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Journal of Energy & Natural Resources Law Volume 12, 1994 - Issue 1: International Energy Trade
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Original Articles

GATT, NAFTA and the Trade in Energy: A US Perspective

Ernest E Smith Rex G Baker Centennial Chair in Natural Resources Law, University of Texas Law School, Austin, Texas.
&
David P Cluchey Professor, University of Maine, School of Law, Portland, Maine.
Pages 27-58 | Published online: 08 Jun 2015

  • US Energy Information Administration, International Energy Outlook 1992 10–11 (DOE/EIA 1992). The figures include petroleum derived from all sources, including natural gas liquids and refinery gains, as well as crude oil. If production of crude oil alone is considered, the figure is significantly smaller, dropping to an average daily production of approximately 8 million barrels.
  • Id.
  • Id.
  • Within recent years natural gas imported from Canada has accounted for between 5 and 7 per cent of US consumption. See Cross-Border Oil & Gas: Canada-US Energy Trade 3 (Pace University 1990), and US Energy Information Administration, The Outlook for Natural Gas Imports: Supporting Analysis for the National Energy Strategy 5 (DOE/EIA 1992). This represents between 97 and 100 per cent of the natural gas imported into the US Id.
  • Coal is also imported into the United States. For example, during the mid-1980s Columbian coal made some inroads among users in the eastern part of the country.
  • See International Energy Outlook 1992, supra note 1, at 21.
  • Id.
  • See the discussion infra at notes 115–129.
  • The Canada-United States Free Trade Agreement (CFTA) 27 ILM 281 (1988) was negotiated from 1986 to 1988 and came into force on 1 January 1989. The North American Free Trade Agreement (NAFTA) is slated to come into force on 1 January 1994. Difficulties in securing passage of the implementing legislation in the United States may delay the date upon which NAFTA comes into force. See the discussion, infra at note 33.
  • Article 101 of Chapter One of the CFTA specifies that in establishing a free trade area Canada and the United States are acting consistently with GATT Article XXIV. Article 101 of Chapter One of NAFTA is to the same effect.
  • CFTA, Chapter Nine; NAFTA, Chapter Six.
  • See the discussion, infra at notes 51–59.
  • J Owen Saunders (ed) 1991 International Monetary Fund figures put Canada's share of United States imports at 17.1 per cent, while the US share of Canada's imports is 69.2 per cent. For purposes of comparison, Japan, the second largest trading partner of both the US and Canada, supplies 15.3 per cent of US imports and 6.1 per cent of Canada's imports. The Economist, 15 August 1992, at 54.
  • J Owen Saunders (ed) 1991 International Monetary Fund figures put Mexico's share of US imports at 7 per cent and the US share of Mexican imports at 72.5 per cent. In 1991, Canada was Mexico's fourth largest trading partner, supplying 3.1 per cent of Mexico's imports. Mexico's second and third largest trading partners in 1991 were Japan and Germany, supplying 5.2 per cent and 3.6 per cent of Mexico's imports respectively. Id.
  • See Cross-Border Oil & Gas: Canada-US Energy Trade, supra note 4.
  • See Robert J Beck, “Second Half Economic Gains to Lift Oil Prices”, Oil & Gas J, 29 July 1991, at 69.
  • Within recent years natural gas imported from Canada has accounted for between 5 and 7 per cent of US consumption. See Cross-Border Oil & Gas: Canada-US Energy Trade, supra note 4, and The Outlook for Natural Gas Imports, supra note 4. This represents between 97 and 100 per cent of the natural gas imported into the US. Id.
  • The Outlook for Natural Gas Imports, supra note 4, at 5.
  • Although as recently as five years ago over 55% of the United States’ electricity was derived from burning coal and almost 20 per cent from nuclear powered facilities, several electric utilities have already shifted to natural gas. L. F Ivanhoe, “Oil, Gas Dominant Sources of Energy in US”, Oil & Gas J, 30 September, 1991, at 110. More extensive shifts to natural gas are planned before the end of this century, although this use of natural gas may be offset during the succeeding 20-years period when coal-fired steam units are expected to come on line. See International Energy Outlook 1992, supra note 1, at 20. In 1988 about as much electricity (9.1 per cent) was generated by hydroelectric power as was generated by burning natural gas (9.5 per cent). Fuel oil accounted for about 5.4 per cent of the electricity generated. See Invanhoe, supra.
  • Id.
  • Some commentators suggest that pipeline imports from Mexico will re-commence before 2000. International Energy Outlook 1992, supra note 1, at 20; The Outlook for Natural Gas Imports, supra note 4.
  • The US Energy Information Administration predicts a level of imports that reaches 2,100 bcf annually and remains constant for approximately 10 years, when a gradual decline begins. The Outlook for Natural Gas Imports, supra note 4. Although it has forecast a significantly lower overall volume of US imports, the Canadian National Energy Board has also concluded that US consumption of Canadian gas would grow rapidly until the mid-1990s, and then stabilise. National Energy Board, Canadian Energy Supply and Demand 1987–2005, s 6.5.3 (1986).
