- Canada. Ministry of Supply and Services. North American Free Trade Agreement Between the Government of Canada, The Government of the United Mexican States and the Government of the United States of America (1992). The legal text of the agreement was initialled on 7 October, approximately two months after the conclusion of negotiations.
- The formal negotiations followed months of preliminary discussions.
- External Affairs Canada, Canada-United States Free Trade Agreement, 10 December 1987, in force 1 January 1989; implemented in Canada by the Canada-United States Free Trade Agreement Implementation Act, SC 1988, c 65, and in the United States by the United States-Canada Free Trade Agreement Implementation Act of 1988, PL 100–449.
- General Agreement on Tariffs and Trade, TIAS No 1700, 55 UNTS 194.
- Also relevant are GATT Art XI:2(a), critical shortages of essential products; Art XX(i), export restrictions in support of a domestic processing industry, where domestic prices are held below world prices, pursuant to a government stabilisation plan; and Art XX(j), products in general or short supply.
- Thus in the Superfund decision, while the principle of conservation was accepted, the implementation of it, under which the United States imposed a differential burden on imported oil to assist in clean-up in the United States, was found objectionable: United States—Taxes on Petroleum and Certain Imported Substances, GATT Dispute Settlement Panel Report, adopted 17 June 1987, BISD, 34th Supp. (Geneva: GATT, June 1988), reproduced in (1988) 27 Int Leg Mat 1596.
- The most important agreement in this respect is that amongst OECD nations on energy sharing: Agreement on an International Energy Programme, Paris, 18 November 1974, (1975) 14 Int'l Leg Mat 1, TIAS No 8278, as amended.
- See for example, A Hudec and J Quinn, “Energy Aspects of the Canada-United States Free Trade Agreement” (1989) 2 Can Pet Tax J 1; J Owen Saunders, “Energy, Natural Resources and the Canada-United States Free Trade Agreement” (1990) 8 JERL 1.
- It might also be noted that this background bears some striking similarities in its themes to the evolution of energy policy in Mexico: J Owen Saunders, “The Mexico Factor in North American Free Trade: A Canadian Perspective” (1991) 9 JERL 239, at 242–48.
- Beginning in the mid-1960s, Canadian policy makers had begun a serious evaluation of the laisser faire approach to foreign investment that had characterised Canada especially in the 1950s, and which had seen the development of what many critics described as a branch plant economy dominated by US firms and their subsidiaries. What had been considered generally as an unalloyed benefit to the impressive growth of the Canadian economy in the post-war world was re-appraised in two important task force reports, one in 1968 (Task Force on the Structure of Canadian Industry (M Watkins, Chairman), Report, Foreign Ownership and the Structure of Canadian Industry (1968)), and the other in 1972, or one year before the dramatic change in the world oil industry (H E Gray (Chairman), Foreign Investment in Canada (1972))—both of which advocated a strong nationalistic agenda to counterbalance the effect of foreign (but especially American) ownership.
- Under the Petro-Canada Act, SC 1974–75–76, c 61, subsequently RSC 1985, cP-11, as amended.
- Energy, Mines and Resources Canada, The National Energy Programme (1980).
- The Programme had predicted a quadrupling of oil prices from 1980 to 1990.
- The Western Accord, An Agreement between the Governments of Canada, Alberta, Saskatchewan and British Columbia on Oil and Gas Pricing and Taxation, March 1985; reproduced in Canadian Institute of Resources Law, Canada Energy Law Service (CELS), Alberta 30–1801.
- Agreement Among the Governments of Canada, Alberta, British Columbia and Saskatchewan on Natural Gas Markets and Prices, 31 October 1985; reproduced in CELS, Alberta 30–1807.
- SC 1973–74, c 46.
- SC 1985, c 20; now RSC 1985 1st Supp., c 28.
- The evolution of the Canadian approach towards foreign investment is discussed in supra, note 10.
