Speaking before an 'Energy Resources' hearing of the United States Senate in May 1971, Brice O'Brian, President of the U.S. National Coal Association, said, ". . . our Government considers Canada our own for energy purposes." This was not the truculent statement of a naive and insensitive American industrialist. To the contrary, O'Brian was merely echoing the sentiments of President Nixon, U.S. political opinion, and his fellow industrialists.
The following month, in a statement on U.S. energy needs, President Nixon himself said that one major solution to the crisis the country was facing lay in the importation of vast quantities of energy from Canada - that is, natural gas, oil, coal, hydro-power, and water. These energy forms, together with such commodities as minerals, coal, pulpwood products and the like, have come to be known as 'continental resources'.
The idea of 'common ownership' of those resources by all the peoples living on the North American Continent is of comparatively recent origin, although the concept, must have been in the minds of U.S. leaders, both political and industrial, for a great deal longer. Such a concept would be laughable were it not the serious matter it is: such logic implies that the resources of the continental U.S. are also the common ownership of Canada, as well as vice-versa. The only trouble is, the United States has no resources left to speak of and therefore has none to share; what U.S. leaders mean by 'Continental Resources' is consequently self-evident.
As public statements on the subject become more frequent the idea of 'common ownership' will be more 'firmly fixed' in the public mind or, at least, the U.S. public mind. Given sufficient airing - like a television soap powder ad. - that same public will be conditioned to regard ownership of continental resources as their inalienable right. The Nixon administration is as adept as any other in translating the desires of the few into the will of the many. If Canada is to accept common ownership of its resources with the United States as the inevitable consequence of its present political and economic course, Canadian managers should do themselves the service of understanding the significance of the emerging U.S. Continental Resources Policy. After all, it is they who will 'manage' the southward flow of this country's energy and natural resources.
The situation so far is as follows. With its population of more than two hundred million people, the United States is already consuming more than its share of the world's resources. By the middle of this century it had shifted from being an exporter to an importer of raw materials. In an earlier article in this series I wrote of the huge industrial machine the U.S. had created, and of the three conditions which must be satisfied to ensure its continued existence. These were its need for material to feed it, people to man it, and markets to consume its output. The crux of the problem is the first condition, since the other two are satisfied by the mere existence of a large and growing population.
One cannot blame the U.S. leadership - by which I mean both corporate and political - for pursuing its present, course of action. The needs of the American people must be met. American industry, which reigned supreme in the world's marketplace for so many years, is facing stepped-up competition from other powerful economic blocs (Japan and the E.C.M.) and its currency, which lies at the very root of its economic wealth, is weakening under repeated attacks. This process of erosion has been going on for many years until it has now reached crisis proportions. It was from such a state of affairs - within the last couple of years - that a recognizable continental resources policy began to emerge.
This policy, aimed specifically at Canada, involves a basic commitment on the part of the Canadian Government to regard Canada's resources as continental resources, a commitment to be brought about by the coercion of political and corporate pressures. Put another way, it means nothing less than the creation of a free American market in energy and raw material resources with a cast-iron guarantee that nothing would ever be done to interfere with the status quo, whatever Canada's future needs might be.
The Nixon administration acted quickly once it decided what its 'future course of action must be. In February 1970 the Schultz Report (named after Labour Secretary George P. Schultz) was presented. Entitled "The Oil Import Question: A Report on the Relationship of Oil Imports to the National Security", it summarized American thinking on this important subject. The report warned the Government of the possibility that the Middle- East oil producing nations, North Africa and Venezuela might band together to get a. better deal from the United States and other Western nations in the big league. (Incidentally, this section was under the interesting heading "Economic Exploitation"). It recommended a search for 'safe' sources of foreign supply, with Canada being considered the safest source. The report stated;
"The risk of political instability or, animosity is generally considered to be very low in Canada. The risk of physical interruption or diversion of Canadian oil to other export markets in an emergency is also minimal for those deliveries made by inland transportation."
The Schultz Report went on to recommend "common or harmonized United States-Canadian policies with respect to pipeline and other modes of transportation, access to natural gas, and other energy-related matters" Furthermore, provided Canada accepted the principles of a common resources policy, the oil restrictions then in force would be relaxed and Canadian crude oil would be permitted to flow south.
Since the report was published, the oil-producing nations of the Middle-East and North Africa have banded together to get a better pricing deal and the U.S., along with other oil-using nations, has been forced to submit to economic exploitation'.