  • See The Outlook for Natural Gas Imports, supra note 4. Under these projections, natural gas is seen as successfully competing with coal in generating electricity and making significant inroads as a fuel for vehicles. See, eg, Ivanhoe, supra note 19.
  • See, eg, NAFTA, Annex 302.2(5), (10) (providing for tariff elimination between the US and Canada pursuant to Annex 401.2 of CFTA); NAFTA, Annex 300-A, Appendix A: Canada (maintaining the Auto Pact as preserved by the CFTA as the basic agreement relating to the trade in automotive products between Canada and the United States); NAFTA, Annex 300-B, Appendix 2.1 (Canada and the United States will eliminate duties on textile and apparel goods in accordance with CFTA); NAFTA, Article 605 (provision on use of GATT exceptions in energy trade, similar to CFTA, Article 904); NAFTA, Annex 703.1 (applies CFTA agricultural provisions to agricultural trade between US and Canada); NAFTA, Annex 801 (Canada-United States bilateral emergency action governed by CFTA, Article 1101); and NAFTA, Chapters 19 and 20 (dispute resolution provisions largely drawn from CFTA, Chapters 18 and 19).
  • See Reglamento de la Ley para Promover la Inversion Mexicana y Regular la Inversion Extrajera, Diario Official [DO], 16 May 1989; Jorge Camil “Mexico's 1989 Foreign Investment Regulations: The Cornerstone of a New Economic Model”, 12 Hous J Int'L 1 (1989).
  • See, eg, Mexico-US: Agreement on Subsidies and Countervailing Duties, 1985; Mexico-US: Framework Understanding on Bilateral Trade and Investment, 6 November 1987, 27 ILM 438 (1988); Mexico-US: Understanding Regarding Trade and Investment Facilitation Talks, 3 October 1989, 29 ILM 36 (1990); The Integrated Environmental Plan for the Mexican-US Border, 1992. Mexico also entered a bilateral agreement with Canada, Mexico- Canada: Understanding on Consultations on Trade and Investment, 1990.
  • In 1983, Mexico began the process of opening its economy to foreign competition and of privatising sectors of its economy owned by government. Shortly thereafter it began consciously building toward the negotiation of a free trade agreement with the United States. The United States was supportive of Mexican efforts to free its economy from government regulation and ownership. One important objective of the NAFTA from the standpoint of both the Mexican and US governments is that it will institutionalise the reforms which have been made in the Mexican economy. See generally, Francisco Velazquez, “Mexican Perspective on the North American Free Trade Agreement”, Mexico Trade and Law Reporter, 1 January 1992, available in LEXIS, Nexis Library, MTLR file.
  • On 10 June, 1990, Presidents Salinas and Bush instructed their respective trade ministers to initiate preliminary consultations on the negotiation of a free trade agreement between the two countries. In February 1991, Canada expressed its interest in joining the negotiation process. It has been suggested that Canada joined the talks to protect gains made in the negotiation of the Canada-US Free Trade Agreement, to make selective improvements in the provisions of that agreement, to win access to the growing Mexican market for Canadian exporters and to maintain Canada as an attractive investment location in North America. See Michael Wilson, “Canada Made the Right Choice to Sit at the NAFTA Table”, The Financial Post, 31 August 1992. Michael Wilson was Canada's Minister for International Trade during the NAFTA negotiations.
  • The adoption of the Single European Act and the negotiation of the Maastricht Treaty suggest the prospect of very substantial integration of the EC member states. The controversy over the Maastricht Treaty is illustrative of Europe's current inward focus. To the extent that the EC is outwardly focused, that focus tends to be on other countries of Europe. For example, the EC has reached agreement with the European Free Trade Association to create the European Economic Area. The EC has substantially increased economic ties to the countries of Eastern Europe. In March 1992, agreements went into effect providing better access to the EC market for Poland, Hungary and the former Czechoslovakia. Recent figures establish that trade between the EC and the countries of Eastern Europe is growing rapidly. The European Commission is now seeking a mandate from EC Foreign Ministers for trade negotiations with Russia.
  • In 1989, the combined GNP of Canada, Mexico and the US was $5,932 billion and the combined population was 357 million. The combined GNP of the countries of the EC and the European Free Trade Area was $5,784 billion and the combined population was 358 million. See Gary Hufbauer and Jeffrey Schott, North American Free Trade: Issues and Recommendations, Institute, for International Economics, 1992, at 4.
  • Several of the major issues of the Uruguay Round were also part of the NAFTA negotiations. Specifically, extension of the GATT to trade in services, provisions relating to the protection of intellectual property rights and strengthening of the dispute resolution provisions were all important issues of the Uruguay Round where significant progress has been made in NAFTA.
