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Big Oil pushes for NAFTA, Council calls for end to energy proportionality and ISDS provisions

Recent statements and news reports have highlighted that Big Oil is pushing to both save and deepen climate-killing provisions in NAFTA, including the energy proportionality and investor-state dispute settlement provisions.

Energy proportionality

NAFTA includes an energy proportionality provision. The Financial Post explains, “[Article 605] means Canada and the US cannot reduce access to each other’s oil, natural gas, coal, electricity or refined petroleum products without an equivalent reduction in domestic access to the same product. So if Canada wanted to cut oil exports to the US by 20 per cent it would have to cut domestic supplies by 20 per cent as well, except in specific circumstances such as the need to protect national security.”

This makes it virtually impossible for a Canadian government to phase out oil and gas exports to the United States and to use conventional fuels in Canada to transition to a 100 per cent clean energy economy by 2050.

In December 2017, Canada’s chief NAFTA negotiator Steve Verheul stated the government wants to “modernize” the energy chapter and highlighted, “We’re also looking at bringing Mexico into the energy chapter because they were not part of it in the original NAFTA when it was negotiated.”

While Mexico’s oil and gas sector was state-owned when NAFTA first came into force in 1994, the Mexican government under president Enrique Peña Nieto implemented an ‘energy reform’ law in 2014 that seeks to attract billions in foreign capital to increase oil production to as much as 4 million barrels per day by 2025.

On January 31, Business News Americas reported María Regina García Cuéllar Céspedes, a member of Mexico’s NAFTA negotiating team, saying that “a new agreement would acknowledge the sector’s openness to investment”.

That article also quoted Sergio Gómez Lora, another member of their team, saying, “If the deal is undone, the energy reform is being consolidated and Mexico will seek a mechanism to provide protection to US investors in the sector.”

Investor-state dispute settlement

The controversial Chapter 11 investor-state dispute settlement (ISDS) provision allows corporations to sue governments in secret hearings for lost future profits relating to public interest legislation, most commonly environmental legislation. The Trump government wants the US to be able to opt-out of this provision, while the Trudeau government has said Canada and Mexico would opt-into the provision.

In September 2017, Bloomberg reported, “Energy companies [are] securing formal roles on committees advising the process, unleashing lobbyists to influence it and outlining their priorities for the administration. Armed with a modest wish list, the industry is mostly in a defensive posture, terrified Trump will torpedo the current deal or weaken existing provisions that allow investors to sue countries over discrimination, seizures and other injustices.”

That article also highlighted, “Industry officials from all three countries are eyeing the deal as a way to seek more regulatory certainty and the harmonization of industry standards, something factored in to other trade accords. Canada, for example, may use the negotiations to push for more predictability surrounding the approval of pipelines and power lines crossing into the U.S., following years of squabbling [including a Chapter 11 challenge] over TransCanada Corp.’s proposed Keystone XL project.”

What’s next?

The seventh round of NAFTA talks is now scheduled to be held in Mexico City from February 26 to March 6. Energy is likely to be key in those talks.

The Council of Canadians opposes the energy proportionality provision in NAFTA, highlights that entrenching Mexico’s neo-liberal oil and gas laws in NAFTA would only worsen the climate crisis, says that trade disciplines (like the investor-state dispute settlement provision) should not be allowed to impede climate action, and asserts the need for a 100 per cent clean energy economy by 2050.

For further details on our upcoming public forum with author-activist Gordon Laxer speaking on this issue in Vancouver, please click here.