Such was the impact of the policy that by September 1970 the Canadian Government had agreed to the sale of some 6.3 trillion cubic feet of natural gas over the next fifteen to twenty years. The growing reality of the policy was given an added spur when, in August 1971, the U.S. Government imposed the ten per cent surcharge on imported goods flooding the U.S. market. Aside from helping stabilize its balance of payments problem by forcing the Japanese to float the yen and so, in effect, devalue the U.S. dollar among the world's currencies, it levered Canada further along the road to complete economic union with the United States.
It will be recalled that in the first half of 1970 Canadian oil producers expressed concern over the U.S. cut-back of import quotas for Canadian crude oil; the Schultz Report was issued in February 1970. The failure of the Canadian Government to recognize the new and emerging resource policy of the U.S. was apparent when J. J. Greene, Minister of Energy, Mines and Resources, addressed the Independent Petroleum Association of America at Denver, Colorado, in May. He expressed deep 'dissatisfaction with the U.S. quota of Canadian oil imports'. In fact, his strong bargaining point was that the U.S. could not have Canadian natural gas unless it took Canadian oil as well. In effect, with a natural gas agreement already settled, he neatly delivered Canadian oil reserves into U.S. hands. With raised eyebrows, one cannot believe that the U.S. Government was not delighted. The same kind of strategy is being applied to other energy resources.
On the hydro-power front - a line roughly connecting Churchill Falls, Labrador, James Bay in Quebec, and Kettle Rapids, Manitoba - the assault on Canadian resources has already moved far north. So acute is the electrical power shortage that corporate America foresaw the need more than a decade ago and swung into action. No opportunity is missed when it comes to securing these resources, even in the matter of investment capital. A good example is to be found in the Churchill Falls development: originally estimated to cost some $500 million for a developed 6 million horsepower (in round figures), the investment cost doubled dramatically over night once the project came to the verge of reality. To explain the mechanics of this interesting exercise in high finance is not a purpose of this article. The James Bay project, not yet off the ground, is slated to cost somewhere in the region of $6 billion. Kettle Rapids, which is on a much smaller scale than either Churchill Falls or the James Bay Scheme, is nearing completion. The bulk of the power developed at all these hydro-electric projects and many others will be delivered to the United States. It stands to reason that Canada's reserves in this field will be permanently reduced by a like amount. In the Schultz Report it was pointed out that for every dollar invested in Canada to extract oil, 71c would be returned to the U.S. in the form of investment returns within the first year of the investment being made. There is no reason to doubt that the same investment return pattern holds true for any other type of energy development or mineral extractive industry, be it natural gas, hydro-power or base metals.
As with gas, oil, and hydro-power so with water needs. Water may seem to be low on the resource priority list, but this is far from the truth. Recognizing that a desperate water shortage would develop in the next decade, the Frank M. Parsons Company, as far back as 1964, proposed a North American Water and Power Alliance (NAWAPA). This envisages the construction of a series of dams through Alaska and the Yukon to harness the watershed of the far north. A five-hundred-mile-long reservoir would be made of the Rocky Mountain Trench, with connecting canals to Lake Superior and the upper reaches of the Mississippi and Missouri Rivers.
"This water would help mightily to meet the needs of the Western States for irrigation, industry, power, recreation and municipal conservation," said Congressman Jim Wright in his book 'The Coming Water Famine' which basically outlines the NAWAPA proposal.
Senator Frank Church of Idaho took the NAWAPA Project so much for granted that he publicly stated, "To perform the great task before us may well need a programme as farsighted as the Louisiana Purchase." Apart from contributing its section of the Rocky Mountain Trench to accommodate the five-hundred-mile reservoir, rights of way for the connecting canals, to say nothing about the diversion of at least five major Canadian rivers, one cannot help wondering where Canada fits in the scheme of things. It is common knowledge that many other water-harnessing proposals in the Canadian north have been made, equally as ambitious as the NAWAPA Scheme.
General 'Andy' McNaughton, a brilliant engineer and former President of the International Joint Commission (relating to joint water resources), was almost alone in recognizing the danger to Canadian sovereignty of the U.S. demands for water. When he rebuffed the NAWAPA Project, back in 1965, it was as though he was anticipating the whole continental resources question. At that time he said,
"To me it is obvious that if we make a bargain to divert water to the United States, we cannot ever discontinue or we shall face force to compel compliance. There is nothing in our experience which indicates any change in the vigor with which our American friends pursue objectives which they deem in their national interests, however much this may hurt a neighbour who has unwittingly made a careless bargain in other circumstances."