- “Analysis of Chapter Nine of the US-Canada Free-Trade Agreement, Concerning Trade in Energy”, Memorandum prepared by the staff of the US Department of Energy and the office of the US Trade Representative (Mimeo, 1988), at 7.
- Canada, North American Free Trade Agreement: An Overview and Description (August, 1992), at iv.
- GATT, Agreement on Government Procurement (GATT Procurement Code), 26 BISD 33 (Geneva: GATT Secretariat, 1980).
- For a discussion of the implications of Mexico in this regard, see United States International Trade Commission, Potential Impact on the US Economy and Selected Industries of the North American Free Trade Agreement, Report to the Committee on Ways and Means of the United States House of Representatives and the Committee on Finance of the United States Senate on Investigation No 332–337 Under Section 332 of the Tariff Act of 1930, USITC Pub 2596 (January 1993), at 3–8, 3–9.
- A description of the applicability of the various rules, together with an estimate of the likely impact on the continental automotive industry can be found in id, at 4–6, 4–7, 4–10. On the basis of that analysis, it would seem that in light of NAFTA, the major competitive threat, at least in terms of attracting Asian or European carmakers, will no longer be the United States, but rather Mexico.
- United States—Restrictions on Imports of Tuna, GATT Dispute Settlement Panel Report, submitted to the Parties on 16 August 1991, reproduced in (1991) 30 Int Leg Mat 1594. For two very different views of the approach taken by the GATT panel in that case, see Robert F Housman and Durwood J Zaelke, “The Collision of Environment and Trade: The GATT Tuna/Dolphin Decision” (1992) 22 Env Law Rep 10271, and J Owen Saunders, “Trade and environment: the fine line between environmental protection and environmental protectionism” (1992) 47 Int'l Jour 723.
- Crude oil imports from Mexico constitute fewer than two per cent of Canada's total oil imports. The crude that is imported—into eastern Canada—is heavy crude “and is not in strong demand”. Canada, North American Free Trade Agreement, Canadian Environmental Review (October 1992), at 51.
- In Art 902(2), FTA; Art 603(2), NAFTA.
- The power is found in Gas Resources Preservation Act, SA 1984, c G-3.1, as am, s 5.
- It might be pointed out that the NAFTA energy chapter also adds certain (basic) petrochemicals to the coverage found in the FTA. However, these products are already caught by the equivalent provisions under Chapter Four of the FTA (that is as goods in general).
- In the FTA, Art 903 and NAFTA, Art 604.
- The “duty” Pemex pays for hydrocarbon extraction has varied somewhat, depending upon whether the oil is used domestically or exported. Gary B Connie, “National Gas Transactions Between the United States and Mexico-Political and Legal Impediments to Free Trade” (1992) 27 Tex Int'l L J 577. at 598.
- The two most important taxes in this respect were an oil export charge, authorised in 1974 (by the Petroleum Administration Act, SC 1974–75–76, s 7) and an export tax on natural gas and gas liquids, approved in 1981 (by an amendment to the Excise Tax Act, now RSC 1985, cE-15, Part V).
- NAFTA Art 605(a).
- NAFTA Art 605(b).
- NAFTA Art 605(c).
- NAFTA Annex 602.3.
- NAFTA Annexes 603.6, 605 and 607, respectively.
- One might also include under the rubric of “fair trade” measures, the issue of “safeguard” (or “emergency”) measures, as anticipated in GATT Art XIX (although, strictly speaking, they are predicted on disruptive rather than unfair trade practices). Both the FTA and the NAFTA have important provisions in this respect, which do address some of the undoubted abuses of Art XIX. While such measures have been significant in Canada-US trade, especially in natural resources, they have not been a factor in energy trade. As such, the FTA and NAFTA provisions in this respect are not discussed here. A discussion both of the use of these measures in the natural resources sector, and of the FTA provisions in this regard, can be found in Saunders, supra note 8, at 1–15. The general approach of the FTA is reflected in the NAFTA (and indeed, with respect to bilateral Canada-US emergency actions, most of these will continue to be covered by the relevant article of the FTA, which is incorporated by reference into the NAFTA for this purpose through Annex 801.1).
- Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, GATT, 26 BISD 171 (Geneva: GATT, 1980).
- See Saunders, supra, note 8; Christian Yoder, “United States Countervailing Duty Law and Canadian Natural Resources, in J Owen Saunders (ed), Trading Canada's Natural Resources (Calgary: Carswell, 1987), 81.
- The process is set out in FTA Chapter 19.
- Omnibus Trade and Competitiveness Act of 1988, PL 100–418.
- Supra, note 8.
- NAFTA Art 608(1) (drawn from FTA, Art 906) agrees to allow both existing and future such incentives in order to maintain a reserve base for these resources. However, at least one writer (who acts as counsel for US domestic gas producers) has argued that there may be a case for countervailing duties against Canadian natural gas imports into the United States: Robert C Platt, “United States-Canadian Trade in Natural Gas: 1992 is a Pivotal Year” (1992) 27 Tulsa L J 647.
- NAFTA, Art 1907(2).
- FTA, Annex 905.2(1).
- FTA, Annex 905.2(2).
- Natural Gas Pipeline Company of America, 37 FERC¶ 61,215 (1986). At the heart of the decision was the question of whether pipeline companies importing Canadian natural gas could pass on to their customers all those charges imposed in Canada, pursuant to NEB approval. The FERC held that it could disallow those charges that were inconsistent with its own ratemaking principles. The case is discussed in S P Battram and R H Lock, “The Canada/United States Free-Trade Agreement and Trade in Energy” (1988) 9 Energy L J (No 2) 327, at 338–39. Art 905 of the FTA addresses this problem by providing for consultations where regulatory actions discriminate against the energy goods of the other party. As the writer has argued elsewhere, however, it is questionable whether FERC Op. 256 would even come within the threshold criterion of discrimination established in Art 905: supra, note 8, at 11. For a discussion of some of the attempts to mitigate the consequences of Op 256, see Piatt, supra, note 43, at 664–66.
- For a two views of the myriad legal regulatory issues involved in Canada-US natural gas trade, by counsel who have represented both Canadian and US producing interests respectively, see C Kemm Yates and Patrick J Keeley, “Alberta Gas in United States Markets: Canadian and American Perspectives on Competition and Contract Enforcement Issues” (1991) 30 Alberta L Rev 219; and Piatt, supra, note 43. I am also grateful to my colleague, Susan Blackman, Editor of the Canada Energy Law Service, Federal for the opportunity to review her updated commentary on this issue, which will be forthcoming in the Service.
- Supra, note 15.
- Id, para 1.
- Id, para. 16.
- See Canada. National Energy Board. In the Matter of Review of Natural Gas Surplus Determination Procedures, Reasons for Decision, July 1987, digested in CELS, Federal, NEB Decision 44. This procedure does not apply to short-term exports, which are not subject to licensing requirements, but which are approved by Board order, in a procedure which does not provide for public hearings or objections by third parties; see National Energy Board Part VI Regulations, CRC 1978, c 1056, as am. The discussion below focuses on long-term exports.
- See Canada, National Energy Board. Proposed Changes to the Application of the Market-Based Procedure, Reasons for Decision, GHW-1–91, May, 1992, digested in CELS, Federal, NEB Decision 50.
- See id, CELS, Federal, at 10-4754-10-4757.
- United States. Department of Energy. New Policy Guidelines and Delegation Orders on the Regulation of Imported Natural Gas (February 1984). The Guidelines are discussed in Canada. National Energy Board. Canadian Petroleum Association Ltd, Review of Decision re Alberta and Southern Gas Ltd (GH-5-88), Reasons for Decision, GH-R-1–91, June 1992, digested in CELS, Federal, NEB Decision 49, at 10–4705, 4706.
