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Pendulum Policy: Natural Gas Forecasts and Canadian Energy Policy, 1969–1981

Published online by Cambridge University Press:  10 November 2009

John Bridger Robinson
John Bridger Robinson
Affiliation:
University of Waterloo
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Abstract

Major energy policy decisions are usually based in part upon forecasts of energy supply and demand. However an examination of the Canadian National Energy Board's forecasts of natural gas supply and demand over the last decade indicates that these forecasts were not a reliable basis for policy decisions. An analysis of the policy context underlying those forecasts reveals that they were not neutral “best guess” estimates of future supply and demand, but instead closely reflected the policy context and major project proposals of the time. The reasons for this are rooted in the nature of forecasting techniques and the way that they are used by decision-makers. This, it is argued, has important implications for the use of energy forecasting in policy planning.

Résumé

Les principales décisions de la politique énergétique sont généralement basées sur les prévisions de la demande et de l'approvisionnement énrgétique. Cependant, une étude des prévisions de la demande et de l'approvisionnement en gaz naturel de l'Office nationale de l'énergie durant la dernière décennie indique que ces prévisions n'étaient pas une bas fiable pour des décisions en matière de politique énergétique. Une analyse de contexte sous-jacente à ces prévisions révèle qu'il ne s'agissait pas de prévisions neutres des approvisionnements et de la demande future mais qu'ils reflétaient au contraire fidèlement le contexte de la politique et les principaux projets du temps. Les raisons se trouvent dans la nature des techniques de prévisions et leur utilisation par les preneurs de décisions. Ceci, c'est un fait, a des implications importantes sur l'utilisation des prévisions énergetiques dans la planification des politiques.

Type
Research Article
Information
Canadian Journal of Political Science/Revue canadienne de science politique , Volume 16 , Issue 2 , June 1983 , pp. 299 - 319
Copyright
Copyright © Canadian Political Science Association (l'Association canadienne de science politique) and/et la Société québécoise de science politique 1983

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References

1 For graphic illustrations of this tendency see the following National Energy Board publications: Report to the Governor in Council (Ottawa. August 1970), 3–23Google Scholar: Canadian Natural Gas: Supply and Requirements (Ottawa. April 1975), 3. 4, 49, 50Google Scholar: Canadian Oil: Supply and Requirements (Ottawa, February 1977), 9–10Google Scholar: Reasons for Decision: Northern Pipelines Vol. 2 (Ottawa: Supply and Services Canada. July 1977). 59, 81;Google ScholarCanadian Oil: Supply and Requirements (Ottawa: Supply and Services Canada, September 1978), 69, 148-50: Canadian Energy Supply and Demand. 1980–2000 (Ottawa: Supply and Services Canada, 1981). 34. 38. 46. 51. 71. 73. 87. 92.Google Scholar

2 Such wide variability is not limited to the Canadian forecasts discussed here. See Brodman, J. R. and Hamilton, R. E, A Comparison of Energy Projections to 1985 (IEA Monograph No. 1; Paris: International Energy Agency, January 1979)Google Scholar, for a presentation and discussion of 78 international energy supply and demand forecasts which also illustrate great variability.

3 The obvious self-perpetuating nature of this process is what has prompted several commentators to describe energy forecasts as self-fulfilling prophecies. See, for example, Daly, Herman, “Energy Demand Forecasting: Prediction or Planning?” AIP Journal (1976), 4–15.Google Scholar Such a description, however, overlooks the (fortunate) fact that forecasts are often wrong.

4 Because of the closely intertwined nature of federal oil and natural gas policy, it is not meaningful to discuss only the latter.

5 For a more extensive discussion of the history of Canadian oil policy see Debanne, J. G., “Oil and Canadian Policy,” in Erickson, Edward W and Waverman, Leonard (eds.). The Energy Question, Vol. 2 (Toronto: University of Toronto Press, 1974).Google Scholar

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7 Under the National Energy Board Act, any approval by the Board is subject to approval by the Governor in Council, but any refusal is final.

8 Energy, Mines and Resources Canada, “Press Release,” September 29, 1970.

9 National Energy Board, Report to the Governor in Council (Ottawa, August 1970), 10–11.Google Scholar

10 Quoted in North, F. K., “Guarding Our Oil and Gas Reserves,“ Calgary Herald, November 28, 1972, 5.Google Scholar

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12 Ibid., 6-11.