  • For example, the “Dunkel Draft” of the results of the Uruguay Round contains a section on the protection of intellectual property rights that is quite similar to Chapter 17 of NAFTA. See The Institute for International Legal Information, “The Dunkel Draft” From the GATT Secretariat, (1992). Arguably, NAFTA takes the achievements of the Uruguay Round negotiations in this sector and improves upon them.
  • See 19 USCs 2191 et seq. President Bush formally presented NAFTA to the Congress in December, 1992. Thereafter, the implementing legislation for NAFTA could be presented by the President at any time and still receive the benefit of the 90 day fast track approval process. It now appears likely that Congress will vote NAFTA up or down before the end of November. By contrast, the major amendments of the GATT being negotiated in the Uruguay Round negotiations are in a somewhat different situation. As the results of these negotiations have not yet been finalised, it now appears unlikely that the Uruguay Round will be concluded in time to take advantage of the recent Congressional extension of fast track authority to 15 April 1994. In the past requests to Congress to extend fast track authorisation have been occasions for negotiation between Congress and the President on a variety of trade issues. Even with extension of the fast track authority, a bill implementing the results of the Uruguay Round negotiations would presumably stand in line in the legislative process, behind the President's health care reform package and a bill implementing NAFTA and any side agreements. If these initiatives are delayed for any reason and the timing of Uruguay Round legislation extends beyond the spring of 1994, the midterm Congressional elections in November 1994 may push the implementation of the Uruguay Round results in the US into 1995.
  • See eg, The ITC Report, Texas Perspective, May 1991 (vol 4, no 4 & 5), at 22.
  • See Beck, supra note 16, at 60.
  • See the discussion, infra at notes 94–102.
  • NAFTA, Artide 101.
  • NAFTA, Artide 102.
  • NAFTA, Artide 301(1). Artide 301 specifically incorporates GATT Artide III and its interpretative notes into NAFTA. It also requires that provinces and states accord no less favourable treatment to goods of a party than the most favourable treatment accorded to directly competitive or substitutable domestic goods.
  • This transition period runs from 1 January 1994, to 1 January 2008. See NAFTA, Annex 302.2. The Tariff Schedules of each party attached to NAFTA designate the timetable for elimination of tariffs on particular goods. These Schedules are quite detailed and run to almost 1000 pages.
  • NAFTA, Articles 303 and 304.
  • NAFTA, Article 309.
  • NAFTA, Article 309(2). This provision is taken from Article 407(2) of the CFTA.
  • NAFTA, Articles 310 and 314. These provisions are similar to Articles 403 and 408 of CFTA.
  • These restrictions require that export shipments not be reduced below the proportion that exports to a party bear to the total supply of the good of the party imposing the export restriction. This determination is to be based on the data for the most recent 36-month period prior to imposition of the measure. The exporting party may not impose a higher price on exports than the price charged for domestically consumed goods. The export restriction may not disrupt normal channels of supply or normal proportions of goods supplied to the importing party. These provisions are taken from Article 409 of the CFTA.
  • CFTA, Article 301, Annex 301.2.
  • Id.
  • These disputes concerned the importation of automobiles assembled at plants located in Canada and exported to the United States under the CFTA. One of these disputes resulted in a panel determination in Canada's favour under the dispute resolution provisions of Chapter 18 of the CFTA. See In The Matter of: Article 304 and the Definition of Direct Cost of Processing or Direct Cost of Assembling; USA-92-1807-01; Final Report of the Panel, 8 June 1992.
  • NAFTA, Article 401 (b) provides that each of the non-originating materials used in the production of a good must be transformed as a result of production activity occurring in the territory of a party.
  • NAFTA, Article 402. This may not at first blush seem like much of a simplification. However, by focusing on transaction value, which generally can be obtained from a commercial invoice, and the value of non-originating goods, the transaction value method should be much easier to use than the CFTA method of attempting to value the materials and labour used in assembling operations. Although the net cost method will be somewhat more difficult to use, it at least provides a systematic basis for valuing the non-originating content of a good. It should be noted that NAFTA, Article 401 provides that a good will be classified as originating in a party if the regional value of a good is not less than 60 per cent under the transaction value method or not less than 50 per cent under the net cost method. With some exceptions, the choice of the valuation method is left to the exporter or producer of the good. The NAFTA Rules of Origin Chapter provides for separate treatment of automotive goods. See Article 403.
  • NAFTA, Article 603. This provision recognises that a party may restrict imports or exports of energy goods to a non-party and allows it to make sure that its restrictions are not evaded through transportation of energy goods through the other parties’ territories. However if a party takes such action, either or both of the other parties may request consultation in order to avoid undue interference with their own pricing, marketing and distribution arrangements.
  • NAFTA, Article 604.
  • For example, GATT Article XX(g) allows conservation measures only if they are taken in conjunction with restrictions on domestic production or consumption.
