We Can Help New Orleans, But Can We Help Ourselves?
Ricardo Acuña
Parkland Institute
Edmonton Journal
20-Sep-2005
Alberta has a positive track record of using its natural resource wealth to help in times of crisis. Hurricane Katrina was no exception. But what would happen if the crisis was at home?
Recently the Alberta Energy and Utilities Board suspended its Maximum Rate Limitation systems to allow the Alberta oil patch to extract up to 30,000 extra barrels of oil per day on a “temporary basis. ”The goal, according to the EUB, is to help the United States meet its energy needs for “as long as necessary. ”
There has been much rhetoric from the Klein government of late about exclusive provincial control over natural resources and the spoils that go with it. One might ask if Alberta would be just as willing to lift limits on production in order to help avert a Canadian energy crisis.
If it were to happen today, the answer to that question would be irrelevant. Alberta would simply not be able to increase oil extraction for domestic consumption, regardless of whether it wanted to or not.
That’s right, the provincial and federal governments can easily increase production for export in response to a crisis in the US, but are currently prohibited from doing so for domestic consumption.
Article 605 of the North American Free Trade Agreement (NAFTA) states that Canada can do absolutely nothing to reduce the proportion of oil being exported to the United States relative to the proportion being consumed domestically. NAFTA’s proportionality provisions are not limited to oil they extend to natural gas, energy and petrochemicals as well but these days it is oil that is front and centre.
In 2004, Canada produced approximately 3. 1 million barrels per day of oil, of which about 68% (2. 1 million barrels per day) was exported to the United States. What proportionality means is that regardless of how much - or how little - oil we are producing, our governments cannot ever take any steps which will result in less than 68 % of it going to the United States.
What would that mean if a hurricane like Katrina were to hit Nova Scotia or Montreal today?Quite simply that, if we choose to abide by the rules of NAFTA, we would not be able to help. Regardless of how much oil there is in Alberta, we would not be able to help.
But there is a choice, and the time is right to do something about it.
International trade agreements are essentially legal contracts. When one party refuses to adhere to the rules of the contract, the other parties can also ignore the rules.
The basic premise of NAFTA was that Canada would give up control over our natural resources in order to gain access to the US market. By ignoring the softwood lumber decision, the US has reneged on its side of the bargain. We no longer have to live up to our side of the bargain.
US Vice President Dick Cheney has said on a few occasions that Alberta’s oil is one of the “pillars of North American energy security. ”The truth is that, under NAFTA, Alberta’s oil may be a pillar of the United States’ energy security, but it can do nothing for energy security in Canada - especially in a crisis.
Whether it is by declaring NAFTA null and void, or by having the US declared in violation, or by simply issuing due notice that we are withdrawing from the agreement, Canada must assert its sovereignty over our energy and trade policy now. If we do not, and find ourselves faced with a disaster like Katrina, we will not be able to help ourselves. Instead, we will have to rely on the charity and good will of those in the world that do have control over their own resources.
Ricardo Acuña is executive director of the Parkland Institute, a non-partisan public policy research network based at the University of Alberta.
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Parkland Institute
11045 Saskatchewan Drive
Edmonton, AB T6G 2E1
Switchboard: (780) 492-8558
Fax: (780) 492-8738
www.ualberta.ca/parkland
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