traded on Nymex, the New York-based commodities exchange owned by CME Group.

Two interesting—albeit tentative—conclusions can be drawn from looking at these two articles.  First, the Canada-U.S. energy relationship is complex:  Canada is America’s #1 source of foreign oil, but a U.S. competitor when it comes to the emerging natural gas market.  Second, regardless of what nations certain natural gas producer firms are based in, the U.S.-based Nymex commodities exchange looks like the big winner of North America’s natural gas binge.  In fact, Nymex—as reported by Bloomberg Businessweek—earlier this month launched “a broad suite of new natural gas and power markets.”

Woodrow Wilson Center Talks Shale Gas With Jim Slutz

Jim Slutz, president and managing director of Global Energy Strategies LLC, talks on American shale gas production in this informative interview with Lynann Butkiewcz.

Some highlights:

• America has tons of natural gas. "[America's] natural-gas resource base, which includes proven and unproven reserves, is now estimated at 2203.0 TCF, or almost 90 years of supply."

•  Shale gas will soon be leading source of U.S. natural gas.  "EIA (Energy Information Administration) projects that from 2010 to 2035, natural gas production from shale formations will rise from 23% to 49% of the U.S. gas supply. The term “game-changer” is often used and is very appropriate for this development." 

• FTAs and U.S. regulation of natural gas exports.  The Department of Energy (DOE) authorizes natural gas exporters, using a two-tiered process.  For countries that America has free-trade agreements (FTAs), the export automatically considered in the public interest and, once all regulatory steps are taken,  DOE authorization is granted.  But for those nations with FTAs, a more complicated process follows.  In short, America's trade relations and review process has a direct impact on American natural gas exporters.  Learn more about DOE's natural gas regulation, which is governed by the Natural Gas Act of 1938.  Finally, check out Michael Levi's discussion paper, A Strategy for U.S. Natural Gas Exports, a publication of the Brookings Institute's Hamilton Center.  The paper reviews U.S. gas regulation, and puts forward a trade strategy for the U.S. to push for global market-based pricing and transparency.

• America and Canada's energy relationship--and Canadian pipeline concerns.  "The United States can be a partner to Canada as a market for additional crude oil from the oil sands. The only restriction is the need for added pipeline capacity. The United States has extra capacity in oil refineries, which are specifically designed to process heavy oil, so it makes economic sense to ship more oil to the United States. The regulatory delays by the U.S. government regarding the Keystone XL pipeline are directly responsible for Canada’s increased urgency in seeking oil-export opportunities in Asia. This has also raised concerns by Canadians about whether Canada is overly reliant on the United States as a trading partner."

• Challenges to exporting natural gas to Asia:  Asia's long-term gas lock & oil-pricing pegs. America's short-term contracts put barriers to exporting cheaper U.S. natural gas to Asia. 

"It will be a long time before a global gas market develops. While there may be movement in that direction, challenges exist to the development of a U.S.-style, Henry Hub–type market. Gas markets in Asia and the United States function quite differently. In Asia, much of the gas supply depends on LNG, which requires huge upfront investment and therefore is predicated on long-term contracts, typically twenty years. These contracts use oil prices as a basis for determining gas value. In the United States, gas is traded independently of oil price and on a much shorter-term basis. A typical contract in the United States is measured in months, not years. Long-term contracts will remain a key component of LNG project development because of the financing required to undertake the infrastructure construction. The other important component of pricing is to remember is that there is a significant cost to liquefy and transport LNG, in most cases more than the cost of the gas. Therefore, just because there is a current significant differential between U.S. and Asia prices does not automatically mean that exporting gas to Asia will be economically attractive for the long term." 

