Politics of energy south of the border are being closely watched in Canada for its potential impact on trade with the U.S.
The upcoming U.S. election campaign ushers in an anxious time for Canada’s oilpatch.
The politics of energy south of the border are being closely watched in Canada for its potential impact on oil and gas trade with the United States — a prolific relationship that’s sometimes fraught with potential land mines.
It underscores the unpredictable nature of the relationship, which is also accurately described as the most important energy partnership in the world.
“In Canada, we’ve got to recognize that we’re the mouse beside the elephant. And the best thing we can do is build relationships at the business level, and at the government level, in a very cooperative way,” said Hal Kvisle, former CEO of TransCanada Corp. (now TC Energy) when it developed the original Keystone pipeline to ship oil into the United States.
“The interplay between energy and politics just never goes away.”
With the U.S. presidential campaign in full swing, former president Donald Trump was set Thursday to formally accept the Republican party’s nomination and become its candidate in the Nov. 5 election.
Alberta political and business leaders are keeping an eye on the campaign and what a victory by either the Republicans or Democrats could mean for Canada.
“People always say it’s the most pivotal time — but I would say it is the most pivotal time and I say we need to be watching,” James Rajotte, Alberta’s senior representative to the United States, said in an interview Thursday.
“We need to be really getting our message out with people on both sides of the aisle, in terms of what … we currently provide (and) what we would like to provide.”
At stake is energy trade between the two countries valued at US$152 billion last year, including oil, natural gas and electricity.
The integrated system between the two countries fosters the trade of traditional oil and gas, along with developing areas of business, such as clean energy supply chains and critical minerals, said James Coleman, a law professor who specializes in North American energy infrastructure at the University of Minnesota.
“It’s probably the most important bilateral energy trade relationship in the world,” said Coleman.
“But I think there’s a broader question about: Are the U.S. and Canada going to be able to build on those strengths? And that’s very much in question … because there have been a lot of tensions.”
While past tensions over the Keystone XL are well documented, other areas of the bilateral relationship could also reverberate into the energy file.
At this week’s meeting of the premiers in Halifax, several premiers raised the issue of Canada living up to its commitment of allocating at least two per cent of GDP to defence spending as a member of NATO by 2032 – and what it could mean to trade with the U.S.
“If we don’t make this investment, the next U.S. administration is likely to cause some consternation when it comes to the super important relationship with U.S. trade that creates jobs and economic opportunities across Canada,” Manitoba Premier Wab Kinew told reporters.
Canada West Foundation CEO Gary Mar noted energy could be part of a broader review of the Canada-United States-Mexico Agreement in 2026. The deal replaced the long-standing North American Free Trade Agreement in 2020.
Addressing issues such as Canada’s defence spending might help smooth the way on other bilateral matters, said Mar, Alberta’s former trade representative in Washington.
“Trade is not always about trade. Trade is also about all of the other things that you can do, above and beyond the trade issue itself,” he said.
“It doesn’t matter whether it is a Democrat or a Republican in the White House, it’s important for Alberta and its energy sector to make its case on why we fit as a trusted supplier of something that they need, that creates jobs in the United States.”
Canada is the largest international oil supplier to the United States – accounting for 60 per cent of all U.S. crude imports and shipping an average of 3.9 million barrels per day (bpd) south last year.
The U.S. is the largest supplier of foreign crude to Canada, averaging 336,000 bpd in 2022.
Even with the startup of the Trans Mountain expansion, which has allowed domestic petroleum producers to transport more oil to the West Coast for export, Canadian oil shipments to the U.S. reached record levels of 4.4 million bpd last week, according to Reuters.
“Particularly in the Canada-U.S. file, it’s been infrastructure that has been the biggest problem,” said Christopher Sands, director of the Wilson Centre’s Canada Institute in Washington.
However, Sands said he believes the U.S. is entering a period of “energy pragmatism,” which could affect future views on nuclear developments, oil and gas, and energy security.
He notes the new trade agreement in North America remains relatively popular and has retained bipartisan support in the U.S.
“I don’t feel we’re in danger of losing (the agreement) when the review starts,” Sands added.
Coleman said he will be watching what happens with the U.S. Inflation Reduction Act if there’s a Republican presidency, the possibility of the U.S. imposing tariffs – Trump has proposed a 10 per cent import tariff – or the potential introduction of carbon border adjustment taxes impacting Canada.
“The key issue for us is just to continue to emphasize the integrated nature of our economies, particularly on the energy side…. We’re their No. 1 provider of crude oil and natural gas,” added Rajotte.
“We just have to keep emphasizing that, regardless of which scenario results in November. And obviously, we want to prepare for every scenario.”
Chris Varcoe is a Calgary Herald columnist.