Liberals and federal NDP policies restrict Alberta oil to U.S. market

Commentary, Elmira Aliakbari, Ross McKitrick

During the 1988 Free Trade debate, the Liberals and NDP fought a provision that required Canada to maintain its oil export volumes to the U.S. at historical levels. So it is a remarkable irony that these two parties are now fighting against pipelines that would allow Canada to sell to the rest of the world.

Article 904a of the Canada-US Free Trade Agreement prohibited Canada from imposing export restrictions on any energy good so as to reduce the U.S.’s share in our exports below the average of the preceding three years. It put a floor on Canada’s oil exports to the U.S. It was seen by proponents of the Free Trade Agreement as exploitive, putting Canada in a subservient role to our largest customer. The U.S. would be given the power to prevent other countries from increasing their access to Canadian oil exports. For the Liberals and NDP, this provisions smacked of economic imperialism.

Fast-forward to 2016. At the recent NDP convention, Alberta Premier Rachel Notley implored the audience to support the goal of getting her province’s oil to a tidewater port via a pipeline. As she pointed out, geography currently dictates that the U.S. is the only buyer for Alberta oil. As a result the product is selling at a discount compared to the world price, which hurts Alberta and reduces Canada’s export earnings.

In effect she was begging them to support a plan to stop the U.S. from commanding 100 per cent of Alberta’s oil exports. 

Yet the room remained unmoved: delegates voted instead to send the Leap Manifesto, which proposes a ban on all pipeline projects, to riding associations for study and approval. Had the Free Trade Agreement in 1988 proposed to make the U.S. our only customer for Canadian oil for all time, the NDP would have been apoplectic. Now, apparently, they are all in favour.

The federal Liberals have not sounded much different. In November 2015, the new government implemented a ban on B.C. coastal tanker traffic north of Queen Charlotte Sound. This effectively shut down the possibility of the Northern Gateway pipeline or any other project through B.C., except for the Kinder-Morgan expansion project to the lower mainland. The Liberals have also introduced changes to the National Energy Board’s pipeline review process which will strengthen the hand of environmental groups who want to block future pipeline approvals, and they have thus far failed to push back against anti-pipeline activism of Montreal Mayor Denis Coderre, who is leading a campaign to prevent the Energy East pipeline from being built.

Thus a party that expressed horror at the idea that we would impose on ourselves a requirement to sell most of our oil to the U.S. is implementing policies that will prevent us from ever selling it to anyone else.

The Liberals and NDP got it wrong on free trade in 1988 and they are getting it wrong on pipelines in 2016. Premier Notley’s appeal to the NDP seems certain to fall on deaf ears. The Liberals to their credit eventually embraced free trade and even oversaw its extension to Mexico under NAFTA. And there are encouraging signs that Prime Minister Trudeau has realized he needs to get solidly behind at least one major pipeline project if it is going to happen. But he has been harshly critical of the Conservative government for, as he puts it, “cheerleading” on behalf of pipelines. If he really understands the intractable nature of environmentalist opposition to any and all new pipelines, that is precisely what he will have to do. And it is not obvious his heart is in it.

With oil prices so low, Canada needs Alberta to boost its export volumes and seek the most favourable world prices. Canada needs a pipeline to tidewater. The NDP and Liberals once supported diversifying our energy exports beyond the U.S. It’s time for them to get behind that ideal once again.

This op ed was originally published by The Edmonton Journal on Sunday, May 8, 2016: http://edmontonjournal.com/opinion/columnists/opinion-liberals-and-federal-ndp-policies-restrict-alberta-oil-to-u-s-market