BUEC 463: Energy Industries and Markets

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Natural Resources, Energy and Environment

Professor: Andrew Leach Office: 3-40K Business Building Phone: 780-492-8489

Class: Tuesdays and Thursdays 2:00- 3:20PM, Business Building, B-09

Office Hours: By appointment. I am generally on campus every day. Send an email for an appointment or drop by. If I am away for an extended period, I will post an announcement

Course website: Contained within the ULearn system

Prerequisite: BUEC 311 or equivalent or permission of the instructor.

COURSE OVERVIEW

The goal of this course is to develop a broader and deeper understanding of the energy sector and energy markets from a business point of view. The course focuses on market conditions and regulations of relevance to the energy industry. The course begins by introducing the Canadian and global energy situation today and delves briefly into scenario planning for the future. We then look at the electricity, oil, and natural gas sectors in detail. Finally, we will spend some time on environmental issues such as climate change. Throughout the semester, I will be

supplementing my lectures with talks by several guest speakers who will offer their perspectives on the course material.

COURSE MATERIALS

There is no text required for this course, however a set of readings are listed below which will be used throughout the semester to supplement lecture material. All readings are available freely online or available through the University of Alberta Libraries on-line access. You are also expected to remain up-to-date on issues related to the energy industry in the daily news. I will provide a Google Reader link for the course and I will maintain a course blog. I expect you to be up-to-date on current energy industry events.

TOPICS COVERED

Topic 1: Energy and the Economy Readings:

Canada’s Energy Future – Reference Case and Forecasts to 2030

http://www.neb.gc.ca/clf-nsi/rnrgynfmtn/nrgyrprt/nrgyftr/2007/nrgyftr2007-eng.pdf US-EIA Energy Forecasts

http://www.eia.doe.gov/oiaf/aeo/pdf/appa.pdf

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Topic 2: Oil and Gas Production

Topics Covered Include:

Oil Sands

Conventional Oil

Sour Gas

Oil and Gas Royalties

Environmental Approvals Guest Speakers:

Bob Mitchell, Conoco Philips (Climate Change and Oil Production) (tentative) Rick Hyndman, CAPP (tentative)

Simon Dyer, Director, Pembina Institute Readings:

National Geographic Feature on Oil Sands

http://ngm.nationalgeographic.com/2009/03/canadian-oil-sands/kunzig-text.html Andrew Nikiforuk’s Web Site

http://www.andrewnikiforuk.com/

Pembina Institute’s Website http://www.pembina.org/

Topic 3: Oil and Gas Markets Topics:

Regulation of pipelines

Financial Markets

Supply and Demand Drivers Renewables

Readings:

James Hamilton’s Blog

http://www.econbrowser.com/archives/energy/index.html

Why Your World is About to Get a Whole Lot Smaller: Oil and the End of Globalization, by Jeff Rubin, Random House Canada (http://www.theglobeandmail.com/books/why- your-world-is-about-to-get-a-whole-lot-smaller-by-jeff-rubin/article1148668/)

Pindyck, Robert S. (1999), “The Dynamics of Commodity Spot and Futures Markets: A Primer.” The Energy Journal, 22(3). International Association for Energy Economics, pp.

1-29.

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Alberta Royalty Review Panel Final Report

http://www.albertaroyaltyreview.ca/panel/final_report.pdf Conoco Phillips Response to the Royalty Review Panel http://www.quattroenergy.ca/Conoco.pdf

Alberta’s New Royalty Regime

http://www.energy.gov.ab.ca/Org/pdfs/royalty_Oct25.pdf

Topic 4: Electricity Production and Distribution Topics:

Understanding the grid

Different sources of generation Renewable Power

Guest Speakers:

Derek Hollman, Capital Power (Coal Power/Clean Coal Technology) Readings:

Cost comparison of generation in Canada

http://www2.nrcan.gc.ca/es/erb/erb/english/View.asp?x=497&oid=757 Nuclear Energy in Alberta

http://www.energy.alberta.ca/Electricity/pdfs/NuclearPowerReport.pdf

Topic 5: Electricity Markets and Regulation Topics

Why regulate?