  • NAFTA, Article 605.
  • NAFTA, Article 607. Restrictions are also permitted in order to implement national policies or international agreements relating to explosive devices and to respond to direct threats to disrupt the supply of nuclear materials used for defence purposes.
  • NAFTA, Annexes 605 and 607.
  • NAFTA, Article 603.
  • NAFTA, Article 608.
  • NAFTA, Article 606.
  • See eg, GATT, Article XIX.
  • Chapter Eight of NAFTA is quite similar to Chapter Eleven of CFTA. The NAFTA provisions contain some minor changes. For example, Article 801(32)(b) of NAFTA requires that any emergency action must be taken within one year of the institution of an emergency action proceeding, thereby imposing a time limit on the duration of such proceedings. Article 802(2)(a) provides that imports from a party normally shall not be considered a substantial share of imports unless the party is among the top five suppliers of a good subject to emergency action. The equivalent CFTA provision, Article 1102(1), provides that “the range of five per cent to 10 per cent or less of total imports would normally not be considered substantial.”
  • NAFTA, Article 801(2)(b).
  • NAFTA, Article 801(2)(d). The transition period extends from 1 January 1994 to 1 January 2008.
  • NAFTA, Article 801(2)(c).
  • NAFTA, Article 801(3).
  • NAFTA, Article 802.
  • NAFTA, Article 802. The goods of a party should not be found to have contributed importantly to injury if the growth rate of imports from a party is appreciably lower than the growth rate of total imports of the good in question.
  • The GATT Agreement on Government Procurement, GATT, 26th Supp BISD 33 (1980), 18 ILM 1052 (1979), covers procurement of goods and services incidental to the purchase of those goods. It does not cover service contracts. It applies to procurement contracts of SDR 130,000 or more. NAFTA Chapter 10 applies to goods, services and construction services as agreed by the parties and set forth in annexes. The inclusion of services and construction services contracts is a substantial expansion of coverage beyond both the GATT Code and CFTA. The NAFTA provisions on government procurement are applicable to federal government contracts for goods and services of $50,000 or more and to federal construction contracts of $6.5 million or more. They apply to contracts for goods and services by government enterprises of $250,000 or more and construction contracts of $8 million or more. The specific limits on state and provincial contracts remain to be negotiated in consultation with state and provincial governments. See NAFTA, Chapter 10 Annex 1001. la-3. Although there are a number of limits and reservations to the NAFTA coverage levels, the NAFTA incorporates the most liberalised approach to government procurement of any existing free trade agreement. The CFTA actually provides a lower threshold for coverage of government contracts for eligible goods—$25,000. This threshold is incorporated into the NAFTA to govern relations between the United States and Canada on this issue. See NAFTA, Chapter 10, Annex 1001.2c.
  • See NAFTA, Chapter Ten, Annex 1001.la-2.
  • See NAFTA, Chapter Ten, Annex 1001.2a.
  • Mexico does retain the right to set aside up to $300 million in contracts of PEMEX and CFE commencing in the year 2003. NAFTA, Annex 1001.2b; Schedule of Mexico 3(c).
  • See Larry G Bowles, “North American Free Trade Agreement Opportunity for US Suppliers to Pemex,” paper delivered at the ABA National Institute on the North American Free Trade Agreement (29 January 1993) (Washington, DC).
  • Chapter 11 covers Investment, Chapter 12 covers Services and Chapter 14 covers Financial Services.
  • NAFTA, Articles 1102, 1103, and 1104.
  • NAFTA, Article 1106. NAFTA does permit the imposition of certain other requirements in connection with an investment, eg worker training, construction of a facility and domestic research and development requirements.
  • NAFTA, Article 1109.
  • NAFTA, Article 1110.
  • NAFTA, Article 1114. Article 1114 provides that a party that perceives that another party to the agreement is relaxing health, safety or environmental standards to encourage investment may request consultations “with a view to avoiding any such encouragement”.
  • NAFTA, Articles 1115–1138. The creation of the roster is provided for in Article 1124(4).
  • NAFTA, Article 1108 provides that the national treatment, most favoured nation treatment and performance requirement limitations will not apply to existing non-conforming measures that are described in a party's schedule to Annex I of NAFTA. Numerous non-conforming measures have been noted by the parties. In addition, provinces and states are given two years to schedule non-conforming measures.
  • NAFTA, Articles 1202, 1203 and 1204.
  • NAFTA, Articles 1206 and 1207.
  • NAFTA, Articles 1206(2), 1207(2).
  • Trade in services is assuming an increasing proportion of trade of the developed nations. It is now the fastest growing segment of US trade, hence, significant liberalisation of the trade in services is seen as an important negotiating objective for the US and other developed nations.
  • NAFTA, Chapter 14.
  • NAFTA, Annex VII, Schedule of Mexico.
