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Economy

The Cost to Western Canada if Steven Guilbeault Copies Biden’s Assault on LNG

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8 minute read

From EnergyNow.ca

By Jim Warren

” if all of the gas exported by Canada to the US from 2014 to 2021, the years encompassing the price depression, had instead been exported to Europe at average European prices, Canadian natural gas revenues would have been US $100.7 billion higher “

What would it cost western Canada’s natural gas producers if the federal government does to them what it did to tidewater export opportunities for petroleum?

This question became topical last week when the Biden Democrats announced they would block construction of new LNG export facilities in the US. It makes sense to get a handle on the size of revenues at stake if future development of LNG export capacity in Canada is similarly at risk. Indeed, it seems quite reasonable to worry that Steven Guilbeault will take inspiration from the Biden decision and try to do something similarly silly in Canada.

Getting pipelines to tidewater is something Canada’s petroleum industry has been counting on to improve export revenues. This was a particularly urgent hope during the eight-year oil price depression that lasted from Fall 2014 until early Winter 2022. It was, and still is, assumed exporting Canadian diluted bitumen (dilbit) into new non-US markets will allow producers to avoid the costly differential charges assessed by American buyers and refiners.

What if scenarios floated during the eight-year price slump showed that had the Northern Gateway and Trans Mountain pipelines been completed, Canadian producers could have earned billions in additional revenues. Estimates of lost revenues ranged from a Fraser Institute estimate of $15.8 billion for 2018 alone to my own low-ball estimate for losses of $7 billion to $9 billion for that same year. Numerous back of the napkin “what if” calculations for lost revenues produced in coffee shops across the prairies helped fuel frustration and anger at federal government environmental policies intended to limit global warming by cancelling pipelines.

Fast forward to 2024 and we can see that similar conditions apply to western Canada’s natural gas sector. The US is virtually the sole export market for Canadian natural gas. Looking back at the period from 2010-2019 we find that the prices paid by US importers for Canadian natural gas were less than half what Europeans were paying. The price spread became exponentially wider beginning in 2016. It peaked in 2022 when the European price was six times higher than the US price. The European gas price will be five times higher than US prices for 2024.

All else being equal, if all of the gas exported by Canada to the US from 2014 to 2021, the years encompassing the price depression, had instead been exported to Europe at average European prices, Canadian natural gas revenues would have been US $100.7 billion higher than what they actually were.

Of course “all else” is far from being equal. The $100.7 billion figure does not account for the cost of converting natural gas to LNG or the added costs of ocean transportation. In addition, the estimate assumes enough Canadian pipelines and tidewater terminals could be built to accommodate all of the gas currently flowing to the US.

The yawning chasm between US and EU prices today is of course largely the result of Russia’s invasion of Ukraine in late February 2022.  EU sanctions aimed at Russian energy exports and the destruction of the Nord Stream pipelines has put Europe firmly on track for developing new sources of natural gas.

Notwithstanding the bland platitudes and unreachable targets emanating from the most recent COP conference in the UAE, there are policy makers in many countries who recognize the important role natural gas can play in reducing global GHG emissions. For example, in December 2021 the European Commission made changes to its GHG emissions law. It now allows both nuclear energy and natural gas to be considered suitable transition fuels during the period while renewable options become more viable.

Lately, there has been a popular backlash in Europe and the UK over excessively zealous green transition initiatives. It turns out a lot of people are unwilling to accept additional increases to their cost of living even when told it is necessary to “save the planet.” People won’t stand for a prohibitively expensive green transition. And they never will be willing to freeze in the dark; especially when an acceptable option like natural gas is available.

Biden’s bizarre decision to block the expansion of US LNG export facilities was probably not motivated by a desperate desire or useful effort to curb GHG emissions. It is more likely a ham-handed attempt to staunch the Democrats’ loss of support among the young and the woke. Regardless of Biden’s motivation, we might reasonably worry that Canada’s environment minister will want to copy him. You might think the collapse in support for Canada’s Liberals and common sense would militate against the imposition of any additional half-baked environmental policy. But when has common sense ever intervened in the creation of environmentally virtuous policy on the part of the Liberals in Ottawa?

