A devil’s bargain
Donald Trump is known for tweeting alternative facts. But occasionally, perhaps inadvertently, he gets it right.
When he approved the building of Transcanada’s proposed Keystone XL pipeline, Trump said it would “reduce our dependence on foreign oil.” Given that the pipeline would be filled with mainly Alberta bitumen, Trump revealed that he thinks Canadian oil is American oil.
Unfortunately, it’s virtually true. NAFTA’S proportionality rule (Article 605) gives Washington virtually unlimited, first access to most of Canada’s oil and natural gas.
Canadian discussions of the upcoming NAFTA renegotiations focus on dairy farming, softwood lumber, buy-american purchasing policies, and trade dispute panels. They are important, but Canada is playing defence on them. A hockey team that only plays defence loses. Facing off with a U.S. president who boasts he is the winner who takes all, Canada must make its own demands.
At the top of the list, Ottawa should demand the same exemption from NAFTA’S energy proportionality rule that Mexico has. Jean Chrétien won the 1993 federal election partly on this promise, but caved when Bill Clinton resisted.
NAFTA’S proportionality rule obligates Canada to make available to the U.S. the same share of its oil and natural gas as it has in the previous three years. Currently, it’s over 50 per cent of our natural gas and 75 per cent of our oil.
No other industrial country has signed away first access to its energy resources.
No wonder. Under proportionality, Canadian exports of oil and natural gas can rise or fall through “market” changes — essentially decisions by Big Oil — but Ottawa cannot as a matter of policy, reduce carbon energy exports to cut greenhouse gases, or redirect domestic oil to displace oil imports to Eastern Canada, as it did during the oil supply shortages of the 1970s.
Because Alberta Sands production is so costly, European and U.S. oil corporations are pulling out from them. Oil workers and their communities are left to fend for themselves. But NAFTA’S proportionality rule hinders Alberta and Ottawa from phasing out the Sands to achieve a soft landing and phasing in low carbon alternatives, employing laid off and retrained Sands workers to do so.
Canada cannot greatly reduce its greenhouse gases if it can’t reduce its largest source — from the production of oil and natural gas in Canada, especially from Alberta’s Sands.
Oil will likely become a minor part of the world’s energy mix by mid century. But today oil is the primary energy source for armed forces.
What would happen to Eastern Canadians if a Middle East war temporarily halts much of the world’s oil shipments through the narrow Persian Gulf? Trump’s penchant for unpredictability raises the chances of a wider war spreading from those in Yemen, Syria and Iraq and tensions between Qatar and neighbouring states.
Eastern Canadians are vulnerable to an international oil shortage because they rely heavily on foreign oil to heat their homes and drive their cars, trucks, trains and ships. NAFTA’S proportionality clause greatly hinders Canada from prudently ensuring that they get domestic, non-fracked, conventional oil.
Once Canada wins a Mexican-style exemption from proportionality, it should direct that tankers exporting Newfoundland’s conventional oil be rerouted to Atlantic Canadians and eastern Quebecers instead and end oil imports including those from the U.S. In an international oil supply crisis, Trump would ban U.S. oil exports to Canada and elsewhere and redirect them to Americans.
In “The Art of the Deal,” Trump advocates knowing when to walk away. Two can play that game. Canada should enter the NAFTA talks to make it better but keep NAFTA’S sixmonth exit clause on reserve just in case.
Gordon Laxer, founding director Parkland Institute, University of Alberta and author of “After the Sands. Energy and Ecological Security for Canadians”