A comparative perspective of the impact of Canadian and United States oil regulation law differences on approving use of new petroleum-based energy sources.

• Author: Mohyi, Diana

INTRODUCTION:

The race to find alternative energy to fuel the American economy and save it from reliance on the Middle East oil supply fails to reflect that the United States has a ready source of oil from Canada. In terms of proven petroleum reserves, Canada ranks third after Saudi Arabia and Venezuela. (1) Canada's oil reserves are eight times larger than the United States. (2) Although the United States and Canada have similar governing structures due to their shared heritage, and both countries are committed to working together, their energy policies are not completely congruent. United States energy policy overemphasizes security and environmental concerns consequently disadvantaging its economy; alternatively, Canada's economy-focused energy policy gives its economy an advantage in energy matters.

1. BACKGROUND

   Security and environmental concerns are the 'rock and hard place' in the American race to find alternative energy sources. The risk to United States energy security mandates that the United States find energy sources outside of the Middle East. (3) Experts have determined that a potential terrorist attack on the Saudi Arabian oil infrastructure can be easily carried out and have devastating effects on the United States economy. (4) As the State Department sits poised to approve the Keystone XL Pipeline Project that would allow increased oil imports from Canada, those opposed have raised concerns about the negative impact on climate change and possible air, water and wildlife pollution. (5)

   The oil sands of Alberta produce crude bitumen, commonly called 'dirty oil,' which TransCanada Corporation intends to import into the United States via its Keystone XL Pipeline. (6) The Keystone XL project would transport 900,000 barrels of oil a day from Alberta through the United States and on to refineries in the Gulf of Mexico. (7) The pipeline will start in Hardisty, Alberta, cross the United States border from Monchy, Saskatchewan, and cut across Montana, South Dakota and Nebraska. (8) The pipeline expansion project will also extend the pipeline from Cushing, Oklahoma, to Houston and Port Arthur, Texas. (9) American groups opposed to the pipeline worry about the potential for more oil-leak disasters. (10) Politicians in Nebraska have urged United States Secretary of State Hillary Clinton to consider alternative routes for the pipeline. (11) Meanwhile, the Canadian government has already approved the Keystone XL Pipeline Project. (12) Canada's approval includes provisions for landowner rights and environmental protection. (13)

   The United States has cautiously made advancements toward full approval of the project. In January 2012, United States President Barack Obama denied TransCanada permission to build the northern part of the pipeline from Canada to Oklahoma because of the need for more time to review the environmental impact. (14) Recently, in June 2012, the Obama Administration acted on its promise to expedite the southernmost portion of the project by granting construction permits for part of the route passing through Texas. (15) Other United States government entities have followed suit. The U.S. Army Corps of Engineers in Tulsa, Oklahoma subsequently approved the segment of the Keystone XL pipeline, which will run from Cushing to Texas. (16) Keystone XL Pipeline builder TransCanada needs approval for its wetland and water-crossing plans from each U.S. Army Corps office which oversees a district included in its Keystone XL Pipeline Plan. (17) TransCanada awaits similar approval from the Corp's Fort Worth, Texas district office. (18)

2. SURVEY OF OIL REGULATION LAWS IN CANADA AND THE UNITED STATES

   The United States and Canada have a shared British history, which has influenced legal development in the two countries. (19) The founders of these nations sought to ensure that their citizens had freedom and sought to build prosperous economies. (20) Founders also established federal systems of government in which the national government shares its powers with the sub-national state or provincial governments, respectively. (21) Different influences have contributed to each nation's development and produced both subtle and significant differences in the ways in which each government runs its respective country. (22)