I have provided my data sources and relevant tables below

Hypothetical question: What if the exports to the US had been exported to Europe?

the cost of canada's steven guilbeault copying biden’s assault on lng 1

Source: derived by the author from the sources and data provided below

Natural gas prices for the US and Europe 2022 to 2024 in US$ per million British thermal units (BTUs) 2023 and 2024 figures are forecasts.*

the cost of canada's steven guilbeault copying biden’s assault on lng 2

Source: derived from Statist: Natual gas commodity prices in Europe and the United States from 1980 to 2022 with forecasts for 2023 and 2024.
https://www-statista-com.libproxy.uregina.ca/statistics/252791/natural-gas-prices/

Canadian natural gas exports in billion cubic metres (all to US)

the cost of canada's steven guilbeault copying biden’s assault on lng 3

Source: Statista. Natural gas exports by pipeline from Canada from 2010 to 2021 (in billion cubic metres).
https://www-statista-com.libproxy.uregina.ca/statistics/567703/natural-gas-exports-from-canada/

 

Natural gas prices for the US and Europe 2010 to 2024 in US$ per million British thermal units (BTUs) 2023 and 2024 figures are forecasts.*

the cost of canada's steven guilbeault copying biden’s assault on lng 4

Source: Statista: Natural gas commodity prices in Europe and the United States from 1980 to 2022 with forecasts for 2023 and 2024.
https://www-statista-com.libproxy.uregina.ca/statistics/252791/natural-gas-prices/

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Business

Taxpayer watchdog calls Trudeau ‘out of touch’ for prioritizing ‘climate change’ while families struggle

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From LifeSiteNews

By Anthony Murdoch

The prime minister told a G20 panel this week that fighting so-called ‘climate change’ should be more important to families than putting food on the table or paying rent.

Canada’s leading taxpayer watchdog blasted Prime Minister Justin Trudeau for being completely “out of touch” with everyday Canadians after the PM earlier this week suggested his climate “change” policies, including a punitive carbon tax, are more important for families than trying to stay financially afloat.

In speaking to LifeSiteNews, Canadian Taxpayers Federation (CTF) federal director Franco Terrazzano said Trudeau’s recent comments show his government “continues to prove it’s out of touch with its carbon tax.”

“Canadians don’t support the carbon tax because we know it makes life more expensive and it doesn’t help the environment,” Terrazzano told LifeSiteNews.

Terrazzano’s comments come after Trudeau told a G20 panel earlier this week that fighting so-called “climate change” should be more important to families than putting food on the table or paying rent.

Speaking to the panel, Trudeau commented that it is “really, really easy” to “put climate change as a slightly lower priority” when one has “to be able to pay the rent this month” or “buy groceries” for their “kids,” but insisted that “we can’t do that around climate change.”

Terrazzano said that the Trudeau government’s carbon tax in reality “impacts nearly all aspects of life in Canada by making it more expensive to fuel up our cars, heat our homes and buy food.”

“The carbon tax also puts a huge hole in our economy that we can’t afford,” he said to LifeSiteNews, adding that if Trudeau really wanted to help Canadians and “prove it understands the struggles facing Canadians,” then it should “scrap the carbon tax to make life more affordable.”

On Thursday, Trudeau, who is facing abysmal polling numbers, announced he would introduce a temporary pause on the federal Goods and Services Tax (GST) for some goods.

Conservative Party of Canada leader Pierre Poilievre this afternoon said about Trudeau’s temporary tax holiday that if he is serious about helping Canadians, he would cut the carbon tax completely.

“What a ridiculous gimmick. Bribing Canadians temporarily with borrowed money,” Bernier wrote.

“When the real solution is to stop growing the bureaucracy, cut wasteful spending, stop sending billions to Ukraine, eliminate subsidies to businesses and activist groups, stop creating new unsustainable and unconstitutional social programs, eliminate the deficit, and THEN, cut taxes for real. None of which he will do of course.”

As reported by LifeSiteNews, a survey found that nearly half of Canadians are just $200 away from financial ruin as the costs of housing, food and other necessities has gone up massively since Trudeau took power in 2015.

In addition to the increasing domestic carbon tax, LifeSiteNews reported last week that Minister of Environment Steven Guilbeault wants to create a new “global’ carbon tax applied to all goods shipped internationally that could further drive-up prices for families already struggling with inflated costs.

Not only is the carbon tax costing Canadian families hundreds of dollars annually, but Liberals also have admitted that the tax has only reduced greenhouse gas emissions by 1 percent.