Canada's Arctic Strategy

By Keith Edmund White

The development of Arctic Canada could generate mineral, fishing, and tourism revenue to the tune of $1 billion dollars.  Furthermore, Canada's sovereignty and control of the emerging waterways through the Arctic is a source of national pride.  So it's no surprise that Prime Minister Harper has made developing the North a key initiative of his government.  But, when it comes to economic development, will the high costs of developing the Arctic--in combination with other countries own newly appreciated energy finds (read:   North American natural gas) require an Arctic rethink?  In any case, simply developing the North--without carefully planning of each infrastructure and energy project-- could result in Canada actually losing money on its Arctic gamble.

Last week, Canadian Prime Minister Stephen Harper kicked off his seventh trek to the Arctic. If you want to learn more about his schedule, check out this informative Montreal Gazette article. Of more interest, to me, is where Canada’s Arctic strategy stands in 2012.

Press Takes on Harper’s Trek

The Calgary Herald, unsurprisingly, comes out in favor of Harper’s Arctic policies. It highlights the Prime Minister’s push to develop and cement Canadian claims to the Arctic. But, to its credit, the article highlights the current costs of developing its Northern region: totaling $2.9 billion for 112,000 people, and funding 77 – 90% of revenues for Canada’s northern territories (the Yukon, the Northwest Territories, and Nunavut. Of a particular note to me is the article’s mention of opposing U.S. and Canadian claims on the Northwest Passage or Canadian Archipelago—with the US claiming the emerging waterway as an international strait, while Canada would naturally prefer these to be Canadian waters. (For those wanting an exhaustive look at Canada’s Arctic claims, check out the 50+ page Sovereignty & Security In Canada’s Arctic, an interim report by a Canadian Senate Committee).

The National Post used Harper’s Arctic tour for discussion on the Polar Bear, probing two questions: (1) whether the polar bear should replace the beaver as Canada’s national symbol, while (2) delving into how Canada patrols its frontier region:

The roughly 4,700 Rangers — sprinkled in 178 communities across the North — are the backbone of the military’s presence in the region.

They conduct patrols across the vast frozen wasteland and are equipped with Lee-Enfields, bolt-action, magazine-fed rifles that were standard issue during the first half of the 20th century.

The Winnipeg Free Press provides a useful counter-weight, highlighting the failure of the Mackenzie Valley Gas Pipeline, a project that has found itself falling prey to the Arctic’s “obvious economic handicaps” of remote from other Canadian industrial centers. Read the section below, or the article, to learn a few more details of the project and the project’s impact of Canadian environmental policy, but the economic message can be summed up in short: Developing the energy-rich Arctic is expensive, and with Canada just one player among many, costly infrastructure projects can go belly-up without careful planning. 

From the Winnipeg Free Press:

The Mackenzie Valley Gas Pipeline project of Imperial Oil and others is one of Canada's greatest unbuilt infrastructure projects. After years of investigation and litigation over aboriginal title and further years of environmental review, the project won National Energy Board approval in 2010. It is not being built, however, because U.S. oil and gas exploration companies have found ways of extracting great volumes of natural gas that were previously not recoverable. In the present glutted natural-gas market and low natural-gas prices, the expense of the Mackenzie Valley line is difficult to justify.

Northerners eager to see the Mackenzie Valley line built believe it was killed by too much environmental review. The Harper government agreed and changed the National Energy Board Act to allow itself to set limits to environmental review and speed up approval. The three-member panel studying Enbridge Inc.'s proposed Northern Gateway gas pipeline from Alberta to the Pacific Coast is now operating under the government's tighter timeline.

But it is just as reasonable to conclude that the Mackenzie Valley line is a technically good project that just has to wait until somebody needs the gas badly enough to pay for construction of the line. Environmental review didn't kill a good project -- it delayed an unnecessary project. If the Mackenzie Valley line was reaching completion today, it might stand idle for want of buyers for the gas. The investors would be stuck with an engineering marvel that lacks, for the moment, an economic purpose.

Some Arctic Basics & Grading Canada's Arctic Push 

First, just so readers can be hip to Canadian political lingo, Harper announced, in 2009, a four-pillar strategy for Canada Great White North: (1) asserting sovereignty, (2) protecting the environment, (3) promoting social and economic development; and, finally, (4) improving and devolving Arctic governance. The main focus on this posting is on that third aspect—economic development.

