Mike Gladstone

This year, we mark the 30th anniversary of the completion of the North American Free Trade Agreement and the generation of growth it kicked off for Canada. NAFTA — and its successor, the Canada-US-Mexico-Agreement  (CUSMA) — represent a continuation of a long history of agreements that connect our countries, foster cooperation and importantly, safeguard and advance our shared interests.

There is no more important trading relationship in the world than that between Canada and the United States. There are few shared interests as impactful to our national economies as our energy future – a world of secure, sustainable and affordable energy. 

North America relies on an integrated energy system. 

As the world digs out from under the weight of the COVID-19 pandemic and looks to address the dual crises of addressing climate change and returning to economic growth, the North American responsibility to provide sustainable energy to allies around the world is becoming more important and evident.

To fulfill that responsibility and realize the benefits at home and abroad, it will be critical to sustain – and enhance – the spirit of cooperation engendered by agreements such as NAFTA.

The Global Energy Institute at the US Chamber of Commerce has referred to North America as an “energy powerhouse” arguing that “integration of these large markets enhances the flexibility and reliability of the energy supply and distribution system for American consumers, business and industry.” 

In March of this year, West Virginia Senator Joe Manchin, chair of the Senate Energy Committee, put forward the concept of a North American Energy Alliance to “strengthen our collective supply chains and minimize vulnerabilities to those nations that might use supply chain dependencies against us.”

A robust North American energy alliance serves global interests in meeting energy transition aspirations. By focusing on how we build upon our integrated energy strengths, North America can do more to support our allies’ need for secure energy sources, reduce global emissions and ensure long-term energy affordability. 

We take for granted how integrated our energy system is with the United States. Energy flows every day across the border, in both directions, drives economic activity and supports our quality of life. According to the United States Trade Representative in 2019, the overall trade relationship was valued at US$718.4 billion. That same year, energy accounted for one-quarter of Canadian exports to the US with 91 percent of this being crude oil and petroleum products. Flowing north to Canada was US$23 billion of energy (89 percent petroleum products) accounting for 8 percent of total US imports by Canada. 

Our existing integrated system is not risk-free. For example, Enbridge’s Line 5 offers a powerful illustration of the risks on both sides of the border when cooperation is compromised – as well as the importance of another, less well-known, international treaty.  

In 1977, then-Prime Minister Pierre Trudeau signed the Transit Pipelines Treaty with President Jimmy Carter. This treaty was initiated by the United States’ desire to secure transit of American energy from Alaska, through Canada and back into the United States during the Arab oil embargo energy crisis of the late 1970’s. Although long forgotten, this treaty has recently risen to prominence. 

Enter Line 5. This pipeline is existing critical infrastructure moving western Canadian oil down through the United States, through Superior, Wisconsin and back into Canada across the Straits of Mackinac. Line 5 feeds the Sarnia refining complex — in turn providing gasoline and jet fuel to some of Canada’s busiest airports — and now is a linchpin for how Canada moves Canadian oil into the Quebec market, supplying Quebec refineries with roughly 60 percent of their feedstock. 

As a symbol of integration, the impact of Line 5 is broader than just Canada and helps showcase the integrated nature of North America’s energy systems. This single pipeline supplies product to 10 regional refineries across Canada, Michigan, Ohio, and Pennsylvania. These refineries in turn provide local, cost-effective gasoline, diesel, jet fuel, home heating oils, and other products. This pipeline is also important to the production of Natural Gas Liquids, which can be stored for peak winter deliverability of propane for heating purposes in homes and businesses across the region. 

Michigan Governor Gretchen Whitmer promised to shut down Line 5 and then pursued that policy agenda in state courts. In response, the government of Canada invoked the Transit Pipeline Treaty’s dispute resolution mechanism to defend its national interest, with then-Natural Resources Minister Seamus O’Regan stating that the “continued operation of Line 5 is non-negotiable”. In August of this year, the government of Canada invoked the Treaty again in relation to efforts in Wisconsin to shut down Line 5. 

Canada’s efforts on defending the continued operations of Line 5, including invoking the Treaty, have been a remarkable show of what a united Team Canada can achieve. 

Line 5 is a symbol of how interconnected our energy systems are, but it is also a representation of what can go wrong when we aren’t focused on our North American energy partnership. The world needs more Canadian energy and our path to realizing this is through our energy collaboration with the United States.

Later agreements between Canada and the United States further cemented the energy relationship with key articles, perhaps most notably in the NAFTA agreement, where they recognized “that it is desirable to strengthen the important role that trade in energy and basic petrochemical goods plays in the free trade area and to enhance this role through sustained and gradual liberalization”. 

Foreign Affairs Minister Mélanie Joly put it succintly in a statement on Aug. 29. “Line 5 not only helps provide energy that is essential for empowering a resilient Canadian economy, it also supplies energy to business owners and residents in the Midwestern United States, including Wisconsin,” Joly said. “Canada and the United States share a vision for a sustainable and inclusive economic growth that strengthens the middle class, creates more opportunities for them, and ensures people have good jobs and careers on both sides of the border. Both Canadians and Americans expect their governments to strengthen Canada-US supply chain security and work to reinforce our deeply interconnected and mutually beneficial economic relationship.” 

This is where we came from, but where we are going is equally important. How can we seize the next shared opportunity – achieving net-zero?

The global energy transition is not a time to tear down our free trade agreements but rather to use them to increase the supply of lower-emission, cleaner, affordable and secure sources of energy that the world, and especially our allies, need. 

North America’s existing infrastructure is ideal for maximizing our continental advantages with existing ports proximate to major reserves, especially in the US Gulf Coast and British Columbia, and with a new eye to Europe, increasingly off the Northeast Coast as well. Collaboration at the policy, regulatory and government level with industry could improve our ability to leverage this natural advantage to maximum effect by prioritizing which molecules move where based on proximity and cost. 

What is needed for us to build North America’s next great opportunity?

In Canada, energy strategy needs to capitalize on our advantages. We have a world-class energy system and the know-how to export the most sustainable energy worldwide. In partnership with the United States, we have world-class resources connected to every major global demand centre and the highest ESG standards in the world.

Canada’s strongest asset is our friendship with the United States, whereby working together on energy policy, North America can be the world’s dominant energy supplier in a net-zero world.

We can leverage the energy systems of today as a bridge to creating the energy systems of the future. We can do all of that while advancing Indigenous reconciliation at home. 

The time has come to take a fresh look at Canada’s role in the energy transition and we need to do it as a partner of the United States. Together, we can lead the world.  

Mike Gladstone is Director, External Affairs, Canada, and Enterprise Public Policy at Enbridge, Inc. He is also vice-chair of the Energy Council of Canada and co-chair of the Canada-US Committee of the Canadian Chamber of Commerce.