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Crime

Mexican cartels are a direct threat to Canada’s public safety, and the future of North American trade

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From the Macdonald Laurier Institute

By Gary J. Hale for Inside Policy

RCMP raided a fentanyl ‘superlab’ in Falkland, BC, with ties to a transnational criminal network that spans from Mexico to China.

On October 31, residents of Falkland, BC, were readying their children for a night of Halloween fun. Little did they know that their “quaint, quiet, and low-key little village” was about to make national headlines for all the wrong reasons.

On that day, RCMP announced that it had raided a fentanyl “superlab” of scary proportions near Falkland – one that police called the “largest and most sophisticated” drug operation in Canada. Officers seized nearly half-a-billion-dollars’ worth of illicit materials, including 54 kilograms of finished fentanyl, 390 kilograms of methamphetamine, 35 kilograms of cocaine, 15 kilograms of MDMA, and six kilograms of cannabis” as well as AR-15-style guns, silencers, small explosive devices, body armour, and vast amounts of ammunition.

They also found massive quantities of “precursor chemicals” used to make the drugs. This strongly suggests that the superlab was tied into a transnational criminal network that spans from Mexico to China – one that uses North America’s transportation supply chains to spread its poisonous cargo across Canada and the United States.

The Canada-US-Mexico relationship is comprised of many interests, but the economic benefits of trade between the nations is one of the driving forces that keep these neighbours profitably engaged. The CUSMA trade agreement is the successor to NAFTA and is the strongest example globally of a successful economic co-operation treaty. It benefits all three signatories. This level of interdependence under CUSMA requires all parties to recognize their respective vulnerabilities and attempt to mitigate any threats, risks, or dangers to trade and to the overall relationship. What happens to one affects all the others.

The supply chain, and the transport infrastructure that supports it, affects the balance books of all three. While the supply chain is robust and currently experiences only occasional delays, the different types of transport that make up the supply chain – such as trucks, trains, and sea-going vessels – are extremely vulnerable to disruption or stoppages because of the unchecked violence and crime attributed to the activities of Mexican Transnational Criminal Organizations (TCOs). These cartels operate throughout Mexico, from the Pacific ports to the northern plains at the US-Mexico border.

The sophistication of the Falkland superlab strongly suggests connectivity to multi-national production, transportation, and distribution networks that likely include China (supply of raw products) and Mexico (clandestine laboratory expertise).

For most Canadians, Mexican cartels call to mind the stereotypical villains of TV and movie police dramas. But their power and influence is very real – as is the threat they pose to all three CUSMA nations.

Mexico’s cartels: a deadly and growing threat

Mexican cartels started as drug trafficking organizations (DTOs) in the 1960s. By the late 1990s they had evolved to become transnational enterprises as they expanded their business beyond locally produced drugs (originally marijuana and heroin) to include primarily Colombian cocaine that they transported through Mexico en route to the US and Canada.

Marijuana and the opium poppy are cultivated in Mexico and, in the case of weed, taken to market in raw form. While the cartels required some chemicals sourced from outside Mexico to extract opium from the poppy and convert it into heroin, the large-scale, multi-ton production of synthetic drugs like Methamphetamine and today Fentanyl expanded the demand for sources of precursor chemicals (where the chemical is slightly altered at the molecular level to become the drug) and essential chemicals (chemicals used to extract, process, or clean the drugs.)

The need to acquire cocaine and chemicals internationalized the cartels. Mexican TCO’s now operate on every continent. That presence involves all the critical stages of the criminal business cycle: production, transportation, distribution, and re-capitalization. Some of the money from drug proceeds flow south from Canada and the US back to Mexico to be retained as profits, while other funds are used to keep the enterprise well-funded and operational.

In Mexico, the scope of their activities is economy-wide; they now operate many lines of criminal business. Some directly affect Mexico’s economic security, such as petroleum theft, intellectual property theft (mainly pirated DVDs and CDs), adulterating drinking alcohol, and exploiting public utilities. Others are in “traditional” criminal markets, such as prostitution, extortion, kidnapping, weapons smuggling, migrant smuggling and human trafficking. Organized auto theft has also become another revenue stream.

