Oil and gas industry praises Trump’s new NAFTA deal

Washington Examiner – by Josh Siegel

The petroleum industry on Monday urged Congress to approve the Trump administration’s renegotiated NAFTA agreement, and said the new deal promises to maintain booming exports of oil and natural gas to America’s northern and southern neighbors.

“We urge Congress to approve the USMCA,” said Mike Sommers, president and CEO of the American Petroleum Institute, the largest U.S. oil and gas trade group. “Having Canada as a trading partner and a party to this agreement is critical for North American energy security and U.S. consumers. Retaining a trade agreement for North America will help ensure the U.S. energy revolution continues into the future.”  

The group praised the new deal after some had feared President Trump could tear up the North American Free Trade Agreement, which had helped make Mexico the largest export market for U.S. oil, transportation fuel, and natural gas.

Canada has its own special energy relationship with the U.S. that is aided by NAFTA, and is the biggest U.S. supplier of foreign oil and a significant net exporter of electricity to America.

The heavier crude oil produced in Alberta’s oil sands is attractive to Gulf Coast refiners that are built to process heavier crude. The refiners are in need of a reliable supplier as Venezuela’s production crashes amid financial and political problems. The fracked U.S.-produced crude oil is lighter and sweeter, and refineries are still adjusting to process it.

NAFTA, implemented in 1993, contains few energy-specific provisions. But it allowed for the U.S., Mexico, and Canada to pay nothing on most goods that cross borders between them, including energy products.

The new trade deal maintains the “zero tariff” status for energy products.

It also keeps in place investor protections for energy projects in Mexico. The energy industry had worried that U.S. Trade Representative Robert Lighthizer would succeed in his push to eliminate NAFTA’s Investor-State Dispute Settlement process, which allows businesses to take legal action through third-party arbitration if a foreign government harms their investment in that country.

Critics of the process say the settlement provision encourages U.S. companies to invest internationally and move jobs overseas.

The protections are especially important for energy, because investments usually require substantial time to bear fruit, such as the process of exploring, and then producing crude oil in the Gulf of Mexico.

While the new NAFTA deal mostly eliminates investor protections for Mexico, and gets rid of them entirely for Canada, the energy industry is among a few key industries that won an exception for investments in Mexico. Protections there are especially important as a hedge if the country’s new leftist government tries to nationalize its energy industry again.

The new trade agreement has other technical provisions important to the oil and gas industry.

For example, it provides “additional flexibility” to make it easier for a U.S. company to prove is it importing oil or natural gas from Canada or Mexico to qualify for no tariffs, allowing for alternative documentation, the American Petroleum Institute said.

https://www.washingtonexaminer.com/policy/energy/petroleum-industry-praises-trumps-new-nafta-deal