Canada seen playing energy card in lumber dispute with US

Vancouver (Platts)--15Aug2005

Under pressure from Canada's 10 provincial premiers to challenge Washington to
abide by trade rulings on softwood lumber exports, Prime Minister Paul Martin
is expected to speak directly to President George W. Bush this week and warn
him that oil and natural gas could become a weapon in the 23-year dispute.

British Columbia Premier Gordon Campbell told reporters over the weekend that
it is time for Martin to remind the US how much it relies on Canadian energy
exports, which have exceeded C$55-bil ($46-bil) in each of the last two years,
with oil, NGL and gas claiming about 98% of the total. Campbell said exporters
of oil and gas may start to "look beyond American markets" and pursue
friendlier opportunities in the Asia-Pacific region. "Make no mistake, China
and India want our natural resources," Campbell was quoted as saying following
the premiers' annual meeting in Banff, Alberta.

Herb Dhaliwal, a former federal energy minister, said a surtax on natural gas
exports would quickly recover C$5-bil ($4.2-bil) in duties imposed on softwood
since 2001. "You have to play hardball with the Americans," he told the Globe
and Mail, a national newspaper. "Otherwise we are just going to get bullied by
them." 

Although unwilling to use energy as leverage, Alberta Premier Ralph Klein,
whose province accounts for more than 80% of Canada's oil and gas exports,
told reporters in Banff that the US is "not shy" about taking advantage of
Canada's "secure and reliable energy supply... but when it comes to softwood
lumber, they are willing to violate the rules" of the North American Free
Trade Agreement. 

But Klein told reporters he has no interest in cutting back energy exports by
using measures that will "create vindictiveness on the other side and (could)
start to escalate." The US has shown increased interest in Alberta's oil sands
sector, and Klein announced that US Vice President Dick Cheney is scheduled to
visit the oil sands in early September.

On Aug 10, a NAFTA appeals panel ruled that Washington had failed to prove
Canadian softwood poses a material threat to US producers. US trade officials
said the ruling was inconsequential and that Washington had no intention of
scrapping a punitive duty on Canadian softwood. David Wilkins, the newly
installed US Ambassador to Canada, reportedly told the premiers in Banff the
only solution is a negotiated settlement, triggering an angry response from
federal and provincial officials.

For more information, take a trial to Platts Oilgram News at
http://oilgramnews.platts.com.

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.