1. What is the role of NAFTA in Canadian exports of oil & gas?
Steven Shrybman: One of the things that distinguishes NAFTA from the World Trade Organization agreements is that it includes a chapter that deals explicitly with energy. And the basic rules of trade as they apply to energy in the NAFTA context is that the US is entitled to unlimited access to Canadian natural gas and oil resources at the same price that those resources are made available in Canada and the form in which that's given expression by NAFTA is to impose a ban on government measures. Measures under trade agreements include policy, laws, programs, regulations, any government measure that imposes to restrain export growth to the Unites States, or that seeks to impose an export tax on oil and gas resources that head to the United States. It's also significant to appreciate that under WTO rules the tool of using tariffs to control the flow of resources or goods across boarders is permitted. Under NAFTA it isn't and that's the distinction between the two regimes. So under NAFTA we're obliged to give the US virtually unfettered access to Canadian natural resources, oil and gas resources included and we can't charge them more than we do Canadians. So a two price energy policy such as the one that's in place in Quebec is clearly non-compliant under NAFTA, the two price policy in Quebec of course having to do with electricity. And there are reasons why the NAFTA rules haven't been visited yet on Quebec, but the measure would be non-compliant and I don't think there would be an awful lot of debate or dispute on that. The qualification on this right of unlimited access is this, that, if at some point it becomes apparent in Canada that we simply don't have enough oil and gas to meet Canadian needs and we have to ration domestically, we're entitled to cut back export flows as well but only in proportion to the relative volume of resources being exported to the overall production in Canadian markets, in other words, right now for example in maritime Canada which is a factual situation that I'm familiar with at the moment. Seventy-five percent of all natural gas that's being extracted from the Nova Scotian offshore reserves flows to the United States. If it turns out that there simply isn't as much out there as we thought and if in fact that's not enough to meet both domestic and export needs, we can cut back on production, but the United States will be entitled to 75% of those diminished supplies in perpetuity until they're finally exhausted. So no matter how severe the supply constraints may be in Canada, no matter how dire the economic impacts associated with supply reduction in Canada the United States will still be entitled in that case to three-quarters of everything that's produced in Canada in perpetuity. The relative proportion that they're entitled to is determined by export flows as an average over the 3 year period prior to the imposition of the rationing regime. So that's the way the trade agreements work with respect to oil and gas exports. The other aspect of NAFTA which is reverent in this context is a specific pass or exception that's created for subsides for oil and gas exploration and development to remove them from the application of trade discipline that make subsides generally when they relate to export goods or products or commodities impermissible. In other words if we were subsidizing the production of solar panels to export to the US market, we'd be vulnerable to a complaint of a countervailing and anti-dumping complaint, that we're suppling solar panels to export markets at a subsidized price and we're competing unfairly with producers of other jurisdictions. People can't complain that we're using subsidies unfairly to support oil and gas exploration development in Canada. So a reverse consequence of that, of course is that we're using public funds to support the exploration and development of Canadian energy resources to supply export markets. I mean it's simply a subsidy to US consumers at the expense of Canadian taxpayers.
2. Can you give an example if how NAFTA works in Canadian natural gas exports to the US?
Here's an example on how all of this plays out in real life. Right now, you know there's a fair bit of natural gas development off the coast of Nova Scotia. Much of that supply is headed for the US markets. The pipeline infrastructure that's been created to provide a conduit for those natural gas resources takes that gas to the United States and that's been very controversial because there are many who have argued, including the province of New Brunswick (that's going to become a champion of Canadian interests in all of this). Has championed the construction of a pipeline that would hook the Nova Scotian offshore supplies into the Canadian grid which right now ends in Quebec. So we've got this Canadian gas being produced off shore that really isn't connected into the Canadian system, but really only flows into the US markets and wherever Canadian consumers might be located along the pipeline infrastructure. Oh! One of the problems that comes to light in arguing that was a mistake, that it's a betrayal of Canada's interest, it's a betrayal of the public interest, that it leaves many of potential consumers of natural gas in New Brunswick and that part of Eastern Canada simply with no access to fuel of choice in Canada. That it's going to put them at a competitive disadvantage when it comes to the needs of reducing greenhouse gas emissions. One of the issues that's come to light is the way in which the National Energy Board is exercising its mandate under the National Energy Board Act, because under the National Energy Board Act which was largely where the regulatory oversight of the Energy Board was largely eviscerated at about the same time that free trade rules are being implemented. It very much was a piece of the act and the jurisdiction of the board was being diminished in a way to pave the way for the free trade principals that were implemented by originally the free trade agreement with the United States in “88” and then subsequently with NAFTA in 1994. The National Energy Board still has a public interest mandate however under the law. The public interest mandate is this, before issuing an export license the National Energy Board has to have regard to reasonable foreseeable requirements for use on Canada. In other words, it shouldn't be issuing export licenses for