Why deregulate?

Does deregulation help consumers or hurt consumers Transmission lines…do we need more?

Guest Speakers:

Joseph Doucet, Professor, University of Alberta School of Business Willie Grieve - Chair Alberta Utilities Commission (tentative) Readings:

Daniel, T., J. Doucet, and A. Plourde (2003): “The Challenge of Electricity Restructuring,” in Electricity Industry Restructuring: The Alberta Experience, ed.

Andrew N. Kleit. Rowan and Littlefield. Copies to be made available.

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Hrab, R., and M. Trebilcock (2004a): “Electricity Restructuring: A Comparative Review,” Working Paper. http://www.law-lib.utoronto.ca/investing/reports/rp41.pdf Hrab, R., and M. Trebilcock (2004b): “What Will Keep the Lights on in Ontario:

Responses to a Policy Short-Circuit,” Discussion paper, C.D. Howe Institute.

http://www.cdhowe.org/pdf/commentary_191.pdf

Joskow, P. (2006): “Markets for Power in the United States: An Interim Assessment,”

The Energy Journal, 27(1), 1–36.

Topic 6: The new reality: Environmental Policy and the Social License to Operate

A. Environmental Policy:

Guest Speakers:

Robert Page, President, National Roundtable on the Environment and the Economy (tentative)

Readings:

American Clean Energy and Security Act (ACES /Waxman-Markey) http://www.pewclimate.org/acesa

Canada’s Regulatory Framework for Air Emissions (2007) http://www.ec.gc.ca/doc/media/m_124/toc_eng.htm

National Roundtable on the Environment and the Economy (2007) “Getting to 2050”

http://www.nrtee-trnee.ca/eng/publications/getting-to-2050/Getting-to-2050-low-res- eng.pdf

National Roundtable on the Environment and the Economy (2006) “Achieving 2050 (2009)”

http://www.nrtee-trnee.com/eng/publications/carbon-pricing/carbon-pricing-eng.php Alberta Climate Change Strategy

http://environment.gov.ab.ca/info/library/7894.pdf

B. Social License and Sustainability Reporting in the Energy Industry:

Readings:

Ontario Power Generation Sustainable Development Report:

http://www.ontariopowergeneration.com/pdf/sustainable%20development%20reports/sus tainable%20development%20Report%202007.pdf

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Suncor Sustainability Reporting Case Study:

http://www.fivewinds.com/uploadedfiles_shared/SuncorSustReport040127.pdf Suncor 2009 Sustainability Report:

http://www.suncor.com/pdf/2009_Report_on_Sustainability_Summary.pdf ASSIGNMENTS

Company Brief – Teams of 3 or 4

Presentations October 6^th, Assignments due October 9^th by 4:30pm

You are to provide an analysis of an energy company with regulatory exposure. Your analysis should be presented in 4 or fewer pages. Your role is to assess the market environment for your company, and to assess the strengths, weaknesses, opportunities and risks associated with their position within the market. You should include a summary of regulations which affect the company’s position, whether positively or negatively, as well as other non-regulatory risks or opportunities particular to the energy sector. An example of the type of analysis I am looking for will be provided on the course website. You may choose one of the following companies:

Clean technologies First Solar (FSLR)

Canadian Hydro Developers (KHD) Plutonic Power Corp. (PCC) Innergex (INE)

Utilities and Pipelines Capital Power (CPX) TransAlta (TA) Enbridge (ENB)

Oil and Gas Juniors Fairborne Energy (FEL) Penn West Energy (PWT.UN) Oil and Gas Majors

Suncor (SU) Syncrude Encana (ECA) Nexen (NXY)

Canadian Natural Resources (CNQ)

You may also work on a company of your choice subject to approval. You would have to justify your interest in the company and, more importantly, the relevance of their situation to the course.