  • There is an important exception to this statement. Mexico has reserved the right to insist on consultations on the necessity of temporary limitations on participation by foreign banks in the Mexican market if the authorised capital of foreign commercial banks doing business in Mexico reaches 25 per cent of the total authorised capital of all commercial banks in Mexico. NAFTA, Chapter 14, Annex 1413.6.
  • NAFTA, Articles 1405 and 1406.
  • See Articles 1109–1111, 1113–1114, incorporated into Chapter 14 by Article 1401(2); see also Articles 1115–1138.
  • NAFTA, Articles 1502 and 1503.
  • Comment of William C Ramsay, Deputy Assistant Secretary, Department of State, National Institute on the North American Free Trade Agreement (28 January 1993) (Washington, DC).
  • Article 1501 on competition law specifically provides in paragraph 3 that a party may not seek recourse to NAFTA dispute settlement mechanisms for an issue arising under that Article. Presumably, concern about the conduct of a monopoly or a state enterprise that implicated other NAFTA articles could be raised under Chapter 20 which contains the general dispute resolution provisions of NAFTA.
  • Intellectual property is mentioned in Article 2004 of the CFTA. This Article merely provides that the parties will cooperate in the Uruguay Round negotiations and other forums to improve the protection of intellectual property.
  • CFTA, Chapters 18 and 19.
  • Chapter 19 governs dispute settlement in antidumping and countervailing duty matters and Chapter 20 provides the general dispute resolution provisions for disputes arising under the agreement. In addition, there are a number of dispute resolution provisions governing the procedures to be followed in the settlement of disputes in specific subject areas. For example, Articles 1115–1138 provide a dispute settlement mechanism for investment disputes and Article 1414 modifies the Chapter 20 dispute settlement provisions for disputes concerning trade in financial services.
  • 96 See generally, Andreas Lowenfeld, “Binational Dispute Settlement Under Chapter 19 of the Canada-US FTA: An Interim Appraisal”, 24 NYUJ Int'l L & Pol 269 (1991).
  • NAFTA, Article 2001.
  • NAFTA, Article 2002.
  • NAFTA, Article 2006.
  • NAFTA, Article 2007.
  • NAFTA, Articles 2008, 2016 and 2017. Article 2009 provides that panelists must be selected from a roster of 30 individuals appointed by consensus for terms of three years. Article 2011 requires a disputing party to select panelists who are citizens of the other disputing parties. Panels are limited to five members.
  • NAFTA, Article 2018(1).
  • iosnafta, Article 101.
  • NAFTA, Article 103. Article 103(2) provides that “In the event of any inconsistency between this Agreement and such other agreements, this Agreement shall prevail to the extent of the inconsistency, except as otherwise provided in this Agreement.” Although this paragraph does not refer specifically to GATT, read in the context of Article 103, it appears to have been the intent of the drafters that the GATT would be included in the phrase “such other agreement”.
  • See eg, Article 301 (national treatment); Article 309 (quantitative restrictions); Article 603(1) (prohibitions and restrictions on trade in energy and basic petrochemicals); Article 802 (escape clause); Article 903 (rights and obligations under GATT Agreement on Technical Barriers to Trade); Article 1902(2)(d)(i) (GATT restrictions on antidumping and countervailing laws); and Article 2101 (exceptions under GATT Article XX).
  • See, eg, Article 315 (limits on parties rights to adopt or maintain restrictions pursuant to GATT Articles XI:2(a), XX(g), (i), and (j)); Article 605 (limits on parties rights to adopt or maintain restrictions pursuant to GATT Articles XI:2(a), XX(g), (i), and (j) on exports of energy or basic petrochemicals); Article 607(limits on parties rights to adopt or maintain restrictions pursuant to GATT Article XXI on imports of energy or basic petrochemicals); and Chapter Seven, Annex 703.2, Schedule A (US and Mexico waive rights under GATT Article XI:2(c) regarding certain agricultural trade).
  • In particular, investment, services, financial services and intellectual property are areas where NAFTA provides substantive coverage and GATT does not.
  • These agreements are the Convention on International Trade in Endangered Species of Wild Fauna and Flora, 3 March 1973, 27 UST 1087, TIAS No 8249; the Montreal Protocol on Substances that Deplete the Ozone Layer, 26 ILM 1541, 1550 (1987); and the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, 28 ILM 649 (1989).
  • These agreements are the Agreement Between the Government of Canada and the Government of the United States of America Concerning the Transboundary Movement of Hazardous Waste, 28 October 1986, and the Agreement Between the United States of America and the United Mexican States on Cooperation for the Protection and Improvement of the Environment in the Border Area, 14 August 1983.
  • NAFTA, Article 904.
  • Standard related measures are dealt with in Irene McConnell, “The North American Free Trade Agreement: Trading Natural Resource Goods and Protecting the Environment”, 12 JERL (1993).
  • See eg, GATT: Dispute Settlement Panel Report on US Restrictions on Imports of Tuna, 30 ILM 1954 (1991).