13 Ibid., 6-2.

14 Data from Oilweek, February 13, 1978. It is worth noting that much of the 1972 increase was in development drilling.

15 For a discussion of the history of the pipeline question, see Francois Bregha, “Canadian Natural Gas Policy: A Critique,” and John B. Robinson, “Policy, Pipelines and Public Participation: The National Energy Board's Northern Pipeline Hearings,” in Dwivedi, O. P (ed.), Resources and the Environment: Policy Perspectives for Canada (Toronto: McClelland and Stewart, 1980).Google Scholar

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23 Crowe, as a representative of the Canadian Development Corporation, had been a member of the management committee of the Gas Arctic-Northwest Project Study Group, the parent organization of Arctic Gas, from October 30, 1972, until his appointment to the National Energy Board on October 15, 1973.

24 This proposal, which would carry only American gas from Prudhoe Bay along the Alaska Highway, through the Yukon, British Columbia and Alberta to the United States, was proposed by Foothills because there had not been enough gas found in the Mackenzie Delta to justify their original “Maple Leaf” (all-Canadian) pipeline proposal.

25 Energy, , Mines and Resources Canada, An Energy Strategy for Canada (Ottawa: Supply and Services Canada, 1976)Google Scholar. The first report, An Energy Policy for Canada: Phase I (Ottawa: Information Canada, 1973)Google Scholar, had been published three years earlier. It had contained much more optimistic forecasts than those which appeared in 1976.

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33 During the 1970s a significant change occurred in the manner in which estimates of energy resources were prepared in Canada. Over that period the traditional “volumetric” method of estimation, which involved multiplying the estimated volume of sedimentary rock by the expected oil and gas yield of the sediment (the expectations being derived from other similar sedimentary basins that were better explored), began to be replaced by the more sophisticated “probability-play” method, which involved estimates by petroleum geologists of probability distributions for oil and gas on a play-by-play basis, using the results of drilling and seismic tests. See Energy, , Mines and Resources Canada, Oil and Natural Gas Resources of Canada, 1976 (Ottawa: Supply and Services Canada, 1977)Google Scholar. Since, as indicated below, it is reserve and not resource estimates that serve as the basis of the supply forecasts used by the government to justify export and pipeline decisions, this change has not had a major bearing on the energy supply forecasts described in this article.

34 National Energy Board, Report to the Governor in Council (Ottawa, August 1970), and Reasons for Decision (Ottawa, November 1971).Google Scholar

35 National Energy Board, Canadian Natural Gas: Supply and Requirements (Ottawa, April 1975).Google Scholar

36 Good examples of this can be found in the range of supply forecasts submitted to most National Energy Board hearings, all of which have been prepared on the basis of standard terms of reference specified by the board in advance of the hearing.

37 Robinson, John B., “Bottom-up Methods and Low-down Results: Changes in the Estimation of Future Energy Demands,“ Energy: The International Journal 7 (1982). 627–35.CrossRefGoogle Scholar

38 Ibid.

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40 Robinson, John B, “Bottom-up Methods and Low-down Results.” See also, National Academy of Sciences, Alternative Energy Demand Futures to 2010 (San Francisco: Freeman, W. H., 1979), 33.Google Scholar

41 The points made in the rest of this and the next section are elaborated upon in Robinson, John B, “Backing into the Future: On the Methodological and Institutional Biases Embedded in Energy Supply and Demand Forecasting,” Technological Forecasting and Social Change 21 (1982), 229-40.CrossRefGoogle Scholar

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50 Such scenario forecasting is no novelty to energy forecasters themselves. See, for example, Energy, Mines and Resources Canada, Energy Demand Projections-A Total Energy Approach, for a good discussion of energy demand forecasting based on such an approach. However, it has rarely been used by energy policy-makers.

51 For more on the background, methods and potential uses of energy backcasting see Robinson, J. B., “Energy Backcasting: A Proposed Method of Policy Analysis,” Energy Policy 10 (1982), 337-44.CrossRefGoogle Scholar

52 Energy, , Mines and Resources Canada, The National Energy Program (Ottawa: Supply and Services Canada, 1980), 65.Google Scholar