Egypt crisis opens door for oil sands
John Ivison, National Post · Thursday, Feb. 3, 2011
The escalating tension in Egypt has provided Stephen Harper with an unexpected opportunity to push for a guarantee that there will be no border tax on Canada's oil sands when he visits U.S. President Barack Obama in Washington on Friday.
The two men are expected to sign a major security and trade deal, which will likely be long on promises and short on specifics.
Copies of an early draft of the Beyond the Border deal on a "shared vision for perimeter security and competitiveness" have been leaked to a number of media outlets. The draft talks about accelerating the flow of people and goods between the two countries, while at the same time enhancing security.
The few specifics that are mentioned are predictable --an integrated cargo strategy that screens goods before they depart foreign ports bound for the United States or Canada; "expeditious implementation" of the new Detroit River
International Crossing; and streamlined procedures for regulatory compliance.
These are motherhood issues. Even Michael Ignatieff -- who seems to have a hate-on for wealth creation at the moment -- agrees that increasing the speed at which people and goods flow across the border is a positive thing. But the Liberal leader made clear that the Opposition will resist any agreement that is seen to compromise Canadian sovereignty, particularly when it touches on privacy or immigration issues.
Any deal has an obvious downside for the Prime Minister, in what may be a pre-writ period with voters who are always wary of being too close to the Americans. Yet Mr. Harper would be able to trump such concerns if he were able to show progress on an issue such as access to the United States for Canadian oil.
Colin Robertson, a former diplomat who is now vice-president at the Canadian Defence and Foreign Affairs Institute, said Mr. Harper has to guarantee access to make it worthwhile. "It has to be big to be in Canada's interests," he said.
There is a large "green protectionist" lobby in the United States that considers the oil sands "dirty oil" that should be hit with a tax at the border to discourage its use. One bill, currently marooned in Congress, provides for a "border tax adjustment" for U.S. imports, based on carbon intensity.
A loophole in the U.S.-Canada Free Trade Agreement allows either country to impose tariffs on the other for health or environmental reasons. But, with a line being drawn around the North American continent in terms of security, and Canada already committed to harmonizing its carbon-reduction strategy with the United States, Mr. Harper could convincingly argue there should now be a common environmental standard for the two countries.
It seems unlikely this issue will be resolved on Friday. But this is a long-term deal and under its terms, both countries will appoint working groups to come up with a plan of action. It would be a major coup for Mr. Harper if he could ultimately sign a bilateral energy and environmental accord that would snuff out the prospect of Canadian oil and other energy-intensive businesses being penalized at the border.
John Manley, president of the Canadian Council of Chief Executives, said such a deal would likely take long negotiation but should be a top priority for the government.
Given the escalating uncertainty in the Middle East, the time to make Canada's case as a growing, predictable supplier will never be better. We already supply nearly 10% of total U.S. demand and a new report prepared for the U.S. Department of Energy this week found that growing Canadian oil sands imports and U.S. demand reductions have the potential to "essentially eliminate" Middle East crude imports in the long term.
The study looked at the impact on U.S. oil trade of the 2,673-kilometre Keystone XL crude oil pipeline proposed by TransCanada Corp. that would transport oil from Alberta to delivery terminals in Houston.
It said that if the pipeline were not built, the gap in the market would be filled by supplies from non-Canadian sources such as the Middle East.
Against this background, Mr. Harper may find he's pushing against an open door when he meets Mr. Obama at the end of the week.
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