American Oil and Gas Reporter - August 2018 - 31

IPAA Midyear Meeting

NAFTA'S Future Important To Energy
By Del Torkelson
CEDAR CREEK, TX.-Relatively few
Americans seem to understand the extent
to which the fate of the North American
Free Trade Agreement carries immediate
implications for their everyday lives,
Representative Will Hurd, R-Tx., told
the Independent Petroleum Association
of America.
Speaking during a livestream teleconference from Capitol Hill in which he
was paired with Representative Vincente
Gonzalez, D-Tx., Hurd told IPAA he had
made the case by describing how NAFTA's
disappearance almost certainly would
drive up prices for consumer goods such
as steak, beer and gasoline.
"My brother asked why he should
care about NAFTA," Hurd recounted.
"Describing the future scenarios of what
eventually could happen helps explain
what we are trying to prevent."
The outlook for NAFTA and all of the
United States' international trade was a
recurring theme at IPAA's 88th midyear
meeting, held June 25-26 at the Hyatt
Regency Lost Pines Resort & Spa outside
Austin, Tx. Along with the congressmen,
other speakers who addressed the subject
included Carlos Gonzalez Gutierrez, Mexico's consul general in Austin; and Barry
Russell, IPAA president and chief executive officer.

U.S. sales worldwide-$236 billion. That
is one out of every six dollars the United
States receives in total export revenue,"
Gutierrez detailed. "Today, Mexico is the
United States' second-largest export market
and it is going to become number one in
the next five years. The $243 billion in
U.S. exports to Mexico last year are
nearly twice those of the previous decade,
up 80 percent from 2007."
Energy trade is particularly emblematic
of that symbiotic dynamic, he said, explaining that Mexico ranked fourth among
the sources of U.S. crude oil imports in
2017, and that U.S. refineries turned
much of that Mexican crude into products
exported back to Mexico. "In 2017, Mexico imported more than 1 billion barrels
a day of U.S. petroleum products, and
U.S. gasoline exports made up more than
half of Mexico's gasoline consumption,"
Gutierrez observed.
Moreover, he continued, thanks in
large part to natural gas, the United
States has had an energy trade surplus
with Mexico for each of the past three
years. Mexico constitutes the top destination for U.S. natural gas exports, both
by pipeline and in the form of liquefied
natural gas, he reported, with the United
States providing 90 percent of Mexico's
natural gas imports, and Mexico pur-

NAFTA Benefits
According to Gutierrez, NAFTA was
the model for most international trade
agreements. It helped create the world's
largest regional market of 480 million
people with a combined gross domestic
product of more than $20 trillion, facilitated more than $1 trillion a year in
cross-border trading, and supported 14
million jobs. He also credited the agreement with helping transform Mexico in
a number of ways, including helping
modernize its economy and encouraging
a more open society.
It also strengthened the country's relationship with the United States from
one of distant neighbors to strategic partners, he maintained. In the past 25 years,
he said, U.S.-Mexican trade had multiplied
by a factor of seven to reach $557 billion
in 2017. "Mexicans buy 16 percent of

The United States has run an energy
trade surplus with Mexico for each of
the past three years, notes Carlos Gonzalez Gutierrez, Mexico's consul general
in Austin. He went on to note that the
United States exported more natural gas
to Mexico than any other country, and
that 90 percent of Mexican gas imports
came from its northern neighbor.

chasing about half of U.S. gas exports.
Gutierrez also pointed to four U.S.-toMexico gas pipeline projects under construction that he said would have a combined capacity of 3.5 billion cubic feet a
day, as well as another two pipelines expected to come on line in 2018 that
would bring an additional 3.3 Bcf/d into
his country.
"Mexico is already the United States'
best customer, and we will want to purchase more," he related. "Demand for
natural gas in Mexico is expected to grow
31 percent during the next 11 years."
NAFTA Negotiations
Although negotiators were striving to
be creative and constructive as possible,
Gutierrez said, NAFTA 2.0 discussions
had been complicated by U.S. negotiators'
desire for:
* A sudden death clause that would
terminate the deal after five years;
* Changes to the deal's automotive
rules of origin, and
* The elimination of its dispute settlement mechanisms.
"Those have been the subject of extensive discussions," he acknowledged.
"Throughout this process, we have tried
to be as creative and constructive as possible. At the same time, it has been our
obligation to lay out the red lines we are
not going to cross."
According to Gutierrez, the first item
was one such red line. "The sunset provision runs counter to the objective of
providing economic actors with the certainty and transparency needed to make
long-term commitments and partnerships,"
he characterized. "These would be particularly destabilizing for investments
and growth in the energy sector."
Moreover, he pointed out, NAFTA already had a sudden death provision that
voids the deal six months after a president
gives notice, which President Trump has
threatened to do.
With regard to the third item, he said
that a so-called poison pill provision to
eliminate investor state dispute settlements
(ISDS) seemed to clash with U.S. business
interests. "ISDS has been instrumental
in promoting the development of critical
infrastructure that facilitates energy trade,"
Gutierrez stated. "Mexico is the United
AUGUST 2018 31

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