Now that Canada’s conventional oil and gas supplies have peaked and are in decline, the country may not be able to reduce its exports to the U.S., potentially leaving its citizens out in the cold. This, according to a recently released report by the Parkland Institute, a public policy research institute based at the University of Alberta, is a scenario made entirely possible because of an obscure clause in the North American Free Trade Agreement. If invoked, the institute contends, the proportionality clause would require Canada to maintain its energy exports to the U.S., which already sit at 60 per cent, despite dwindling proven reserves, and no strategic reserve plan in place. Unlike countries like the U.S., which maintains a 160-day supply of oil in case of emergency, Canada has no reserve and is becoming increasingly dependant on oil imports from unstable OPEC countries. Canada, considered an exporting country and therefore exempt from requiring a reserve, currently imports 49 per cent of its oil, mostly to supply Quebec and the Atlantic provinces.

“When we can’t even control the price at which we buy back our own energy from the oil transnationals and we can’t even guarantee that our own citizens get first [claim to] their own resources, I don’t think that’s an energy superpower,” says Gordon Laxer, a political economy professor and director of the Parkland Institute who co-authored the report. “More like an energy colony.”

When NAFTA was being drafted in 1993, many oil and gas companies lobbied hard for the federal government to include the proportionality clause in order to secure access to the U.S. market. During this time, there was a surplus of oil and gas, climate change wasn’t on anyone’s lips and national security wasn’t yet trumping trade, says Laxer. “We’re now at the end of the age of cheap fossil fuel.” In the lead-up to the Ohio primaries this past February, U.S. presidential hopefuls Hillary Clinton and Barack Obama both suggested NAFTA be reopened and renegotiated. Prime Minister Stephen Harper responded by saying, “If any American government ever chose to make the mistake of opening NAFTA, we would have some things we would want to talk about as well.” However, both candidates quickly backed away from the issue, and were accused of pandering for votes in a state that had been hit hard by the economic downturn in the U.S. “That’s the first hint that we’ve gotten that this [Canadian] government recognizes that we got a bit of a raw deal on energy in that agreement,” says Ricardo Acuna, executive director of the Parkland Institute. “If the Mexicans were able to negotiate an exemption for themselves from proportionality, then this is a great opportunity for us to do the same, even if we don’t scrap the agreement, just renegotiate it.”

The doom-and-gloom scenarios painted by the Parkland Institute and other critics of the free trade agreement have been around since it was drafted and are inaccurate, says Nick Schultz, vice-president of the Canadian Association of Petroleum Producers (CAPP). “It’s a myth that proportionality guarantees any fixed proportion of goods to any country,” says Schultz. “Free trade protects commercial arrangements. It’s the marketplace that determines where supply and demand go, and if you look at how the market operates, markets in Canada are getting their demands met through free market proportions, and proportionality has got nothing to do with it.” According to Schultz, there is an underlying understanding between trading partners that, “you don’t do to your neighbour what you’re not prepared to do to yourself.”

Todd Grierson-Weiler, an Ontario-based lawyer who specializes in international economic law, says the whole notion of restricting the flow of goods in and out of the country is ludicrous. “How much of our natural resources are currently the responsibility of kind, generous Americans who have come up and invested in our resources so that we can extract them and gain revenues,” says Grierson-Weiler. “From the perspective of free enterprise, I would be loathe to have anybody put any restrictions over supply any time because it’s usually a bad thing.”

“To talk about free trade, especially the deal we’ve got with the U.S., and use expressions like ‘goodwill,’ and ‘we’re all going to be nice to each other regardless of what the agreement says,’ is just ridiculous,” says Acuna. “We’ve seen the extent of the American goodwill when it comes to protecting their trade interests. We saw it with softwood lumber. We saw it with mad cow. There’s no goodwill there, [the U.S.] is going to protect their interests.”

With emerging countries like India and China requiring more energy to fuel their burgeoning economies, the demand for oil and gas is not expected to decrease in the near future. The use of natural gas, the cleanest burning fossil fuel available, is generally forecasted to increase in part because of its use in bitumen extraction in the oilsands, an energy-intensive process former Alberta treasurer Jim Dinning once likened to “turning gold into lead.” According to the Energy Resource Conservation Board (ERCB), oilsands production is expected to increase from 1.25 million barrels per day (bpd) in 2006 to 3.2 million bpd by 2016. This comes at a time when the U.S. is seeking a more stable and secure source of oil to free itself from its dependence on Middle Eastern oil.

Given a customer with an appetite for energy as insatiable as the U.S., the proportionality clause could prevent Canada from meeting its emissions targets outlined in the Kyoto Protocol. “If we cut down our consumption, what that means is that there’s just more to export south, which when you look at the proportionality rule, it just cranks up that percentage that we’re sending south of the border,” says Acuna. “Ultimately, it would help us in Canada to reduce our emissions, but on a worldwide level we wouldn’t be reducing any less because if it’s not being used in Canada it’s going to get used in the U.S.”

The Parkland report also accuses the Alberta government of violating its own legislation, the Alberta Gas Resources Preservation Act [first proclaimed in 1949] that requires the province to maintain a 15-year reserve of gas for its own citizens before exporting it elsewhere. Using government figures, Laxer calculates there is just over eight years of established remaining conventional gas reserves in Alberta. According to CAPP’s own figures, the number of conventional oil and gas wells drilled doubled between 1999 and 2006, yet production has declined since peaking in 2002. “The fact that we are exporting half our natural gas from Alberta means that we don’t have the 15 years that we’re supposed to,” says Laxer.

According to ERCB spokesperson Bob Curran, the 15-year rule has been misinterpreted by the Parkland Institute and only applies to Alberta core customers — residential, commercial and institutional — that don’t have alternative sustainable fuel sources, and doesn’t include industrial consumers. “It’s a theoretical legal argument, so people can interpret it any way they please,” says Curran. “From our standpoint, the legislation is clear, and there’s enough gas in place that core customers will be protected, but that’s never been tested legally either.”