  • NAFTA, Article 2005(1).
  • NAFTA, Article 2005(2), (3), and (4).
  • The 1985 Coal Trade Equalisation Act is a good example of a proposal whose stated rationale was establishing a level playing field. It was prompted by Congressional concern over US dependence upon foreign energy sources and a Congressional finding that foreign coal producers enjoyed an unfair competitive advantage in that they frequently were not required to comply with the same environmental, health, welfare, and safety standards as US producers. The resulting proposal would have created a two-tiered tariff system for imported coal. It would have imposed an $8.00 per ton tariff on coal from countries that historically had been net exporters of coal to the United States and an additional, higher tariff upon coal mined by producers that failed to meet the environmental standards imposed upon US producers. Although approved by the House of Representatives, the bill died when it failed to win Senate approval before Congress adjourned. The Coal Trade Equalisation Act is unusual in that it involved coal, but typical in its approach and ultimate goal. By imposing a tariff on relatively cheap imported coal, the bill would have removed its price advantage over domestic coal and thereby aided a domestic industry—especially that part of it located in the traditional coal- belt states of Pennsylvania, West Virginia and Kentucky—characterised at a somewhat earlier period by high labour costs and, more recently, by expensive environmental, health and safety regulations.
  • See the remarks of Senator Robert Kruger in support of Senate Bill 254, 119 CONG REC S889–02 (4 March 1993).
  • See generally G Nash, United States Oil Policy, 1890–1964 at 29–35 (1968).
  • 19 USC section 1862 (1988).
  • President Ford's action prompted Congress to consider suspending both the tariff and presidential authority to levy import fees. Ultimately the Trade Expansion Act was amended to give Congress the power to disapprove any presidential adjustment of petroleum imports. See 19 USC section 1862(e).
  • Eg, HR 402, 100th Cong, 1st Sess, 133 Cong Ree H154 (1987).
  • Eg, HR 2200, 100th Cong, 1st Sess, 133 Cong Ree H2842 (1987).
  • See Task Force on Oil Price Stabilisation, Stabilising US Oil Prices 13–34 (University of Texas 1989) for an economic analysis and rationale for legislation establishing a price floor.
  • It should be noted that there are also environmental and conservation arguments advanced in favour of this legislation. The environmental arguments are primarily that an increase in crude oil prices would encourage shifts to use of natural gas and reduce the risk of tanker spills by reducing imports. See Patrick Crow, “US Industry Girding for Battle against Clinton Energy Tax Plan”, Oil & Gas J, 1 March 1993 at 19, 22 (comments by officers of the Domestic Petroleum Council and the Independent Petroleum Association of America). The conservation arguments focus both on the presumed shift to greater energy efficiency (such as higher mileage cars and better insulation in homes and business) that will result from higher priced oil and on the effect of higher prices in maintaining production from marginal wells. In 1991 over 1 million barrels a day of US crude oil production was from “stripper wells” that produced an average of 2.23 barrels a day. Such wells are extremely price-sensitive, and even a small drop in the price of crude oil leads to wide-spread abandonments. For example, 17,584 stripper wells were abandoned in 1991, over 6,000 in Texas alone. See Interstate Oil and Gas Compact Commission, National Stripper Well Survey 3–4 (1992). The initial consequence of abandonment is the loss of oil reserves producible by primary recovery techniques. These wells are located in old, virtually depleted fields that will not be re-drilled if the wells are abandoned. Of perhaps equal, if less obvious importance is the loss of a facility to use for potential secondary or enhanced recovery operations in these field. Many of these fields were improperly produced in earlier decades and contain significant quantities of oil that can be produced only by water flooding or other such techniques. Plugging existing wells makes later institution of secondary recovery programmes more expensive and correspondingly less desirable. Conversely, the marginal nature of the wells and their operators frequently results in the wells being abandoned without being plugged. This leads to a variety of environmental and reclamation problems associated with orphan wells. See Constance Hunt and Holly Prus, “Abandonment and Reclamation of Energy Sites and Facilities: Canada”, 10 JERL 87 (1992) and Donald Zillman and Ernest Smith, “Abandonment and Reclamation of Energy Sites and Facilities: The United States”, 10 JERL 87 (1992).
  • The United States Superfund Amendments and Reauthorisation Act of 1986, codified at 42 USCA ss 9601–9675.
  • Provisions for establishing the “Superfund” are contained in the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 USC s. 9601 et seq (1986).
  • For a more detailed discussion of this controversy, see William Slomanson, Fundamental Perspectives on International Law 467–68 (1990).
  • See National Stripper Well Survey, supra note 123, at p 3.
  • Stabilising US Oil Prices, supra note 122, at 12. The portion of the monograph from which this language is taken was written by Professor Walt W Rostow, Professor of Political Economy at The University of Texas at Austin and former Special Advisor to the late President Lyndon Johnson.