The information you use to support your report must also be publicly available, which generally means you should be looking at public companies.

For the company brief, a component of the mark will be allocated to a presentation in which you treat the class as an investor group. Each team will have 5 minutes in which to present the key findings of their brief. Presentations will occur Tuesday the 6^th of October BEFORE the assignments are due.

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Policy Brief – Teams of 3-4 Due November 6^th, by 4:30pm

You are to provide a summary of a policy from the provided list which has/had a substantial impact on a sector of the energy industry. Your role is to present the key elements of the policy, the factors which motivated its implementation and the choice of particular elements of the policy. You should then discuss 2-3 key areas in which the policy could have been improved and explain your findings. Topics include:

Alberta’s New Royalty Regime

Canadian Renewable Fuels Content Standard California Low Carbon Fuel Standards Electricity market deregulation in Ontario Electricity market deregulation in Alberta Ontario Feed-in Tariffs for Renewable Power ecoENERGY for Renewable Power

Alberta Specified Gas Emitters Regulation (SGER) Canadian Regulatory Framework for Air Emissions

Your analysis of both the rationale and the shortcomings of the policy should rely on economic theory and material from the lectures. The suggested topics are ordered roughly as they will be introduced in the course, so the topics near the bottom of the list will leave you the most on your own. Your analysis should again take the form of a briefing document of no more than 4 pages in length.

Criteria for evaluation – Policy And Company Briefs:

• The 4 page guideline applies to the body of text only. Text should be 1.5-spaced, with reasonable margins, and in 11 or 12 pt. font. Please respect the spirit of the rule. If 4.5 pages are essential for your argument, I will not penalize you. If you shrink the margins and reduce the spacing to fit the same paper in 4 pages, I am likely to penalize you.

• Up to 25% of your grade may be affected by poor writing skills. Please proofread your work.

• References and data (who you cite, how you cite, when you cite).

• Late assignments will be penalized at 20% per day or part thereof.

FINAL EXAM

A final exam will be given during the regular exam period. For each topic covered during the term, I will provide you with 1 or 2 possible final exam long-answer questions. The final exam will include a choice among these questions and will also include some shorter

true/false/uncertain questions which will require short explanations.

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GRADING

Evaluation will be based on the following components*:

Component Weight Policy/Company Briefs (2 x 30%) 60%

Final Exam Long Answer 25%

Final Exam Short Answer 15%

Relative performance in the course will be converted to letter grades based on the following schedule:

Excellent – Very Good A+, A, A-

Good B+, B, B-

Satisfactory C+, C, C-

Poor D+

Minimum Passing Standard D

Failure F

ACADEMIC MISCONDUCT

“The University of Alberta is committed to the highest standards of academic integrity and honesty. Students are expected to be familiar with these standards regarding academic honesty and to uphold the policies of the University in this respect. Students are particularly urged to familiarize themselves with the provisions of the Code of Student Behavior

(www.ualberta.ca/secretariat/appeals.htm) and avoid any behavior which could potentially result in suspicions of cheating, plagiarism, misrepresentation of facts and/or participation in an

offence. Academic dishonesty is a serious offence and can result in suspension or expulsion from the University.” (GFC 29 Sep 2003)

I will take any and all incidents of plagiarism seriously. It is your responsibility to ensure that you are familiar with the rules that govern academic misconduct, in particular the following section:

“30.3.2 Inappropriate Academic Behaviour, 30.3.2(1) Plagiarism

No Student shall submit the words, ideas, images or data of another person as the

Student’s own in any academic writing, essay, thesis, project, assignment, presentation or poster in a course or program of study.”

(http://www.uofaweb.ualberta.ca/gfcpolicymanual/policymanualsection30-3-2.cfm ) More information is available at:

http://www.uofaweb.ualberta.ca/gfcpolicymanual/content.cfm?ID_page=37633