U.S. demand for Canadian oil continues to grow, building on a rich history of cross-border energy trade. But the new administration under President Joe Biden has increased uncertainty about the future of this relationship.
As Alberta’s former envoy in Washington and in Asia, Gary Mar has worked at the heart of bilateral relations between Canada and its trading partners. He’s also the former CEO of the Petroleum Services Association of Canada and the current CEO of the Canada West Foundation, offering a unique perspective on the interests of Canada’s oil and gas sector in the context of its customers.
Here’s what he thinks about what’s next for Canada and the U.S.
CEC: What is your outlook for the energy relationship between Canada and the U.S. under Joe Biden’s administration?
Mar: I remain optimistic. When I arrived in Washington in 2007, about 11 per cent of U.S. oil imports were from Canada. By the time I left [in 2011], it was closer to 18 or 19 per cent. Today, it’s about 48 per cent. So, we’ve not only had a long-standing relationship, it is one that has actually increased in importance.
As the Biden administration goes to COP 26 in Glasgow in November, they need to take into account where their energy comes from and that there is still an enormous demand for it, as evidenced by the lawsuit that came up from 21 U.S. attorneys general who are opposed to the revocation of the Keystone XL permit.
This is something that the president can’t ignore. Whether or not that litigation is successful is almost not the point. The point is that it sends a strong signal that there are Democrats in the House of Representatives and in the U.S. Senate and in states throughout the U.S. that rely upon energy that comes from Canada that it is affordable, reliable, and that is responsibly produced.
CEC: How is the relationship impacted by the cancellation of the permits for Keystone XL?
Mar: I think it’s really important to note that we still have 3.7 million barrels of oil a day that does cross the border. It’ll be up to producers to figure out the ways that they can get it to their customers, because there is demand for it. I do think that it’s important that we stand up for the importance of this type of energy.
In the state of Michigan there is an issue with respect to Line 5. That’s not only important for the U.S. Midwest, but it’s also important for Canada. Roughly half of the crude oil used in Ontario comes through Line 5 and about two thirds of the crude oil used in the province of Quebec, so this is an important issue for us that we shouldn’t lose sight of.
It’s one thing to stop a pipeline that prevents new supply from coming into your country. It’s quite another thing to cut off your existing supply.
CEC: Is Canadian oil and gas still an important industry?
Mar: The answer is yes. The word transition has different meanings to different people. Some people believe it means that we will cease using oil and gas by the end of this decade. I find that to be an incredibly naive and not well-founded belief.
You cannot get to Paris targets or net zero by 2050 without having the involvement of the oil and gas industry, by every credible analysis.
Take, for example, the International Energy Agency, which says oil and gas will continue to be a dominant source of energy in the world, for a couple of reasons.
One is that the world’s population will grow from its current 7 billion people to perhaps 10 billion people by the end of the century. Number two is the growth of the middle class, particularly in places like Africa and India, that will be demanding energy.
It took a century for us to build the infrastructure necessary to have fossil fuels as an important part of our quality of life. It won’t take a century to transition to other types of energy infrastructure, but it’s still going to take a long time.
CEC: Do you see any opportunities for the oil and gas trade relationship between Canada and the U.S.?
Mar: I think the opportunity is in creating a continental energy and environment strategy. I think it’s important for Canada to harmonize some of what it does with the United States.
You cannot develop any kind of economy without access to affordable, reliable energy, and you cannot develop any kind of energy, including renewables, without having some impact on the environment. You’ve got to find that sweet spot where you’re balancing all three. And this is the opportunity for Canada and the United States to work together.
by Deborah Jaremko