Skip to main content

As Congress begins to examine the North American free-trade agreement at the behest of U.S. President Donald Trump, lawmakers need to ensure that nothing they decide disrupts one of the more relevant industries in the pact: energy – in particular, natural gas.

U.S. producers need Mexico, their largest customer. The glut of production in the United States far exceeds domestic demand; thus, exports prevent a collapse in natural gas prices. More than a quarter of Mexico's electricity is powered by U.S. natural gas, leaving it vulnerable in a trade battle. Trade disputes mean U.S. producers would suffer a serious loss of income, while Mexico would face an energy shortage that could wreak havoc on its economy, drive up crime and potentially create a new refugee crisis.

In many ways, Mr. Trump's support of the U.S. energy sector conflicts with his desire to see the 23-year-old agreement revamped or even ended. While Mr. Trump believes the agreement has stripped Americans of jobs and opportunities, NAFTA has actually been a boon to the energy sector and to employment.

Natural gas exports to Mexico, which have been increasing across the U.S. border since 2010, reached near-record highs this year through May, averaging 4.04 billion cubic feet a day, up from an average of 3.78 billion in 2016. The United States had an energy-trade surplus with Mexico of more than $11-billion (U.S.) last year. The value of U.S. energy exports to Mexico in 2016 was more than twice the value of the energy imports. Mexico accounts for more than 60 per cent of all U.S. natural gas exports, according to the Energy Information Administration.

The United States is emerging as a net natural gas exporter, with exports exceeding imports in three of the first five months of this year, putting the United States on course to reverse 60 straight years during which the country was a net importer.

At least 17 pipelines carry more than four billion cubic feet of natural gas daily to Mexico, with four additional cross-border pipelines to be completed over the next two years and many more planned after that. While the United States still is a net gas importer from Canada, exports to Eastern Canada have steadily increased since the completion of the Vector Pipeline in 2000.

The story has been similar for liquefied natural gas, or LNG. Last year, Cheniere Energy Inc. shipped the first cargoes from its Sabine Pass terminal in Louisiana, marking the start of LNG exports from the lower 48 states. Sabine Pass averaged a record 1.96 billion cubic feet a day of exports in May, according to the EIA. Numerous domestic LNG export projects are in development by companies such as Dominion Energy Inc.

There's been a gradual and sustained increase of exploration activity in Mexico, particularly in deepwater regions. The number of active offshore exploration rigs in Mexico reached a 10-year high in June, 2017, and the sector may be only just beginning to see the effects of the energy reforms. Mexico began deregulating the industry in 2013 amid declining domestic gas production.

Anti-NAFTA organizations such as the American Federation of Labour and Congress of Industrial Organizations argue that the pact has been skewed toward corporations and against the advancement of workers' wages and benefits, while increasing trade at the cost of eliminating jobs and depressing wages.

Yet from 2009 to September, 2016, employment in the country's oil and gas extraction industry, including support services, grew by 6 per cent to 392,869 total jobs, according to the Department of Energy. Natural gas generation workers accounted for 47 per cent of all fossil-fuel electric generation employment. Natural gas fuels, supporting 309,993 jobs, are the second-largest category of employment behind petroleum. Together, natural gas generation and fuels support 398,235 jobs nationally. Almost four in 10 workers in natural gas electricity generation are female, and 15 per cent are Hispanic or Latino. The fuels sector has a higher proportion of workers who are 55 and older (24 per cent), while generation has more unionized workers (14 per cent).

The United States needs to focus on maintaining strong yet fair trade by modernizing and improving NAFTA in ways that expand trade and investment. The industry has the support of Energy Secretary Rick Perry and Secretary of State Rex Tillerson, who happens to be the former chief executive officer of Exxon Mobil Corp. U.S. gas exports to Mexico are expected to double by 2019, most of which will come from Texas, the home state of both men.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Foreign Affairs Minister Chrystia Freeland met with Mexican Economy Minister Ildefonso Guajardo Villarreal on Tuesday in Washington ahead of the start of NAFTA negotiations.

The Canadian Press

Interact with The Globe