national energy corridor

Canadian Prime Minister Justin Trudeau (L) meets with U.S. President Donald Trump in the Oval Office at the White House in Washington, U.S., February 13, 2017. REUTERS/Kevin Lamarque

National Energy Corridor providing access to Asian markets would lessen dependence on US markets – and Donald Trump

First it was energy independence, now it’s “energy dominance.” American President Donald Trump has cranked up the rhetoric around United States’ global energy ambitions in advance of NAFTA re-negotiations. Experts say Trump needs Canada to achieve its aggressive strategy. If that’s true, then Prime Minister Justin Trudeau should employ a two-pronged strategy: be tough on NAFTA while building the National Energy Corridor to give Western oil and gas producers access to new markets in Asia.

national energy corridor

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Trump  is set to deliver a speech Thursday in which he sets out the US strategy to unshackle the oil, natural gas and coal industries from regulation, while dramatically boosting production and exports.

President Donald J. Trump has taken action in his first five months to remove unnecessary and burdensome roadblocks that would have prevented the United States from achieving energy dominance,” shouts a Tuesday press release from the White House, laying the groundwork for what the Trump team no doubt hopes will be a watershed moment for the besieged Administration.

University of Houston energy economist Ed Hirs is sceptical. He argues that Trump’s energy plan is based upon “myths.”

“The US remains a net importer of crude oil and the industry will continue to be subject to OPEC behaviour for booms and busts.  The US remains the marginal oil producer, and it is never good to be a high cost producer in a commodity market,” Hirs said in an email.

Next week Trump will meet in Warsaw with a dozen central and eastern European nations eager to see more US liquefied natural gas (LNG) in their markets as an alternative to Russian gas, according to Reuters. In its latest energy outlook, industry giant BP forecasts that the United States will, in fact, dominate global LNG markets by 2035.

“Exporting natural gas will be beneficial, but that was happening under Obama,” says Hirs.

Hirs isn’t expecting much from the President tomorrow.

national energy corridor

Ed Hirs, energy economist, University of Houston.

“Trump’s upcoming speech is a return to his campaign stump formula of talking pro-American.  These platitudes pander to his base, but the economic realities are different,” he said.

Duncan Wood, director of the Mexico Institute at the Woodrow Wilson Intentional Center for Scholars disagrees, arguing that the United States may not be able to dominate global energy markets on its own, but including Canada and Mexico as part of the team changes the calculation.

“Everybody knows that for the United States to do that on its own is a pipe dream in the short term at least – but for North America working together, it becomes feasible,” Wood told Bloomberg.

If true, then the US needs Canada and has to play nice during the upcoming NAFTA talks. Right on cue, Energy Secretary Rick Perry is softening the Trump Administration’s language around energy trade.

“I think we have a unique opportunity in this country to develop a North American energy strategy that will pay great dividends for Canadians, for Mexicans, for Americans, as we go forward,” Perry told White House reporters Monday.

For some veterans of the Canadian oil and gas industry, that sounds suspiciously like a scenario in which the United States buys Canadian energy on the cheap, while growing its own petroleum exports and garnering top dollar on international markets.

“The Alberta petroleum industry is completely dependent on trade with the US economy and this will not change dramatically in the short run,” said University of Calgary economics professor Eugene Beaulieu in an interview.

“But the US supply developments and the rise of protectionism in the US is a clear indication that the Alberta industry needs to find markets outside of North America. Finding access to new and growing markets is crucial and should be the first priority.”

national energy corridorIn the short-term, “finding new and growing markets” means China and India – and that strategy runs right through British Columbia, where Kinder Morgan’s Trans Mountain Expansion continues to be staunchly opposed and the development of the West Coast LNG industry languishes even as Western Canada natural gas producers face declining exports to the United States.

A potential solution lies in the creation of a “national infrastructure corridor” – or National Energy Corridor, from the West’s point of view – that was endorsed by the Canadian Senate last week.

Such a National Energy corridor would stretch from coast to coast through the North and provide a right of way for highways, transmission lines – and pipelines. As North American Energy News reported yesterday, Senate leaders are calling upon Trudeau to take the lead and make the corridor the 21st century equivalent of the national railway that knit Canada together in the late 19th century.

The National Energy Corridor is exactly what is needed. It would reduce dependence on American markets while opening new ones in the fastest growing part of the world, attract much needed capital investment, create plenty of new jobs, and generate economic opportunities for First Nations communities.

Canadians have seen enough of President Donald Trump over the past five months to understand that becoming even more dependent upon the United States is not in their best interests.

Prime Minister Trudeau should immediately begin the process to make the National Energy Corridor a reality, and in the shortest time possible. Even the declaration of Canada’s intent to seriously seek new energy markets would improve the country’s position during NAFTA negotiations.

national energy corridor