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Bitten by the deal that once fed us

Gordon Laxer

The Globe and Mail

June 23, 2008


John McCain’s visit to Canada on Friday was a preview of just how important the issue of renegotiating the North American free-trade agreement will be in this fall’s U.S. presidential election. The prospect of a Barack Obama presidency has sparked a lot of “will he or won’t he” worry in Canada. You can feel the fear of the business-as-usual crowd trying to reassure themselves that Mr. Obama won’t really reopen NAFTA.

He now says he won’t unilaterally withdraw, and that his rhetoric got a little overheated, but Mr. Obama still promises to open up a dialogue on NAFTA. Instead of wringing hands and holding on to the past, Canada should seize the opportunity that renegotiation could bring.


If Mr. Obama wins in November and brings his issues - labour and environment standards - to the table, Canada should prepare its own list. At the top should be getting out of the “energy proportionality” straitjacket that mandates that Canada must offer a majority of its oil and gas to the United States, even if Canadians freeze in the dark. Proportionality is “unique in all of the world’s treaties,” writes Richard Heinberg, a noted California author on energy. In no other developed country are citizens denied first access to their own resources. “Canada has every reason to repudiate the proportionality clause,” Mr. Heinberg continues, “unilaterally and immediately.”


Why did Canada agree to proportionality and why is it a bad idea now?


Canada entered the Canada-U.S. free-trade agreement and NAFTA 15 or 20 years ago under very different circumstances. Then, it was widely believed that the world had plenty of cheap oil, and there were no limits to ever-increasing energy consumption. Few had heard of the catastrophe of climate change. Pre-Sept. 11, security of energy supplies was on few people’s minds.


In the early 1990s, it appeared to make sense for Canada to get virtually guaranteed access to U.S. energy markets and, in return, to give the United States first call on the majority of our seemingly limitless reserves of oil and gas.


None of those assumptions now hold. Elsewhere, governments are making plans to drastically cut greenhouse gases, meet the challenge of very expensive gasoline and natural gas, and are preparing for the sudden shut off of fossil fuels.


But, not Canada. The business as usual crowd, led by Stephen Harper’s government and the oil transnationals, seems to expect our carbon-burning society to carry on as before.


We can’t. Canada has only 9.3 years left of proven supplies of natural gas at current rates of production. Yet Canada must make 60 per cent of it available for export by NAFTA’s proportionality clause.


Albertans are in for a shock. Despite faith in the province’s endless resource reserves, Alberta has only 8.1 years left of remaining established supplies of natural gas.


Yet, Alberta recklessly exports half its natural gas, and uses an increasing amount to produce tar-sands oil. Three quarters is exported to the United States.


The Alberta Gas Resources Preservation Act, first enacted in 1949, is supposed to provide security of supply for Albertans of 15 years before natural-gas removals are permitted from the province. It keeps narrowing its definition of which Albertans it will protect. Alberta doesn’t enforce its own laws. With less than 10 years of proven supply, Canada is running out of conventional oil.


The tar sands have much oil. But they cannot be produced with as low a carbon footprint as conventional oil. A seemingly unstoppable momentum is gathering in the United States to not buy dirty tar-sands oil. If Mr. Obama becomes president, he would likely shut the borders to it.


So, although Canada has lots of oil, we will increasingly be unable to use most of it. That means stretching out the lifespan of conventional oil by ending exports and seriously cutting domestic consumption. The alternative of increasing imports from unstable OPEC countries is irresponsible. Thus, Canada can no longer afford to export its remaining supplies of deliverable oil.


We should take the opportunity offered by the prospect of an Obama presidency and exit from NAFTA’s proportional, mandatory-exporting clause. It may have made sense when we signed it. It doesn’t now.

And if you expect Mr. Obama to back off on renegotiating NAFTA as president, think again.


Ohio decided the 2004 presidential election and may do so again this year. His need to win over the white working-class voters in Ohio, who strongly backed Hillary Clinton during the Democratic Party primary and who oppose NAFTA, will likely propel Mr. Obama to renew his pledge this fall.


What had been a fairly minor American story became much louder as Canadian officials tried to scare the Democratic presidential hopefuls into backing off their pledges to reopen NAFTA.


David Emerson, then Canada’s Trade Minister, warned that “If you open it [NAFTA] for one or two issues, you cannot avoid reopening it across a range of issues.” He added that “Americans’ privileged access to Canada’s massive oil and gas reserves could be disrupted.”


By saying that NAFTA gave the United States a sweet deal on Canadian energy, Mr. Emerson raised the question of whether Canada got a raw deal. By trying to browbeat American politicians into not reopening NAFTA, the Conservatives put renegotiating NAFTA’s energy clauses right where it should be - on our agenda.


Canadians should welcome an Obama presidency. It may force us to embrace the future, by regaining control over our own energy.

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