In a new CUSMA, should Canada offer the U.S. stronger energy rights?
With the future of free trade between Canada and the United States unclear at best, a look to the past could provide hints at where critical exports of energy fit into a deal in the future.
Previous versions of the free trade agreements between the two countries used to include a section called “energy proportionality,” which restricted Canada from reducing the percentage of its total oil, gas or similar exports to the United States — even in the event of an emergency.
“What we’d send to them on a good day, we’d also have to send to them on a bad day,” explained Gitane De Silva, former senior representative for Alberta to the United States and former CEO of the Canada Energy Regulator.
That old treaty language could have functionally stopped Canada from switching exports to a country other than the United States or from halting exports to increase domestic supply.
But when CUSMA replaced NAFTA in 2020, there was no energy proportionality section.
Experts and academics point out that this is because the older energy restrictions were shaped by concerns coming out of the late 1970s and 1980s.
“Back under the original agreement, the spectre of the Arab oil embargo loomed large in the U.S.,” said Carlo Dade, director of international policy at the University of Calgary’s School of Public Policy, and oil supply crunches weren’t that far in the past.
Canada had previously imposed, then lifted, controls on its own oil supply through the defunct National Energy Program.
1980 Lougheed reacts the National Energy Program
Fast forward to the 21st century.
Over decades, the United States ramped up energy production within its own borders. Technological shifts, including shale production and fracking, helped eliminate American concerns over whether others would sell to them if global supplies ran into problems.
In addition, Canadian energy producers continued to sell to customers in the United States. Export systems in this country, such as pipelines, now primarily supply the United States and, on top of that, aren’t really movable.
“That [energy proportionality] chapter wasn’t necessarily required because the infrastructure essentially replaced it,” De Silva said.
World energy supplies again in flux
As the war between Iran, the United States and Israel has highlighted, global oil supplies are not always secured for every nation that wants to import them. So, fears of less supply combined with higher prices could make a guarantee of access to a huge oil supply enticing.
Should Canada enter CUSMA renegotiations with a promise of American access to oil and gas supplies north of the border, that could be seen as a bargaining chip by some.
But it…
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