  • See Donald Zillman, “Energy Trade and National Security”, JERL (1993).
  • This process was accomplished by a series of orders over several years, culminating in Order 636, 59 FERC para 61,030, Docket RM91-11-000 and RM87-34-065, which was issued on 8 April 1992. It eliminates all “bundled” pipeline services and requires all existing pipeline sales contracts to be converted into separate sales and transportation agreements.
  • See the discussion, supra, at notes 19–23.
  • 15 USC s 717–717W (1988).
  • See Joiner, “US Mexican Energy Relations in the 1980s: New Resources versus Old Dilemmas”, 12 Case West Res J Int'l L 485, 495–97 (1980) for a discussion of this dispute between the Carter administration and the Mexican government.
  • The reasonableness of the price was judged by a variety of factors such as whether the true cost of the import could be determined by end-users or whether it would be concealed through intermingling with domestic gas rates. Comparability of price with alternative energy sources that would be used if the import request was refused was also looked to.
  • See Note, “Imported Natural Gas” Conflicts Between International Policies and Regulatory Safeguards”, 15 J Int'l & Econ 431, 431–37 (1981) for discussion of pre-1984 import policies.
  • 49 Fed Reg 6687 (1984).
  • Delegation Order No 0204–111, 49 Fed Reg 6690 (1984).
  • The Policy Statement indicated that security of supply remained relevant, especially for long-term arrangements, and that “international trade policy, foreign policy… national security interest”, and “other factors as may be appropriate” would be considered in determining if this factor had been met. See Panhandle Producers & Royalty Owners Ass'n v Economic Regulatory Agency, 822 F 2d 1105 (DC Cir 1987), for a detailed summary of the 1984 policy statement and its three basic criteria.
  • Id.
  • 8 75 F 2d 882 (DC Cir 1989).
  • Pub L No 102–486, 106 Stat 2776 (1992).
  • Report 1931, Foster Natural Gas Report 23 (10 June 1993).
  • Id.
  • 44 37 FERC para 61,215 (8 December 1986).
  • See National Energy Board, Canadian Energy Supply and Demand 1987–2005, section 6.5.2 (1986).
  • See Alexander J Black, “Economic and Environmental Regulatory Relations: United States-Canada Free Trade in Energy”, 8 Conn J Int'l L 583, 598–600 (1993).
  • For example, FERC Order 436, which allowed pipelines to credit gas transported for a producer against the pipeline's take-or-pay obligations to the producer encouraged pipelines to increase takes of domestic gas in order to reduce their take or pay obligations. One result was a decrease in takes of Canadian gas.
  • Pipeline rates based on geographic zones rather than distance would have disparate effects on domestic and Canadian gas.
  • 16 USC sections 470 to 470w-6 (1988).
  • 42 USC sections 4321–4370 (1988).
  • See National Indian Youth Council v Andrus, 501 F Supp 649 (DNM 1980), aff'd 664 F 2d 220 (10th Cir 1981).
  • 16 USC sections 1531–1544 (1988).
  • The Resource Conservation and Recovery Act (RCRA), 42 USC sections 6901–6992k, which regulates the use and disposal of hazardous wastes, exempts many of the wastes that result from exploring and drilling for oil and natural gas. The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 USC sections 9601–9675, which provides a funding and enforcement mechanism for cleaning up existing hazardous waste sites, specifically excludes petroleum from its definition of hazardous substances.
  • Pub L No 101–380, 104 Stat 486 (1990), principally codified at 33 USC sections 2701–2761.
  • 33 USC section 1321.
  • Friends of the Oldman River Society v Canada, 1 SCR 3 (1992).
  • Id.
  • See eg, Nat'l Energy Bd, Reasons for Decision, TransCanada Pipelines Ltd (Blackhorse Extension), Pub NoGH-1–91 (July 1991); Nat'l Energy Bd, Reasons for Decision, TransCanada Pipelines Ltd (Gananoque Extension), Pub No GH-4–90 (April 1991).
  • See Black at 614, supra at note 146.
  • See Ernest E Smith and Jacqueline L Weaver, A Treatise on the Texas Law of Oil and Gas, chapters 8–15 (1989 and 1992 update) for a description of the Texas regulatory system.
  • 474 US 409 (1986).
  • 15 USCA sections 717 717W (1988). See also Northern Natural Gas Co v Comm'n of the State of Kansas, 372 US 84 (1963) and Schneidewind v ANR Pipelines Co, 485 US 293 (1988), holding that state regulation of interstate pipelines is pre-empted by the Natural Gas Act.
  • 15 USCA sections 3301–3432 (1982).
  • Eg, Ohio Oil Co v Indiana, 177 US 190 (1900); Champlin Refining Co v Oklahoma Corporation Comm'n 286 US 210 (1932); and Henderson Co v Thompson, 300 US 258 (1037).
  • See, eg, Bandini Petroleum Co v Superior Court, 284 US 8 (1931).
