CANADIAN ENERGY WILL BECOME TRUMP CARD WITH UNITED STATES
Trump card.
When Canada sits down with the United States and Mexico to renegotiate NAFTA, our country will have an important poker chip to play at the bargaining table: energy.
And that’s why the country shouldn’t panic amid talk of U.S. protectionism, the escalating softwood lumber spat or other trade headaches, says Derek Burney, Canada’s former ambassador to the United States.
Burney, who was involved in concluding the original Free Trade Agreement in 1988, is now a member of the board of directors of TransCanada Corp., the company behind the Keystone XL pipeline.
At TransCanada’s annual meeting Friday in Calgary, a shareholder asked Burney about the prospect of energy being used as a negotiating chip when the North American Free Trade Agreement is reopened.
“Don’t worry. Keep calm. Nobody has a clue what President Trump has in his mind at any given moment of any given day,” the former diplomat replied.
“There is going to be no surrender on any issue, I can guarantee you that. In terms of energy, that’s a Canadian trump card and we will play it aggressively.”
The sale of Canadian oil and gas to the United States could become a pivotal point in the upcoming NAFTA talks.
That’s because of the mammoth value of the two-way trade of energy between the countries — some US$67 billion last year — and Trump’s recent musings about energy being a trade issue with Canada.
Here’s the reality: Despite rising domestic production, the Americans need our energy, with Canada supplying 41 per cent of their crude oil imports in 2016.
And Canada needs unfettered access to the U.S. market, as 99 per cent of our oil exports head south.
That’s called mutual benefit. Experts on both sides of the border still don’t know why Trump identified energy as an irritant, given the problem-free nature of these commodities crossing the 49th parallel.
Speaking after the meeting, Burney said it’s unclear why the president pointed a finger at energy, but isn’t worried Canada will lose access to the American market.
Heavier grades of crude oil from Canada remain in demand for Gulf Coast refiners, who would rather buy product from north of the border than Venezuela.
Burney points out in the original free trade negotiations almost three decades ago, the Americans demanded access to Canadian energy, while Canada received unrestricted access to southern customers.
This energy compact remained intact until the Obama administration rejected the Keystone XL pipeline in 2015.
“I thought Obama’s veto of Keystone was a violation of NAFTA. The company thought that. We were fighting it out in court,” he added.
“So we should see energy as a strength for Canadians in the negotiation, in my opinion, and we should be making sure another veto of a Canadian pipeline isn’t going to be possible coming down the road.”
TransCanada is in a unique position to comment on the trade front, given one of its marquee projects — the $8-billion Keystone XL development — received a permit from Donald Trump earlier this year.
Today, more than half of the Calgary-based company’s earnings come from U.S. operations. And the company now has 3,500 employees in the U.S., slightly more than it has in Canada.
Chief executive Russ Girling even met with the president after Trump signed the Keystone XL presidential permit.
But the eight-year odyssey surrounding Keystone XL isn’t over yet.
The company is now talking with shippers about affirming their commitment to transport oil on the line. It’s also moving through Nebraska’s regulatory process, where it has faced resistance from landowners in the past.
The Nebraska Public Service Commission will hold hearings on the line’s routing in August, with a decision in hand by late November.
Depending on how that goes, construction isn’t expected to begin until the third quarter of 2018 and it’s likely to take a little over two years to complete.
As Keystone moves forward, NAFTA talks are drawing near and could have a monumental impact on Canada’s energy sector.
Gordon Giffin, former U.S. ambassador to Canada, said it’s important Ottawa keep explaining how essential it is to Americans that both countries have a “fluid” border that permits the efficient movement of people and goods.
“What doesn’t work in the United States is to say this isn’t fair to Canada,” Giffin said in a recent interview. “The argument has to be made that this isn’t a good idea for you.”
So as all three NAFTA partners get ready to reopen the trade agreement, Canada shouldn’t be fearful.
As Burney points out, the Americans are increasing their own oil and gas production, but they still need Canadian energy.
And we still need access to their market. Both sides have a lot at stake.
Negotiations will only work if a revised agreement benefits all sides.
“Otherwise, I’m not negotiating with anybody who has got a gun at my head,” Burney said. “Not going to work.”