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Talks continue to establish a ‘true’ North American energy market Officials from U.S., Canada, Mexico to deliver findings this year; objectives are to remove obstacles to cross-border projects and reduce need for unreliable supplies Gary Park PNA Canadian Correspondent
Without the fanfare and urgency of a year ago, broader integration of North America’s energy markets is still being quietly pursued in the backrooms of government.
At some point in the “coming months” an Energy Working Group of officials from the United States, Canada and Mexico will submit its findings, said a Canadian government official.
Initially talk of a continental policy was driven by natural gas prices skyrocketing to unheard of heights, setting off an energy crisis in California, all reinforced by a sense of vulnerability following the Sept. 11 attacks.
That sense of public panic has diminished without in any way removing the desire at the highest levels for closer ties between the United States, Canada and Mexico.
Tom Huffacker, first energy secretary at the U.S. Embassy in Ottawa, said President George W. Bush believes there is still “upside in terms of development” for the North American market.
He said the working group is not a negotiating session or policy-making body “to dispose of anyone’s resources, or broker anyone’s deals.”
Goal is North American energy market The mandate, instead, is to facilitate the development of a “true North American energy market, to deliver the citizens of North America reliable, affordable energy,” Huffacker said.
The Bush administration believes “we can move toward an ever more seamless, transparent, energy relationship, with tremendous benefits,” he said.
For Canada, the hopes are still pinned on the U.S. government’s sweeping energy plan first announced a year ago that gave priority to an integrated market to wean American dependence on shaky oil sources in the Middle East.
With Saudi Arabia’s current rulers always in danger of losing power to a fanatical regime, Iraq’s leader Saddam Hussein spooking markets by threatening to suspend oil exports until Israel withdraws from the West Bank and Venezuelan supplies vulnerable during internal unrest, vital sources of U.S. crude hang by a thread.
When the U.S. policy was released, Canadian producers, along with the federal and provincial governments, greeted the proposals as a carte blanche to raise production, certain they’d have buyers. Call for relaxation of rules As well as a continental marketplace, the policy called for an easing of regulatory restraints on new pipelines and electricity-transmission lines, relaxing the rules to get the presidential permits required for cross-border projects, making it easier for Canadian oil and natural gas to reach U.S. markets.
The plan also directed the U.S. government to work with Canada to expedite a gas pipeline from Alaska to the Lower 48.
The key for Canada is gaining even greater access to U.S. capital to achieve a huge increase in supplies within a handful of years.
Already there is much development under way, especially in northern Alberta’s oil sands where recoverable reserves are rated at 300 billion barrels using current technologies, but nothing compared to what could occur if the United States got behind exploitation.
Canada, by even the most conservative estimates, could match Saudi Arabia’s output if investment was backstopped by Washington.
North American consolidation a fact of life For now, Canada is by far the leading exporter of oil and gas to the United States, with close to two-thirds of its production destined for southern markets.
Long before Bush took up residence in the White House, the Canadian oil patch had bought into the concept of a continental energy policy, despite polls showing that up to two-thirds of Canadians are convinced greater energy exports will result in higher domestic prices with half certain the exports will result in domestic energy shortages.
But within the industry, North American consolidation has become fact of life in recent years as U.S.-based companies have spent unprecedented billions of dollars acquiring Canadian assets.
A continental energy policy doesn’t need many changes to the North American Free Trade Agreement, says the Canadian Association of Petroleum Producers, which speaks for about 150 companies who produce 95 percent of Canada’s crude oil and gas. Don’t change NAFTA “Our message is don’t change (NAFTA) too much,” said CAPP vice president Greg Stringham.
A CAPP position paper, delivered to the U.S., Canadian and Mexican governments, urged the three countries to build on existing free trade policies and to resist any return to the protectionist and price-setting policies of the 1960s and 1970s.
“It is important to remember that policies supporting free trade and competition in energy emerged from the failures of interventionist, command-control government polices,” said CAPP.
Instead, it said the focus should be on regulatory practices that “facilitate responsible, market-driven resource activity.”
That would include timely development of frontier resources, such as Arctic gas, and cooperation among the jurisdictions on the development front, including uniform, consistent environmental rules.
CAPP also wants tax and royalty regimes that are competitive with other jurisdictions, reflecting actual risk and the natural decline of finite resources.
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