Tuesday, February 19, 2008

Is Ralph Klein Calling for an Unrestricted North American Continental Energy Strategy - in the Middle of an Election?

The Fraser Institute has just released a report on a North American continental energy strategy, authoured in part by former Premier Ralph Klein.

It calls for a “long-term continental strategic framework which would support further integration of North American energy markets.” Seek a potential for “convergence of energy commodity markets” that would result in lower consumer prices and easier switching between energy commodities. Klein and Co. argue that more convergence of the North American energy market would be a “signal to international investors” that we are already “…a stable policy environment with less risk than competing world regions….” Policy certainty in the energy sector is said to be a key for project investors who have to plan out in terms of decades.

They see the framework for going forward is NAFTA and the report acknowledges this. However every US Presidential candidate still in the race form both parties are pretty protectionist and some are seemingly downright hostile to NAFTA, including Obama. The Fraser Institute paper says it will “…offer policy recommendations that could facilitate change to the Agreement (NAFTA) in a manner that is compatible with the objectives of a continental energy strategy.”

This language makes me nervous as a Canadian and an Albertan - and a free trader. This report at first blush is a manifesto to use the Security and Prosperity Partnership of March 2005 as a vehicle to sell out our raw bitumen to the US markets and not to require the upgrading benefits to come to Albertans.

Here is a paraphrase of a very interesting and somewhat disturbing quote from the report:

"Since the signing of NAFTA in December 1992, the North American energy sector has developed, in general, under the assumption of open and free markets in the three countries, and the energy sector has been shaped by the existing regulatory framework with respect to intra-continental trade, investment, and manufacturing. As the times have changed, the need for new legislation concerning North America's energy framework has increased. NAFTA's open-ended position on the the regulatory frameworks affecting energy, which essentially allows each country to do what it will, leaves much to be desired with respect to increasing the integration of North American energy policy, markets and transportation systems. [emphasis added] For example, North America needs an implementation plan for streamlining regulations pertaining to cross-boarder energy flows. Also, energy policies in Mexico, Canada and the United States must be reviewed in relation to the changes being made in environmental policy and in other related policies, and the three countries need ot strive for cohesive approaches to market, pricing, and environmental issuses."

I have to finish reading this Fraser Institute Report and I hope I have cause for more optimism for Alberta and Canada’s independent energy resource future than what I have digested so far. I can't understand what Canada, and ALberta, should be in a mad dash to an unrestricted integration of North American based energy markets with a limited role of government to protect the interests of Albertans, the owners of the resources.

I think we need to assure the Americans of continental energy supply but on terms and conditions and at a pace of development Alberta can absorb. A secure continental energy supply makes sense but not on an exclusive access basis to the oil sands. We need to attract more foreign investment and markest for synthetic crude outside of North America. And the upgrading has to happen in Alberta.

The value added aspects of oil sands development have to benefit future generations. It is not progress for Alberta and Canada to continue to be drawers of water, hewers of wood and now also add in "merely miners of bitumen." So far this report makes me nervous but I have not read it all yet. I think every Albertan better study and understand what is being proposed here.