gas that may be needed at least over the short-term by Canadian consumers. That public interest safeguard doesn't apply for the board when issuing a short-term order and a short-term is an order for less than two years but there is no limit to the natural gas that can be exported during that two year period, so there's no cap on the quantities of gas that can flow to US markets. There's only a limitation in terms of the duration of life that it sells. Well, most Canadian gas that flows to the US markets pursuant to short-term orders. I think that 75% of it is a Canadian average, 90% of it in Nova Scotia. No one any longer applies for a license, but by not making a license application they circumvent the only public interest safeguard built into the National Energy Board Act which is it's obligation to have regard for reasonable foreseeable requirements for use in Canada. The problem with the notion of short-term orders however is that other free trades are not short-term at all. You know, you might argue that well, it's only a short-term order so the board doesn't have to concern itself about mid-term demand in Canada because it can always revisit the issue when the order expires. But if you acknowledge the existence of proportional sharing rules under NAFTA, you understand that there's nothing short-term about the order at all. In fact what it is, is not only a license for a long-term, but it's a license for perpetual portion of access to that share of Canadian natural gas resources and the companies confronted with the argument that, that licensing process needs to be more transparent or as problematic in terms of the public interest mandate of the board, simply says “That's not permitted under NAFTA.” Sighting explicitly that proportional sharing rules of the regime. Now this has come to light in the context of these regulatory proceeding down east and they garnered some attention in terms of, there were a couple of op-eds in the Globe and Mail but this was a storm that blew by and isn't resonating and as of yet kind of grip Canadian public policy consensus or certainly to an extent that would compel the federal government to do something about this betrayal of the public interest and this evasion. The only public interest safeguard that remains in the future of Canadian law when it comes to the export of oil and gas resources from Canada.
3. How effective is the Canadian National Energy Board?
I was retained by the Communication Energy and Paper-workers of Canada to represent them in two regulatory proceedings before the National Energy Board with respect to gas exports from maritime Canada and what becomes apparent when you appear before the board is that it's become a playground for the trans-national energy corporations and really nobody else, and the institution from my perspective has been en-captured by the oil and gas industry. They're the only parties that have the resources to participate in these rather sophisticated and expensive regulatory proceedings. The National Energy Board unlike other regulatory institutions with a public interest mandate doesn't do anything to facilitate the participation of public interest intervener's by providing intervener funding and so, not only is it a lopsided debate between corporations with unlimited resources in terms of hiring experts and consultants to make their arguments and the odd public interest intervener that might appear to make a public interest case. But it's such a lopsided equation that really public interest intervener's don't by and large participate in this process and certainly don't invoke it because the board has been so indifferent or resistant to the public policy arguments that occasionally get presented by first nation groups, trade unions and environmental groups that appear to make arguments challenging the interests of the oil and gas industry and there is in the jurisprudence of the National Energy Board a consistent virtually unleavened or unadulterated inclination to give the industry whatever it wants and is asking for.
4. How is Canada's Kyoto position affected by the NAFTA-oil & gas problem?
I think one of the reasons to be concerned about all of this is that we're fueling the voracious appetites of US consumers in all of this, but we're also, by committing ourselves over the long-term to export the majority of our natural gas resources, for example from Canada to US markets, denying ourselves access to this fuel as a means to assist our own industries to make a transition from relatively carbon intensive to relatively less intensive fuels in terms of greenhouse gas emissions and so that has I think some pretty dire consequences and of course in all of this, we're exporting Canadian energy resources to a country that hasn't embraced Kyoto, and isn't willing to acknowledge an obligation to deal with this enormous and disproportionant appetite it has for the worlds energy resources. With it's 6% of the worlds population consuming about 25% of its energy resources. We know the present rates of consumption are un-sustainable. We know that there has to be a more equitable distribution of access to these resources because many countries simply don't have the basic energy services such as light or even the electricity to run water pumps and some parts of, you know certainly in developing countries there is a compelling case, I think to increase energy consumption in some nations in the world so some people can have the wear with all of substance and so you know, we've got these problems with over consumption and mal-distribution all of which suggest the need for a rather dramatic reduction on energy use in North America and yet we've been trenched at a super-constitutional level. This regime which seems intent on exploiting these resources as quickly as they can be exploited and exporting as much of them to the United States as it demands using public money to subsidize oil and gas exploration and development and creating rules of trade that punish investment in competing conservation, renewable approaches to meeting energy service needs, because those become vulnerable to the full sanction of international trade law if governments use subsidies and other programs to, and regulatory measures for that matter to encourage a shift from un-sustainable, high carbon, industrial production to a more conservation, renewable, sustainable strategy.
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