Canada is making serious investments in Arctic infrastructure. As detailed in a 2011 Library of Parliament research paper, Canada has spent over $720 million to procure icebreakers; gotten new patrol ships; spent $17 million to establish commercial fisheries in Nunavut; and $100 million “to establish a deepwater port in Nunavut” for its security forces. These are the backbone projects of Harper’s push to develop the Arctic. Should these projects continue and be completed, they could begin the long process of making the Northern territories closer to self-sufficiency (though, Canada should probably use U.S. subsidization of Alaska as a more attainable goal). 

So, without getting into the weeds, how is Canada doing in its Arctic project? Well, according to YahooNews, not that great: “While Prime Minister Stephen Harper and Defence Minister Peter MacKay continue to insist Canada is no slouch in the Arctic, other countries’ Arctic strategies seem to be bigger, stronger and faster.” Reporter Andy Radia then points out that the United States is revving up submarine patrols of the Arctic, Russia is spending over $100 billion on 16 new nuclear submarines, some of which will be patrolling the Arctic, and Sweden and Norway may be in on the Arctic gig too.   

But this focus on whether certain waterways in the Arctic will be Canadian waters or international waters misses the (snowy) forest for the trees.  Canada will never out-militarize Russia or the United States, but Canada has already turned the land and waters of the Arctic into an emerging hotbed of economic activity.  The question is, is even further development worth the public infrastructure costs--let alone the costs of providing security to a no-longer mythical Northwest Passage.

There are three key areas where Canada can develop oil and natural gas: the Mackenzie Valley, the Arctic Islands, and the Mackenzie Valley/Beaufort Sea. A 2012 Lloyd’s of London report found that there’s possibly $100 billion to be made in the Arctic for minerals, fisheries, shipping, and tourism. But the report notes that the extreme weather requires strong public infrastructure investment, effective regulatory control, and greater data-collection on the dangers and benefits of Arctic development. 

The U.S. Energy Information Administration (E.I.A.) sums up the "goods news, bad news" of Arctic economic development:

The Arctic presents a “good news, bad news” situation for oil and natural gas development.  The good news is that the Arctic holds about 22 percent of the world’s undiscovered conventional oil and natural gas resources, based on the USGS mean estimate.  The bad news is that: (1) the Arctic resource base is largely composed of natural gas and natural gas liquids, which are significantly more expensive to transport over long distances than oil; (2) the Arctic oil and natural gas resources will be considerably more expensive, risky, and take longer to develop than comparable deposits found elsewhere in the world; (3) unresolved Arctic sovereignty claims could preclude or substantially delay development of those oil and natural gas resources where economic sovereignty claims overlap; and (4) protecting the Arctic environment will be costly.  The high cost and long lead-times of Arctic oil and natural gas development undercut the immediate importance of these sovereignty claims, while at the same time diminishing the economic incentive to develop these resources.

...

The bottom line for Arctic oil and natural gas potential is that high costs, high risks, and lengthy lead-times can all serve to deter their development in preference to the development of less challenging oil and natural gas resources elsewhere in the world.  Also, the less abundant Arctic oil resources will be more readily developed than the Arctic’s natural gas resources.  Thus, while the Arctic has the potential to be a more important source of global oil and natural gas production sometime in the future; the timing of a significant expansion in Arctic production is difficult to predict.       

Conclusion:  Canada and the Arctic

Undoubtedly, the Arctic holds great economic potential for Canada, as well as other Arctic nations. But if Canada fails to push prudent development, it may find itself paying for extensive Arctic infrastructure while finding the promise of Arctic profits a mirage.

