North American Energy Integration: Assessing Oil and Gas Policy Issues ahead of NAFTA Renegotiation

Further integration of energy markets and policies across the three North American countries can only contribute to economic development and may well improve its sustainability. This report reviews a number of key policy areas, including NAFTA, related to oil and gas development in and across the three major North American countries and explores opportunities for enhanced trilateral and bilateral cooperation and policy alignment. It contains descriptions of existing policies, legislation, and regulations on transportation, climate change, royalties and fiscal structures, decommissioning and abandonment, water, and environmental safety, as well as more detailed discussions of harmonization opportunities in each of those areas. The report also highlights several fundamental differences in the broader regulatory frameworks across the three countries, as these have an impact on efforts to harmonize. An October 2016 workshop attended by major stakeholders and held by Resources for the Future—in concert with the Department of Energy’s (DOE’s) Office of Energy Policy and System’s Analysis (EPSA) and two partners in Canada and Mexico (the International Institute for Sustainable Development and Instituto Tecnológico Autónomo de México)—significantly contributed to this report. The workshop had several purposes: first, to identify gaps, best practices, and inconsistencies with economic and environmental regulations and markets across the three countries; second, to inform the creation of legal, regulatory, and policy roadmaps for harmonizing regulations and markets; and third, to bring together individuals who can help implement greater harmonization, and also others who can offer helpful input. This report places the discussions at this workshop in the context of the three countries’ regulations and policies as well as current political climates to summarize both the workshop participants’ and the authors’ recommendations for harmonization. The recommendations include action items for different levels of government in the three jurisdictions, research groups, academics, stakeholders, and others to move toward greater harmonization of policies and markets affecting the oil and gas sector.

Figures

Figure 1. US Natural Gas (Pipeline, LNG, and CNG) Exports, 1973-2016

Figure 2. Relative Value of Four Key North American Oil and Gas Flows in 2016

Figure 3. Canada-US Rail Networks for Energy Trade

Figure 4. Number of Railroad Incidents Compared to Number of Railcars Used in Oil Shipments

Figure 5. Natural Gas Infrastructure and Projects, 2016

Figure 6. Royalty Structures over the Life Cycle of a Well

Figure 7. Fossil Fuel Production Water Consumption