- DOE Guidelines, at 6–7, cited in Canada. National Energy Board. Westcoast Energy, Inc—Tommy Lakes Pipeline Project, Reasons for Decision, GH-2–92, April 1992, digested in CELS, Federal, NEB Decision 48, at 10–4706.
- By SC 1990, c 7, which added a new section, s 119.1 to the National Energy Board Act, RSC 1985, c N-7, as am.
- Id, s 119.1(1).
- The new agreement extended the term by 16 years and the quantity by six trillion cubic feet. By way of background to the discussion below, the following description of the relationships between the various players with interests in the northern California market may be useful: “The northern California market is served by Pacific Gas & Electric (PG&E), a local distribution company…which purchases gas from two domestic pipelines, Transwestern and El Paso, as well as from PG&E's affiliate, Pacific Gas Transmission Company (PGT), an interstate pipeline which connects PG&E with Canada. In Canada, another PG&E affiliate, Alberta & Southern (A&S), aggregates Canadian production and holds a long-term export license to sell the gas to PGT.” Piatt, supra, note 43, at 673–74.
- Cited in NEB Decision 49, supra, note 55, at 10–4709.
- CPUC Decision 90–07–065, cited in id, at 10–4711.
- But not the California Energy Commission, which reminded the CPUC of the dangers in attempting to rescind the contractual obligations which it had previously endorsed. The CEC representations on point are reproduced in NEB Decision 49, id, at 10–4713, 10–4714.
- CPUC Decision 91–11–025, 6 November 1991. Capacity brokering refers to “the assignment by a shipper of its contracted transportation capacity entitlements to another shipper without the need for consent of the pipeline company”. NEB Decision 49, id, at 10–4713. It is of course a key element in the move to a market-based strategy that would promote competition and decouple the various parts of the natural gas industry.
- NEB Decision 49, id, at 10–4701.
- Id, at 10–4734.
- Id.
- Id, at 10–4734.
- Id, at 10–4743.
- That is, Art 905 and Annex 902.5
- On this point see the discussion in Piatt, supra, note 43.
- The two Agreements in this respect adopt the relevant provision in GATT, Agreement on Government Procurement (GAIT Procurement Code), 26 BISD 33 (Geneva: GATT Secretariat, 1980), Art VIII: 1. The FTA adopts the article by reference; the NAFTA does not refer to the Article, but reproduces its wording verbatim. Presumably the change in approach reflects the fact that Mexico is not a party to the Procurement Code.
- Testimony of Ambassador Clayton Yeutter, US Trade Representative, to the Senate Finance Committee (April, 1986), cited in Battram and Lock, supra, note 47, at 366.
- See FTA, Art 1602.
- Article 1605 imposes as preconditions for expropriation the elements typically put forward by Western states: a public purpose, due process, non-discrimination, and prompt, adequate and effective compensation at fair market value.
- Those policies are described in supra, note 9, at 259.
- NAFTA, Ch 11, Section B.
- The latter of which reserves to the Mexican state a number of strategic activities, including investment and provision of services in:
- “1(a) exploration and exploitation of crude oil and natural gas; refining or processing of crude oil and natural gas; and production of artificial gas, basic petrochemicals and their feedstock and pipelines…”
- Additionally, the same Annex, in s 1(b) similarly reserves to the state foreign trade, as well as transportation, storage and distribution activities in these areas.
- These annexes (all found in Annex 1404) relate to architecture, tourism, and computer services and telecommunications-network-based enhanced services.
- Since the energy sector in neither Canada nor the United States is controlled by parastatal enterprises such as Pemex, the government procurement provisions have no significant impact on the energy sectors in those countries.
- Pursuant to Art 1001(l)(a) and Annex 1001.la-2 (8), (9).
- Annex 1001.2a. Even after full implementation, however, Mexico will still be entitled to set aside from the application of the Agreement a total of US$300 million a year in Pemex and CFE contracts: Annex 1001.2b.
- Annex 602.3(4).
Journal of Energy & Natural Resources Law
Volume 12, 1994 - Issue 1: International Energy Trade