  • For a full discussion of these cases and the theories under which they were argued, see Smith and Weaver, supra note 160, at section 8.5(B) (1989) and 1992 update).
  • The principal exception involved the common purchaser acts, which required private oil and gas pipelines as well as common carriers to take production “ratably” from all producers within a field. The court in Texoma Natural Gas Co v Texas Railroad Comm'n, 59 F 2d 750 (WD Tex 1932) held that the Texas Common Purchaser Act, Tex Nat Res Code Ann, sections 111.081–111.131 (Vernon 1978) not only deprived private pipeline owners of property without compensation, but also burdened interstate commerce in violation of the commerce clause. Agency attempts to accomplish the same goal through prorationing orders was also attacked, although primarily on “takings” grounds. The history of this dispute and the current status of common purchaser acts is set out in Smith and Weaver, supra note 160, section 8.5(B)(2)
  • (1989) and 1992 update).
  • State Environmental Quality Review Act, NY Envt'l Conserv Law section 8–0101 et seq (McKinney 1984 and 1993 Supp).
  • A detailed discussion of the Iroquois pipeline project and the legal issues it generated can be found in Frederick M Lowther, “The Iroquois Pipeline Project: A Study in Federal/State Conflict”, 31 Alta L Rev (1993).
  • See Alan S Hollingworth, “California Gas: A Brief History and Recent Events”, 31 Alta L Rev 86 (1993).
  • The NEB's decision, especially as it relates to CFTA and GATT is discussed in J Owen Saunders, “GATT, NAFTA and North American Energy Trade: A Canadian Perspective”, 12 JERL (1994).
  • Lowther, supra note 169, at 18–24.
  • Id.
  • Hollingworth, supra note 170, at 102–103.
  • 16 USC sections 1451–1464 (1988).
  • National Energy Board Act, RSC, ch N-7 (1985).
  • The NEB's powers and functions are described in Alastair R Lucas and Constance D Hunt, Oil and Gas Law in Canada, 228–245 (1990).
  • The procedures in effect by 1989 for approving natural gas exports are set out in some detail in the Vector Energy case, In the matter of Canterra Energy Ltd, Norcen Energy Resources Ltd, Poco Petroleums Ltd Inc and Western Gas Marketing Ltd, National Energy Board GH-8–88 (1989). For a description of the NEB's policies toward natural gas exports, see J Owen Saunders, supra at note 171.
  • Gary B Conine, “Natural Gas Transactions Between the United States and Mexico: Political and Legal Impediments to Free Trade”, 27 Tex Int'l L J 577, 658 (1992).
  • See Alexander J Black, supra at note 146.
  • One example is the dispute over provincial royalty rates and its effect on federal tax revenue described in Lucas and Hunt, supra note 177, at 31–35.
  • See Davies, “Marketing Alberta Natural Gas: A Producer's Perspective Following Deregulation”, 27 Alta L Rev 1(1988) for a discussion of an instance in which the province refused to approve removal applications because the contracts under which the gas was to be sold were deemed unacceptable.
  • For a description of the Mexican legal regime applicable to the oil and gas industry, see Rogelio Lopez-Velardie, “Foreign Participation in the Oil and Gas Industry in Mexico”, The North American Free Trade Agreement: Its Scope and Implications for North America's Lawyers, Businesses and Policymakers, Paper H (ABA 1993).
  • See “Mexico's Oil Industry Heads Towards the 21st Century”, Mexico on the Record, January 1992 (vol 1, no 2), at 2; Dianna Solis, “Mexico Guards its Precious Oil Business: Foreigners Push, but Protectionist Gates Stay Shut”, Wall St J, 20 January 1992, at A-8.
  • The American Petroleum Institute, The Importance of Energy to a Free Trade Agreement with Mexico iii (1991).
  • In Annex 602.3 Mexico reserves to itself the right to carry out and invest in exploring, producing, refining, processing, trading, transporting, storing and distributing, up to and including the first sale of crude oil, natural and artificial gas, goods obtained by refining and processing crude oil and natural gas, and basic petrochemicals.
  • NAFTA, Article 606.
  • See the discussion, supra at notes 94–102 and 113–114.
  • See eg, Jagdish Bhagwati, “The Diminished Giant Syndrome”, Foreign Affairs, Spring 1993, pp 22–26; Gary Hufbauer and Jeffrey Schott, NAFTA: An Assessment, Institute for International Economics, 1993, pp 116–117. Professor Bhagwati suggests the possibility of four regional trading blocs: an expanded EC, a NAFTA extending into South America, a Japan-centred Asian bloc, and “a fourth ‘bloc’ of marginalised nations such as those of South Asia and Africa.” Hufbauer and Schott envision two competing trading blocs: an expanded EC and “a looser Pacific Basin group of North American and East Asian countries.”
  • See the discussion, supra at note 33.

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