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Blumenauer’s bill would be “an additional burden,” as it will also tax the bitumen in the barrel, which “further erodes the economics” of selling oil to the U.S., said Vivek Warrier, partner and co-lead of the national energy industry team at Bennett Jones LP in Calgary.
Energy oil producers are closely watching the bill, Warrier said.
Suncor and Cenovus Energy Inc. declined requests for comment and CNRL did not provide a response before press time.
In total, Warrier said the new excise tax would bring the total tax burden on every barrel of dilbit sold into the U.S. up to roughly 9 U.S. cents — a significant tax burden that his clients in the oilpatch are considering challenging under USMCA rules.
“There were great pains taken in negotiating the Canada-U.S. free trade agreement to ensure that bitumen would be freely moveable through the continent without having to pay any kind of tariff and certainly this excise tax could be interpreted as such,” Warrier said.
Article 2.4 of the new USMCA trade agreement states that “unless otherwise provided in this Agreement, no Party shall increase any existing customs duty, or adopt any new customs duty, on an originating good,” said Mark Warner, principal at MAAW Law in Toronto, adding that the Blumenauer’s bill may not be permitted under the agreement.
Despite cordial relations between Prime Minister Justin Trudeau and President Biden, the energy-trading relationship between Canada and the U.S. has been strained in the early weeks of the Biden’s government. The new U.S. administration cancelled TC Energy Corp.’s Keystone XL pipeline project as one of its first acts in office, meanwhile, Enbridge Inc. is fighting an order by Michigan’s governor to shutdown the Alberta-to-Ontario Line 5 pipeline through Michigan that could disrupt oil supplies to Eastern Canada and the United States.
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