A US withdrawal from the North American Free Trade Agreement could create an additional delay for projects seeking to export US natural gas to Mexico, dealing an unnecessary blow to the Trump administration’s goal of establishing US energy dominance, an American Petroleum Institute official warned during a Jan. 16 discussion at the Heritage Foundation.
The US Department of Energy would need to certify that each gas export project to Mexico is in the US national interest because the country no longer would be part of a free-trade agreement with the US, explained Aaron Padilla, API’s senior advisor for international policy.
“We need provisions that make US companies confident in investing in Mexico,” Padilla said, adding that such cross-border investments represent 19% of the foreign commitments in 31 upstream blocks leased there since the country’s energy reforms began in 2014.
New Mexico has taken the lead in increasing energy exports across the southern US border, noted Daniel Fine, associate director of the Center for Energy Policy at the New Mexico Institute of Mining and Technology in Socorro.
“The biggest surprise was Mexico’s demand for gas and power increase as American geoscience produced the first shale gas and, later, shale oil,” Fine said. “Our goal is to move more of New Mexico’s gas into Mexico. But if trade between our two countries goes off the rails, companies from France and elsewhere are ready to step in.”
Producers in northern New Mexico’s San Juan basin are having trouble competing with those in Pennsylvania and elsewhere in the East, Fine said. Mexico imported 7 bcf of gas in 2013 and expects to need 25 bcf by 2022, largely to generate electricity, he said.
‘Border is not a wall’
“The border with Mexico is not a wall. New Mexicans and Texans export gas to Mexico, but much of it goes directly to Mexico City and bypasses Juarez and the state of Chihuahua,” Fine said. “We have become continentalists, whether we like it or not, because of NAFTA. The center of a resource isn’t simply a nation anymore.”
Policymakers previously treated domestically produced energy as something which needed to be protected, observed the discussion’s moderator, Nicolas Loris, a Heritage Foundation energy and environmental policy fellow. That attitude was challenged with the growth of free trade in the US, particularly with Canada and Mexico through NAFTA, he said.
“Our trade agreements encourage other countries to modernize and create more open markets,” said a third speaker, Bryan Riley, who directs the Free Trade Initiative at the National Taxpayers Union. “This has been particularly true of Mexico’s energy sector, which changed for the better under NAFTA.”
The treaty could have been renegotiated quickly during the Trump administration’s first year, but preoccupations in some parts of the White House with the US trade balance and other factors prevented this, Riley said. “Actually, US exports to Mexico equal 20& of its economy. US imports from Mexico represent 2% of this country’s economy. It’s not an appropriate comparison,” he said.