Adamant: Hardest metal
Saturday, March 15, 2003

Energy ties: Use them or lose them -Canada needs to highlight importance of its oil and gas to U.S.

www.nationalpost.com Claudia Cattaneo Financial Post Friday, March 14, 2003

Canada and the United States have had lots to fight about recently. But there's one area where our relationship with the United States has never been stronger: energy.

Over the coming months, both countries will have the opportunity to build on it -- or watch it flounder.

George W. Bush cares deeply about energy and his country is again pushing forward legislation to boost continental energy sources so it can reduce its dependence on the Middle East.

Canada has a lot to gain if the United States successfully designs a continental energy strategy. Despite tensions on other fronts, such as the war with Iraq and softwood lumber, Canada must re-enforce it wants to be a secure and growing supplier of energy for the United States.

Said Robert Ebel, director of the energy program at the Centre for Strategic & International Studies in Washington, "Canada has to stress to the United States and the consumers in the U.S. that Canada is our largest supplier of oil, and that virtually all of our imported natural gas, and Canada has proven to be a reliable source of supply that we really don't have to worry about. It also needs to stress that Canada understands the need for more natural gas in the United States and will do what it can to meet that growing demand, which is going to be met largely through imports, since we are not going to be able to develop our own gas supplies."

The United States, too, can do its part by refusing to take steps that would hurt Canada's energy industry -- such as rejecting calls for tax credits to facilitate construction of a natural gas pipeline from Alaska. The controversial proposals died in Congress last year, but ConocoPhillips, which has large reserves in Alaska, is again asking Washington to help make an Alaska Highway pipeline viable by minimizing commodity price risks through tax credits.

The unfortunate part is that detrimental initiatives like government incentives could end up being supported by some U.S. legislators because of a lack of awareness of the role Canada can play in meeting U.S. energy security needs.

"It's disappointing that there is not more appreciation," said one Washington insider. "I think Canada is taken for granted."

Energy ties between Canada and the United States have been strong for a simple reason: we want their markets as badly as they want our resources.

Already, this strong relationship has led to a fully integrated natural gas market. The financial community, in fact, increasingly looks at the industry as borderless.

And, thanks in part to strong energy prices, both countries are blessed with strong and growing players. Canadian companies like EnCana Corp. have a big presence in the United States, while large U.S. companies have become large entities in Canada.

The large U.S. presence in the Canadian oilpatch has recently helped strengthen ties, along with defusing flashpoints such as the Alaska subsidy issue. U.S. companies with large interests in Canada's Mackenzie Delta such as ExxonMobil Corp. and Devon Energy Corp., for example, aligned themselves with Canada last year, pressing their case in Washington, where they have more clout than Canadian companies.

It's also an area where Canadian politicians have fared particularly well. Even the Canadian Association of Petroleum Producers has been happy with the efforts of Jean Chrétien, federal Cabinet ministers such as Herb Dhaliwal, and provincial premierssuch as Ralph Klein in fostering a healthy energy relationship.

Canada has benefited by becoming the largest supplier of energy to the United States.

Canada rose to No. 1 supplier of oil and refined products to the United States in 1999, shipping 1.9 million barrels a day, moving ahead of Saudi Arabia, Mexico, and Venezuela.

Canada also accounts 94% of U.S. imports of natural gas, shipping 10.4 billion cubic feet a day, or about two thirds of its production.

North American energy markets are working so well, in fact, all Canada may need to do is public relations -- ensure the United States understands that when it comes to energy, Canada is on side, capable and willing.

ccattaneo@nationalpost.com

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