Can Canada get a Mexican Exemption on oil sharing?
Appeared in: The Parkland Post 12/01/2005
In his State of the Union address, President Bush laid out his government’s goals. The third goal was “to promote energy independence for our country”. Mexico, Canada’s other NAFTA partner, also has a policy of oil energy independence and Mexican public ownership. Canadians seem blissfully unaware that while our NAFTA partners are looking after their own energy security, Canada is the only NAFTA country, prevented from doing so by the energy exporting provisions in NAFTA.
Four years ago, the US adopted a ‘National Energy Policy’, chaired by Vice President Dick Cheney. It emphasizes national ‘energy security’, ‘self-sufficiency’, and even support for domestically-owned firms, in terms reminiscent of Canada’s National Energy Program in Trudeau’s time. Yes, the US has a NEP. Meanwhile, Canada is required by NAFTA to continue exporting oil and gas to the US, even if Canada experiences shortages.
Canadians have not faced oil shortages since the 1970s, so managing without seems a remote possibility. But several recent changes should give us pause. First, even greater instability in the Middle East, the illegal occupation of Iraq and persistent blowing up of oil pipelines there, and recent strikes in Venezuela and Nigeria, make supplies precarious. Add to instability, dwindling potential supply because peak production was reached in most producing areas of the world some time ago. Meanwhile, demand is rising quickly, especially in energy hungry China and India, but also in gas guzzling USA.
Second, after September 11, 2001 the US turned towards security issues, including national security of energy supply, and away from attaining free trade and corporate rights everywhere in the world. American oil transnationals displace French, Russian and Chinese corporations in Iraq. US security trumped global trade. The US NEP pledges to look after American oil and gas demand, not that of its NAFTA partners.
Third, a trilateral task force for deepening economic integration in North America has been set up by the Council on Foreign Relations in the US and the Canadian Council of Chief Executives. When John Manley, William Weld, former Governor of Massachusetts, and Pedro Aspe, former Finance Minister of Mexico, are co-chairing the task force, governments will listen. The task force will likely recommend the further erosion of Canadian sovereignty over energy supplies.
Unless Canadians do something, a combination of these trends could lead to a future nightmare of “let the Northern bastards freeze in the dark”.
How did Canada get saddled with having to continue oil and gas exporting even in times of shortage, when Mexico got exempted? In 1993, oil and gas corporations based in Canada, many of them foreign owned, lobbied for a proportionality clause to be included in NAFTA, which was then being negotiated. Under proportionality, Canada can cut exports to the US to deal with shortages, only if we cut the same proportion of supplies to Canadians. This would not help at all.
Currently, Canada produces about 40% more oil than it consumes and so should not have to worry about shortages. Yet, because of NAFTA, Canada put itself in as precarious a position as the US in relying on imports of oil from offshore. Canada now exports 70% of its supply to the US and imports almost 60% of the oil it consumes. The pipeline taking Western Canadian oil from Sarnia Ontario to Montreal was reversed several years ago and now brings imports the other way.
Proportionality favoured the short term interests of exporting corporations and producing provinces, to the detriment of using Canada’s raw resources to make other things and for long-term energy security for Canadians.
The Mexicans were smart and got an exemption from energy sharing in times of shortage. Look at the respect that exemption got Mexico in the US NEP Report: “Mexico will make its own sovereign decisions on the breadth, pace, and extent to which it will expand and reform its electricity and oil and gas capacities”. Contrast this with the US NEP Report’s assessment of Canada: “Canada’s deregulated energy sector has become America’s largest overall energy trading partner, and our leading foreign supplier of natural gas, oil and electricity”.
In a cold, vast country, where energy is essential for life and a functioning economy, citizens take for granted that Canadians should have first call on Canadian energy. Governments ensure Canadians have enough flu shots and expect the same regarding energy supplies.
If Canada is not going to ensure security of oil and gas supply for Canadians, who is? Can we rely on the Americans? Have they secured Canadian interests regarding beef or soft wood lumber? Alternatively, can we rely on the market to supply Canadians with energy, when we need it? Just think of electrical power deregulation in Ontario and Alberta.
A national energy policy for the US and a continental energy market for Canada is a raw deal for Canada. Instead of further integration with the US, what about a Mexican exemption for Canada?