A prophetic statement indeed; one to which we should pay serious heed but which, for reasons probably having something to do with the laissez faire character of the Canadian people, we are unlikely to. Why? Because among other things Canada has already been cast in the American economic mould and there is simply nothing we can do to extricate ourselves from it. Our governments, both provincial and federal, appear too preoccupied with the wheeling and dealing domestic issues of federalism, who has dominion over off-shore oil and mineral rights and the like, to pay much attention to the emerging continental resources policy of the U.S. Government.
If we are to be concerned, our concern must ultimately rest with the economic, political and cultural existence of Canada as a nation. Those who would decry this concern ignore the fundamental difference which characterizes the respective societies of the U.S. and Canada. The difference is this: though we share a common heritage, the formal American identity is one of revolution and violence while that of Canada is not. This is not so much a criticism as a sociological observation (See Ronald Segal's 'America's Receding Future'). The U.S. was born with the Declaration of Independence clutched in its hand, a declaration which directly stemmed from a revolutionary war of independence and, as Segal says, ". . the significance of which on the development of the American character can hardly be exaggerated." The violence which entered the mainstream of American life at that time has never been overcome. It is the grim witness of succeeding stages of that nation's development: the opening up of the West, the American Civil War, Prohibition, the more recent ghetto riots of American blacks, to name but a few instances. In sharp contrast, with the influx into Canada of one million United Empire Loyalists (one quarter of the population at the time of the Revolution, one might add) up to the present time, Canada has enjoyed a relatively peaceful development. One could not differentiate between the two nations more vividly than by pointing out this fundamental fact. In my view there is no more compelling reason for maintaining Canadian sovereignty.
This raises yet another interesting point. Why not, some may ask, a North American Common Market? Why not do what the European nations are doing? There is a single, simple answer to such questions. It is this. For Canada to draw closer, to the United States it must first be united in a purpose - in an economic, political and cultural sense - for nations must come together on a basis of equality and mutual respect. Until Canadians feel this ephemeral state of equality exists then common-market-style ties with the U.S. are not possible. As long as Canadians feel they are being economically exploited - and this is a real national feeling at the present time - they will approach future economic-political-cultural ties with the U.S. with cautious trepidation.
Despite these strong arguments for asserting our independence, the cause is almost lost, at least on the economic front, and the best we can hope to do is fight a delaying action.
Hope may spring eternal, but the harsh fact becomes clearer as time passes that Canada, as a sovereign nation, has about twenty years left-thirty at the most-before it will be effectively submerged in the thick soup of the American dream. One is prompted to suggest that one nation's dream is another's nightmare. At that time Canada will no longer be distinguishable as a separate and independent nation except, perhaps, in name only. It is a pessimistic outlook, unpalatable to many, but coldly calculated none the less for that.
Looked at another way, twenty million people can never be the equal partners of two hundred million people living south of that imaginary line called the United States-Canadian border. Sooner or later sheer necessity will compel the U.S. to break through that line and take what it needs to ensure the continued existence of its people. The great dilemma of the U.S. leaders is to get what they need to satisfy present requirements of a bludgeoning population without disturbing the status quo.
When I referred at the beginning of this article to Canadian managers participating in managing the south-ward flow of Canadian energy and raw material resources, this was not said with facetious intent. The extent to which Canadians can influence their own destiny is strictly limited, although some leeway exists. Recognizing this limited freedom, Canadian managers, our political leaders, and what remains of our corporate leadership must cooperate in getting the best possible deal for Canada before time runs out. It is pointless, for example, for our federal government to entertain long-term energy and material resource agreements with the U.S. in return for the short-term benefits to be gained by a rescinded U.S. surcharge on imported Canadian goods.
Some will recall that in George Orwell's novel "Nineteen Eighty-four" the hero, Winston Smith, strives hard to maintain his identity and nothing in the novel comes equal to matching this need. But he is already doomed by the actions of past generations in creating the sort of society into which he is born. After a long period of brainwashing he makes the final submission of his own accord. Is Canada a Winston Smith nation?
Originall published in the Guardian Weekly
13 December 1971
Comment: Since published almost 40 years ago little has changed to alter the prediction of economic domination of Canadian energy, mineral and water resources. Quebec, Newfoundland and Labrador hydro-electric power meets the growing need and appetite of the United States for energy, much to the satisfaction of Quebec and Canada's next door neighbour. The Alberta oil sands, about which much is written and deplored from the viewpoint of its evironmental impact, has became the largest source of oil imported by the United States to help satisfy the needs of California. Likewise nickel and other mineral resources. In short, the more things change, the more they stay the same.