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03/16/08

A letter from Natural Resources Minister Gary Lunn

Minster Lunn replies to a letter from Post Carbon Toronto in support of establishing a Canadian strategic petroleum reserve.

Post Carbon Toronto wrote to Federal Minster of Natural Resources Gary Lunn. We have received a reply:

The Honourable Gary Lunn, P.C., M.P.
Minister of Natural Resources
Sir William Logan Building, 21st Floor
580 Booth Street
Ottawa, Ontario,  K1A 0E4

 

Dear Minister Lunn;

I am writing to you for Post Carbon Toronto, an organisation concerned with Canada’s current and future energy situation, about your response to the Parkland Institute report recommending the establishment of a strategic petroleum reserve (SPR) in Canada.

The response reported in the press was an alleged comment by you that "We are the only country in the International Energy Agency - which is the same as the OECD - which is not required to have strategic oil reserves, because we're the only country that has a net export of oil." We consider that this news report may be inaccurate, as we are certain you know (as do we) that the United Kingdom, Denmark and Norway, as oil producers, were also exempted from this membership recommendation. However you are no doubt aware that Denmark and the United Kingdom, as EU members, are now developing reserves, and  but the Norwegian government has also decided to establish a strategic reserve.

A strategic petroleum reserve is a form of insurance; it is not an actual requirement (the IEA cannot impose this condition on Canada), but it is a prudent option. Just as a cautious man would pay for fire insurance on his own home, even though such insurance was not a legal requirement, a prudent Canadian government should have a reserve store of petroleum.

It is true that Canada produces a great deal of oil; however, more than half of the oil pumped in Canada is exported to the United States, and the provisions of NAFTA limits the federal government’s ability to redirect Canadian sourced oil in the event of any disruption in global petroleum shipments. Such a disruption is a very real possibility given that the major sources countries for petroleum imported into eastern Canada are countries of questionable stability such as Algeria, Iraq and Saudi Arabia.

As you are probably aware, the US Congress is on record as recognizing five significant disruptions in global petroleum shipments since the original post-Yom Kippur War oil embargo of 1973-74.  It might be noted the events the US Congress cited were not all crisis’s in international politics – true, the first two were the results of political conflict (the Iranian Revolution of 1979, and the Iraqi invasion of Kuwait in 1990), but the third was the result of a labour upheaval (the Venezuelan general strike of 2002), and the final

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two were climatic events (Hurricane Ivan in 2004, and Hurricanes Katrina and Rita in 2005).

Setting up an strategic oil reserve has not been a Harper Government policy to this point, but it is the responsibility of any government to plan not only for the immediate future but for the long term (unless the current government considers its period in power will be short lived, and one of the other political parties will make up the government). This is not an insignificant concern; the Parkland Institute report appears to have generated a very strong reaction, particularly in the two most exposed provinces (Ontario and Quebec).

The strongest reaction appears to have been in Quebec; the Action Démocratique du Québec declared that immediate action was essential, and announced they would be raising the issue in the provincial legislature. More disturbingly, both the Bloc Québécois, and the Parti Québécois have used the controversy to advance their separatist agendas. The Bloc Québécois noted they had been demanding a fuel reserve be established since the Hurricane Katrina disruption of 2005, and cited the failure to set up an SPR as an example of why Quebec is unable to rely on Canada. The Parti Québécois declared the inability of the Canadian federal government to guarantee Quebec’s energy security illustrated why it was necessity that Quebecers rely only on themselves, i.e., political sovereignty.
 
Setting up a SPR is a desirable policy on its own merits, but it is most distressing when lack of such facilities are used by opponents of a united Canada. This appears to be one of those unintended consequences of a policy decision which make government so challenging in Canada. Establishing the SPR is not only a positive step for a united Canada, but it also corresponds with the policy priorities for this government announced by the Prime Minister.

As the Prime Minister’s stated on his website, the Government’s approach on the management of economic issues would be to “consider not only the net benefit to Canada in reference to our industrial, economic and cultural policies, but also a consideration of our national security interests.  This would include security of supply, technology transfer and any anti-trust implications.”

Within the natural resources portfolio, the decision to establish a SPR would appear to be an essential program for satisfying the Prime Minister’s declaration. We are aware the government has made an effort to reduce taxes, however there are numerous methods available to achieve preserve this achievement while setting up a new program. The government could sponsor a bond issue with the funds dedicated to financing the SPR; or corporations could be offered tax credits if sufficient storage facilities were developed.  

 I wish to thank you in advance for any attention you are able to devote to this issue.


P Trueman
Correspondence Secretary


 

 


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