Criminal Actors

The Cartel de Sinaloa (CDS or Sinaloa Cartel) and the Cartel Jalisco Nueva Generacion (CJNG) are the two principal TCO’s vying for territorial control of Mexico’s air, land, and maritime ports, as well as illegal crossing points. These points on the cartel map are known as “plazas,” and are often between formal ports of entry into the US. By controlling territories crucial for the inbound and outbound movement of drugs, precursors, people, and illegal proceeds, the cartels secretly transport illicit goods and people through commercial supply chains, thus subjecting the transportation segment of legitimate North American trade to the most risk.

That is giving the cartels the power to impair – and even control – the movement of Mexico’s legitimate trade. While largely kept out of the public domain, incidents of forced payment of criminal taxation fees, called “cuotas,” and other similar threats to international business operations are already occurring. For instance, cuotas are being imposed on the transnational business of exporting used cars from the US to Mexico. They’re also being forced on Mexican avocado and lime exporters before the cartels will allow their products to cross the border to the US and international markets. This has crippled that particular trade. Unfortunately, the Mexican government has been slow to react, and the extortion persists throughout Mexico. It is worth repeating – these entirely legitimate goods reach the market only after cartel conditions are met and bribes paid.

The free trade and soft border policies of the US of recent years have allowed cartel operatives to enter that country and work the drug trade with limited consequence. In May, the U.S. Drug Enforcement Administration (DEA) published the National Drug Threat Assessment 2024, where it reported that the Jalisco and Sinaloa cartels operate in all 50 US states and are engaged in armed violence in American cities as they fight for market shares of the sales of Methamphetamine, Fentanyl, and other drugs sourced from Mexico.

The DEA’s findings should sound alarms in Canada. Canada and the US have similar trade and immigration policies, which allow the Mexican cartels to easily enter and control the wholesale component of the drug trade. The long-term effects of the drug trade are the billions of dollars gained that allow for the corruption of government officials. Canada should be on guard: Mexican drug cartels in Canada could begin to not only kill ordinary Canadians by knowingly selling them deadly drugs like Fentanyl – their operatives can also embed themselves in Canadian society, as they have in the US, leading to ordinary citizens on Canadian streets being victimized by the armed violence cartels regularly use to assert their position and power.

Organized crime and Mexican governance

Canada faces these threats directly, but the indirect ones that the cartels present to Mexican governance are no less consequential to Canada in the long term – and likely sooner. Illicit agreements between corrupt Mexican government officials and the cartels assure that the crime organizations retain control of territory and have freedom to operate.

That threat is becoming increasingly existential. Cartel fighters are well disciplined, well equipped and strong enough to challenge Mexico’s military, currently the government’s main tool to fight them. Should the TCOs come to dominate Mexican society or gain decisive influence over government policy, Mexico’s government risks being declared a narco-democracy and the US may come to see the cartels as a threat to national security. That in turn could lead to a US military intervention in Mexico – not an outcome desired by either side.

While that scenario may be considered extreme, it is not as far from reality as many may think. While in many respects the US-Mexico trading relationship remains unchanged, the overall political context has become testy – and could be a real flashpoint for the incoming Trump administration.

Political developments in Mexico have played a role. After his election in 2018, former Mexican President Andrés Manuel López Obrador (commonly referred to his initials, AMLO) demonstrated a disdain for all things North American. This included frequent complaints of US interference or violation of Mexican sovereignty – complaints that were more about keeping Mexican government domestic actions out of the public eye. To retain a shroud of secrecy over government corruption, Mexico under Amlo started in 2022 to limit the activities and numbers of US federal law enforcement agencies operating there, particularly the FBI, DEA, ATF and ICE. These agencies formerly enjoyed a close relationship with the Mexican Federal Police – a force AMLO disbanded and replaced with the National Guard. The AMLO administration reduced the number of US assets and agents in Mexico, particularly singling out the DEA for the most punitive restrictions.

During his administration, AMLO placed the army and navy in charge of all ports of entry and gave them responsibility for all domestic public safety and security by subordinating the Guardia Nacional (GN), or National Guard, to the army. The GN, the only federal law enforcement agency, has been taken over by military officials who are sometimes corrupt and in league with the cartels.

Mexican President Claudia Sheinbaum, who took office in 2024, has continued AMLO’s organizational moves. Sheinbaum comes from the same political party and has so far extended carte blanche to the military, whose administration is opaque and now operates with impunity, under the guise of “national security” and “sovereignty” concerns.