North America’s Shale Energy Stockpiles: Ohio Enters The Game—But Is it too Late, and Will State Politics Get in the Way?

by Keith Edmund White, Editor-in-Chief

With all the chattering over Canada’s oil sands, it’s important not to forget what natural resource literally ties Canada and the United States: shale gas. This resource, while perhaps not as pronounced on the public mind as black-gold brother, has gained prominence over the last decade. For most readers, T. Boone Pickens—and the numerous commercials he generated extolling naturally gas—may have been your first brush with shale.. But now even CNN’s Fareed Zakaria has seemingly blessed this energy shift: noting not only can shale gas production be done responsibly, but could serve as a geo-political stabilizer: with energy-hungry nations like the United States and China not having to be as dependent on keeping oil on the market from more volatile regions on the globe. And, as Canada’s showing, shale brings with it job and GDP growth (refer to page 27). While Canada’s oil sands grab the headlines, it’s clear the natural gas—promising less environmental impact—is trying to give it a run for its dominant role on the global energy stage.

And now Ohio is in on the game. And it’s bringing about its own interesting energy-state politics. First, the geology. Ohio sits—along with about 7 other U.S. states and Ontario—on the Utica shale gas reserves. How much is there? Apparently a lot. And in Ohio is pushing to up its 7-wells, and try to get in on the shale boom.

But this is where the state politics come in. Ohio Gov. John Kasich, not known as a moderate in his former Congressional career and now still-short tenure, has used the issue to show off his inner populist. His plan: finance a across-the-board income tax cut with increased taxes on drilling, which—it should be noted—admittedly Ohio already accessing this ‘severance tax scheme’ at a lower rate than other States. But, alas, Kasich finds himself fighting his own party over the tax proposal, with others calling the tax-proposal a possible killer of shale’s potential for spurring Ohio economic growth.  Whether Kasich populist pivot results from conviction or political necessity is debatable, but in the result is the same:  Kasich is pushing shale gas in a way that presumably will be supported by most Ohio voters.

Now there are two things to consider when assessing the virtues of natural gas. On the macro-scale, its undoubtedly true that natural gas is clean than oil—but, is using natural gas as a crush keeping the American economy from entering its green phase? On the ground in Ohio, there are two far less abstract questions. First, is the market to awash in natural gas?  As pointed out in John Funk's The Plain Dealer Nov. 2011 piece, Ohio might be too late to the party to enjoy a true shale boom:

The problem for Ohio is that the gas industry has been too successful over the last three years at developing shale gas in other parts of the nation, using technologies to drill horizontal wells and then fracturing, or "fracking," the rock to release the gas. 

Now there is too much of the stuff. The glut is growing and prices are falling. Those are the facts. Additionally, no one knows for sure how much gas -- or more valuable oil and other hydrocarbons -- lies trapped beneath Ohio. "The issue for the Ohio economy is whether there is enough demand for natural gas to permit development. It's not a question of whether it will create 150,000 jobs or 170,000 jobs but a question of whether it will happen at all," said Andrew Weissman, executive director of Energy Business Watch, a national private analytical service for energy investors. 

"It will happen on some scale," he added. "But the question is whether it moves quickly or whether it moves slowly so that it has only a modest impact on Ohio's economy."

And second, are Ohioans being over-sold on the economic benefits? Yes, with gas comes drilling operations, leasing and royalties, and pipeline infrastructure (all of which equal more jobs—especially for lawyers!). But, as this OSU report makes clear, while a short-term of income burst is to be expected in drilling areas, shale gas development’s ability to create long-term job-creation is dubious at best (and still comes with some not-fully understood environmental impacts) (refer to pages 15 and 27).  One fascinating statistic: Pennsylvania counties with drilling actually had less job growth than non-drilling countries, though both saw roughly equal income growths over 2000-2010.  Assuming this is trend  continues in Ohio, Governor Kasich’s plan makes sense: use the short-term income boast to simulate growth (income taxes) or some smart government-spending that can actually lead to sustainable job creation.

In any case, shale is here to stay. And with it, at a minimum, will come even more links between Canada and the United States.