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The San Diego Union-Tribune


Time for U.S. to Emulate Mexico?

September 04, 2013

By Mark P. Mills

South of the border, President Enrique Peña Nieto appears to be on track to gain approval from the General Congress of the United Mexican States to reverse decades of tight federal control over the country’s oil and gas resources. Polls in Mexico show citizens favor Peña’s idea 62 percent to 28 percent.

And in a reversal of roles, Mexico is setting an example that the United States should follow: not just permitting, but encouraging, private investment in publicly controlled energy resources.

In Mexico, stakes are high. At least one-third of the government’s revenues come from oil and gas. But Pemex, the monopoly player, has struggled of late, overseeing a 25 percent fall in Mexico’s oil production as the easy deposits have been tapped out.

Peña doubtless knows that, after managing his domestic politics, it is mainly American high-tech hydrocarbon know-how his country needs to unlock billions of untapped barrels in its enormous shale deposits and the monster fields deep in the Gulf of Mexico. Given the proximity, American companies both large and small and their workers will be co-beneficiaries of a Mexican energy revival.

But we can do more than sit on the sidelines.

The United States instead could emulate Mexico and liberalize federal control over oil and gas production. While Peña needs a constitutional amendment to unleash hydrocarbon riches, President Obama could do so with the stroke of a pen. Just like Mexico, where the government controls access to all domestic resources, the U.S. government controls nearly half of America’s land and 100 percent of its offshore territory, 80 percent of which is currently off-limits.

Some of America’s richest federal resources, which dwarf even the fecund shale fields of North Dakota, are entirely off-limits. When other nations find resources at a fraction of the scale found in the United States, their politicians and citizens celebrate and eagerly pursue the bounty. And all, with rare exceptions these days, adhere to strict environmental standards.

Notwithstanding the astonishing recent growth in U.S. oil and gas production — and the associated jobs — a lot more is possible by bringing federally controlled lands into play. According to the Congressional Research Service, all the recent growth in output came from private and state-owned lands. Given the reality of the near-jobless recovery, perhaps the prospect of millions more jobs and hundreds of billions of dollars in economic benefits could lead the White House to re-evaluate its position and open up rather than further constrain federal lands.

No sector of the economy has so much short-term economic and employment potential. No federal fiscal stimulus is required. With the U.S. already first in natural gas and second in petroleum production, imagine what would be possible with a bold cross-border initiative to optimize and rationalize each nation’s projects and infrastructure. The North American continent has more than double the oil and gas resources of the entire Middle East. Unleashing North America’s capabilities would ignite jobs and growth from the Yucatán Peninsula to the Arctic Circle. In less than two decades, North America could surpass Middle Eastern production and become the dominant player in global energy markets.

In order to make that happen, the United States should emulate the 1994 North American Free Trade Act (NAFTA) and create a North American Common Energy Market. Unlike NAFTA, there isn’t a free flow of economically sensible cross-border energy projects, from pipelines to transmission lines. Special government permission is often required, which at best takes time and at worst is denied. It is, for example, illegal to ship crude oil out of the United States without federal exceptions, even to Canada or Mexico. And everyone knows the status of the Keystone XL pipeline.

NAFTA has been a resounding economic success for all three nations and a crowning example of American political bipartisanship. As valuable as NAFTA has been, the Common Energy Market is potentially bigger. We know where Peña stands. And Canada’s Prime Minister Harper has already embraced expanding the economic benefits from exporting more hydrocarbons.

A recent Wilson Center poll tells us where U.S. and Canadian citizens stand: by 63 percent to 30 percent, people favor more oil production to reduce imports over policies cutting greenhouse gases. These are promising political tailwinds for a bold North American energy alliance.

It would be fitting to launch an energy alliance this year on the 40th anniversary of the Arab oil embargo. We now have the opportunity to utterly eviscerate the paradigm of economic and geopolitical dependency that has gripped energy policy for decades.

Mexico could be the catalyst.

Original Source:



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