   1. Oil Regulation Law in Canada

      The Canadian Constitution Act of 1867, otherwise known as the British-North America Act of 1867, specifically vests various powers of Canadian government in the provincial and national governments, and established that any powers not specifically granted rest in the hands of the Canadian national government. (23) The exclusive legislative authority of the Canadian Parliament extends to the regulation of trade and commerce. (24) The Act grants provincial legislatures the power to make laws in relation to exploration for non-renewable energy sources and development, conservation, and management of nonrenewable energy resources. (25) It also grants provincial legislatures the power to make laws respecting the export of natural resources to other Canadian provinces; such laws cannot allow for discrimination between provinces in terms of prices or supplies exported to another province. (26) The Act states that the ability of the provincial legislatures to enact laws relating to non-renewable energy resources does not detract from the authority of the federal Parliament and that where the laws conflict, the law enacted by Parliament prevails. (27) In each province, the provincial government has the power to tax non-renewable energy resources whether the resource is exported in part or in full from the province. (28) Such laws may not authorize taxation that differentiates based on whether the production is exported from the province. (29)

      The three main principles of Canadian energy policy are: market orientation; respect for jurisdictional authority and the role of the provinces; and, where necessary, targeted intervention in the market through regulation or other means in order to achieve specific policy objectives. (30) The first principle of market orientation is the idea that it is most efficient to allow the market to determine supply, demand, prices, and trade to guarantee an efficient, competitive, and innovative energy system that is responsive to Canada's energy needs. (31) The second principle of respecting jurisdictional authority and the role of the provinces means that provincial governments directly manage most of Canada's resources and are responsible for resource management within their borders. (32) The third principle of market intervention is employed for policy objectives, which include issues relating to health, safety, and environmental sustainability. Safety issues include such matters as pipeline regulation. (33)

      Domestic and international agreements and accords have helped shape Canada's energy policy. (34) The Western Accord and 'Agreement on Natural Gas Markets and Prices', are agreements between Canada's federal government with the provinces of Alberta, Saskatchewan, and British Columbia, which concern oil and gas pricing and taxation. (35) The Atlantic Accords, an agreement between the Canadian federal government and the provinces of Newfoundland, Labrador and Nova Scotia, include the establishment of jointly managed Offshore Boards. (36) The Canadian government considers Canada's Free Trade Agreement with the United States, which was followed by the North American Free Trade Agreement ("NAFTA"), (37) to be the cornerstone of Canadian energy policy regarding trade. (38) NAFTA emphasizes the importance of competitive market behavior and encourages investment in Canadian energy markets. (39) Energy is a globally traded commodity; many international agreements deal with its trade and the emissions associated with the production and use of energy. (40) These agreements also greatly influence how Canada develops and carries out its energy policy. (41) Canadian energy policy includes the resolve to stay "flexible to ensure an economically competitive and innovative energy sector that sustainably delivers a secure, reliable and safe supply of energy." (42) This is to ensure that Canada can meet challenges and benefit from the opportunities that appear on international and domestic energy markets. (43)

      Various government organizations work with companies in the Canadian energy sector. (44) Those dealing with petroleum-based resources include the Canada-Newfoundland and Labrador Offshore Petroleum Board ("CNLOPB"), Canada-Nova Scotia Offshore Petroleum Board ("CNSOPB"), National Energy Board ("NEB"), and Northern Pipeline Agency ("NPA"). (45) The CNLOPB interprets and applies the provisions of the Atlantic Accord and the Atlantic Accord Implementation Acts to the activities of operators in the Newfoundland and Labrador Offshore Area and oversees operator compliance with those statutory provisions. (46) The CNSOPB is the independent joint agency of the Governments of Canada and Nova Scotia responsible for the regulation of petroleum activities in the Nova Scotia Offshore Area. (47)

      The NPA represents the Canadian federal government in overseeing the planning and construction of the Canadian portion of the Alaska Highway Gas Pipeline Project by the Foothills Group of Companies, which are involved in that project. (48) The Alaska Highway Pipeline Project runs from the Alaska North Slope natural gas reserves to Calgary, Alberta along the Alaska Highway. (49)

      The NEB is an independent federal regulatory agency. (50) The Canadian Parliament established the NEB in...