It is expected that Sheinbaum will continue to shield American eyes from Mexico law enforcement and judicial affairs. The fear in the US law enforcement and national security community is that Sheinbaum may even declare DEA non grata, much as then Venezuelan President Hugo Chavez in 2005 and Bolivian President Evo Morales in 2008 did in their countries. Both were anti-American leftists of the same mindset as AMLO and Sheinbaum, who feared detection of their connections to the illegal drug trade.

Sheinbaum has publicly demonstrated disinterest in the consistent application of the rule of law against the TCOs by stating that she will continue the “hugs not bullets” (“abrazos, no balazos”) non-confrontational, non-interventional posture towards organized crime. Agreements with corrupt government officials will allow the cartels to expand their business and to operate with impunity. Through intimidation, bribery, and murder, the cartels affect decision making at the municipal, state, and federal levels of Mexican government. That leverage, while performed outside the public eye, has the potential to negatively affect supply and demand among the three countries at the very least, and at worst, to signal that cartels in Mexico are directly or indirectly involved in the formulation of government security, immigration, drug, and trade policy.

AMLO enacted constitutional changes that will provide Sheinbaum with the powers of a dictator, giving her administration unchecked control of the executive, legislative, and judicial branches of government. As a result, the judiciary in Mexico is in crisis mode with 8 of 11 Supreme Court Justices resigning in October 2024 to protest the unconstitutional disregard for due process that started with AMLO and continues with Sheinbaum thanks to a “voting for judges” law that she and AMLO have rammed into operation without debate. This development portends even more corruption.

Without the existence of an independent judicial system, these institutional changes could give pause to US and Canadian negotiators when it comes time to renew CUSMA in 2026.

Beyond 2025: Mexican organized crime as a threat to the US and Canada, and Greater North American implications

Most worrying, the cartels will be in a yet stronger position to affect and even dictate the pace and volume of legitimate trade between the US and Mexico under Sheinbaum. This makes Mexico the weakest link among the three CUSMA members.

The US and Canada should therefore be concerned about the strength and power of the cartels because the current trajectory could provide them a greater role in Mexico’s performance as a trade partner. Should this trend continue, the US would likely begin to see Mexico through the lens of a threat to critical components of its national security: 1) the public safety of US citizens being killed in epidemic proportions by the drugs produced by citizens of Mexico; 2) the negative impact or increased cost of commerce that supplies goods to the American market; and 3) the CUSMA relationship that sustains the economic strength of all three participating countries.

This worrisome evolution requires proactivity by Canada and the US to insist that Sheinbaum reverse the gains that the cartels have made to influence policy and erode the government’s monopoly on territorial control and the use of violence, and reverse Mexico’s limits on drug enforcement co-operation with what should be its partners to the north. Pressure should also be applied to demand a return to a drug policy model that includes international law enforcement co-operation and a continuation towards the transformation of the Mexican judicial system from a mixed inquisitorial or accusatorial system to an adversarial system that employs the use of juries, witness testimony, oral hearings and trials, and cross-examination of witnesses, as opposed to a system where cartel-influenced elections could dictate judicial outcomes.

The implications of the further development of a Mexico narco-democracy for US-Mexico-Canada relations would be devastating. Co-operation on public safety and security would cease completely, allowing the cartels to take full control of commercial supply lines, significantly reducing trade between the three nations – likely causing the CUSMA trade deal to fracture until governance returned to duly elected civilian officials.

Continental security and Canada’s contribution

The continued success of CUSMA lies with Mexico more than any other country. Should Mexico continue on its path to autocracy, it could upset the trade deal, crucial to the prosperity of all three countries. Canada is not immune from what on the surface may appear to be mostly bilateral, US-Mexico issues, because, regardless of the commodity – whether it’s consumables or manufactured items – the cartels are positioned and empowered to affect imports, exports, trade, and migration throughout North America.

For the foreseeable future, Mexico is not going to voluntarily change its security posture. This enables the cartels to remain persistent threats, especially to trade. Canada and the US need to continue to jointly insist that Mexico take a stronger stance against organized crime and that it take steps to strengthen the judiciary and the rule of law in that country.


Gary J. Hale served 31 years in the Drug Enforcement Administration (DEA), retiring as an executive-level intelligence analyst. In 2010, he was appointed as Drug Policy fellow and Mexico Studies Scholar at the James A. Baker III Institute for Public Policy at Rice University in Houston, Texas.

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