- - Wednesday, February 5, 2014


Canada and the United States have generally been on the same side of history in confronting international military threats to our common values and interests.

We have a long history of finding common strategic purpose in developing oil- and gas-pipeline infrastructure.

In the 1940s, just weeks after the Japanese attack on Pearl Harbor, Canada and the United States agreed on plans to build the Canol Project, a pipeline from an oil field in the Mackenzie Valley to the Yukon, a refinery, airstrips and pipelines to the Alaskan coast to support the war effort against Japan, which at the time had the upper hand in the Pacific theater.

In the early 1950s, during the Korean War, the U.S. government determined that supply to Petroleum Administration for Defense District V on the West Coast was limited and at risk. U.S. officials approached Canada and an act of Parliament was passed to expedite the approval and construction of the Trans Mountain Pipeline.

The pipeline extended from Edmonton, Alberta, through Jasper National Park and over the mountains to southern British Columbia, and eventually to the refineries on Washington state’s Puget Sound.

In the 1960s, Canada agreed to a higher, U.S.-set oil price west of the Ottawa Valley in order to have access to the U.S. oil market, while the United States reluctantly made this exception to its restrictive oil-import policy aimed at protecting its industry.

In the 1970s, President Nixon opted for a trans-Alaskan pipeline, rejecting Canada’s proposal to move the newly discovered oil at Prudhoe Bay by pipeline across the Yukon and down the Mackenzie Valley.

Then, in the wake of the first OPEC oil crisis, both signed the treaty that set up the International Energy Agency and its mechanism for sharing oil in times of oil-supply interruption.

Recognizing the strategic importance of natural gas, Canada and the United States signed the Treaty on Principles Applicable to a Northern Natural Gas Pipeline, and Canada subsequently passed legislation to expedite construction of the Alaskan Natural Gas Transportation System across Canada (yet to be built).

In the 1980s, Canada and the United States signed a free-trade agreement that gave the U.S. access to all of Canada’s oil and agreed to prorate exports in the event of government-inspired cutbacks. In return, the United States reluctantly granted Canada access to no more than 50,000 barrels per day.

In the 1990s, the North American Free Trade Agreement was signed. As Mexico launches a historic reopening of its hydrocarbon sector, the one thing we don’t have on this continent is free trade in oil.

Ironically, as its neighbors open up their energy markets, the United States’ markets remain closed. These export restrictions result in price discounts of U.S. oil and any other oil imported to the country, especially Canadian oil.

President Obama’s refusal to approve the Keystone XL pipeline compounds the discount of Canadian crude oil because his advisers have convinced him that killing the project will enable him to establish his legacy as the president who stopped the seas from rising owing to climate change.

However, his advisers must not have told him that the shale oil boom is not forever. The real experts at the U.S. Energy Information Administration project decline in shale-oil production beginning eight years from now.

While shale resources will continue to contribute to U.S. supply, the nation will be hard-pressed to match the growing supplies from Canadian oil sands.

The president declared in June that Keystone XL’s approval will be predicated on whether it “will significantly exacerbate the problem of carbon pollution.” Setting aside the fact that carbon is not a pollutant, any metric applied to assessing the oil sands’ carbon footprint would suggest approval is forthcoming.

The Energy Information Administration projects that Canada’s oil output in 2014 will exceed 4 million barrels per day. At OPEC’s recent meeting in Geneva, Iran and Iraq declared their intention to each produce 4 million barrels per day in 2014.

While this is unlikely, Mr. Obama’s diplomatic resources appear devoted to helping Iran and Iraq do so while ensuring that supplies from Canada will decline or maybe disappear altogether. Between friends, what’s 4 million? More to the point, which nation is a friend?

Robert Skinner is executive fellow in the School of Public Policy at the University of Calgary.

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