more countries showing an interest in the Classification, applying it and acceding to the Nice Agreement, and thus bring about the desired geographical extension of the Nice Union.

WIPO Doc. C. M 542/CLIM 314 (June 27, 1977).

§ 8

Fuels and Energy

U.S.-Canada

Bilateral Agreements

On March 30, 1977, President Carter sent to the U.S. Senate for advice and consent to ratification the Agreement between the United States and Canada Concerning Transit Pipelines signed at Washington on January 28, 1977. An excerpt from President Carter's letter of transmittal to the Senate describing the Agreement follows:

The Agreement was negotiated in response to a request made by the Congress in the Trans-Alaska Pipeline Authorization Act (Public Law 93-153) that the President determine the willingness of the Government of Canada to permit the construction of pipelines across Canada to carry oil and gas from Alaska's North Slope to markets in the lower 48 States, the terms and conditions which might apply to the operation of such pipelines and the need for intergovernmental agreements for this purpose. The Agreement negotiated in response to this request provides reciprocal protection against interruption in the flow of hydrocarbons in transit, and against discriminatory taxation. The Agreement is applicable both to existing and future pipelines transiting the United States and to future pipelines transiting Canada.

It became clear early in the negotiations that the Government of Canada was not prepared to conclude an arrangement which granted advance approval to a specific pipeline project. Consequently, the Agreement was drafted without reference to the specific proposals which have been made for the construction of pipelines to transport gas from Alaska's North Slope to the lower 48 States. Its provisions would be applicable to both existing and future transit pipelines. The Agreement does not constitute Canadian approval of construction of a transit pipeline across its territory. Upon completion of studies currently in progress, the Government of Canada will announce whether or not it is willing to permit construction of a transit pipeline for Alaska gas.

The Transit Pipeline Agreement provides a formal basis for United States-Canadian cooperation on hydrocarbon transportation systems, should both governments decide cooperation is advantageous.

S. Ex. F, 95th Cong., 1st Sess. III.

President Carter also transmitted to the Senate, inter alia, the report of the Dept. of State submitted on Mar. 21, 1977, by Secretary Vance with respect to the Agreement. An excerpt of Secretary Vance's report providing further information concerning the Agreement follows:

The Agreement applies to all existing and future pipelines transiting the territory of the United States and Canada, carrying all forms of hydrocarbons including crude oil, petroleum products, natural gas, petrochemical feedstocks and coal slurries. The Agreement is reciprocal with the assurances contained therein applying equally to both countries. It prohibits interference by any governmental authority with the flow of hydrocarbons in transit pipelines and prevents discriminatory treatment of transit pipelines by Federal, Provincial or State authorities, particularly in regard to taxes and other monetary charges. In the event of disputes which can not be resolved by negotiation, the Agreement provides for arbitration. The Agreement will remain in effect for an initial period of 35 years and may be extended beyond that time. After its initial term, the Agreement may be terminated upon notice given ten years in advance.

During the negotiations, considerable attention was focused on the question of establishing an objective standard against which taxes applicable to transit pipelines could be measured for their discriminatory effect. The text of the Agreement establishes as the basic standard of comparison similar pipelines within taxing governmental jurisdictions. In January 1976 letters were exchanged between the heads of the U.S. and Canadian negotiating teams setting forth their mutual understanding that a separate protocol to the Agreement could be negotiated in the event that additional specificity with regard to the level of taxation applicable to a given transit pipeline was required. . . .

S. Ex. F, 95th Cong., 1st Sess. 1-2.

On September 15, 1977, the U.S. Senate gave its advice and consent to ratification, and instruments of ratification were exchanged on September 19, 1977. The Agreement entered into force on October 1, 1977.

Dept. of State File L/T.

On September 8, 1977, President Carter and Canadian Prime Minister Pierre-Elliott Trudeau issued a joint statement announcing agreement in principle on a joint proposal to construct a pipeline to transport natural gas from Alaska through Canada to the lower 48 States. The joint statement reads in part as follows:

Today, we have agreed in principle on the elements of a joint proposal to construct the Alcan-Foothills [Alcan Pipeline Co.-Foothills Pipe Lines Ltd.] pipeline along the Alaska Highway to transport Alaskan natural gas through Canada to the lower 48 States and, at a later time, Canadian gas to Canadian markets.

This joint undertaking will be the largest single private energy project in history. . .

Major benefits from this project will accrue to both countries. When the pipeline is built, Canada will have a much greater ability to develop its own gas reserves, particularly in the frontier regions of the Mackenzie Delta. The United States, in turn, will have the

enormous benefit of new natural gas supplies from the North Slope of Alaska at a significantly lower cost-of-service price than could have been achieved through an all-U.S. route.

77 Dept. of State Bulletin 609 (1977).

The United States and Canada signed on September 20, 1977, the Agreement concerning Transit Pipelines previously announced by President Carter and Prime Minister Trudeau. Portions of the Agreement entered into force upon signature; implementing legislative action was required in both the United States and Canada to bring the balance of the Agreement into force. In a statement prepared for submission to Congress, John R. Crook, Acting Assistant Legal Adviser for European Affairs, Department of State, described the Agreement in part as follows:

The Agreement specifies the route of the pipeline, and requires the two Governments to take all actions required on their part to permit its construction according to a specified timetable. It contains provisions regarding the capacity of the line, and provides that the line shall be privately financed. It establishes a tax regime applicable to the pipeline in the Yukon Territory until such time as the alternative tax regime of nondiscriminatory taxation established under the Agreement between the Government of the United States and the Government of Canada Concerning Transit Pipelines ("the Transit Pipeline Treaty") can be applied in the Yukon. The Agreement establishes certain principles applicable to the determination of tariffs, and provides for consultations on regulatory issues between U.S. and Canadian regulatory agencies. As a condition for Canadian agreement to a pipeline route differing from that approved by the Canadian National Energy Board, these tariff principles allocate to U.S. shippers a portion (ranging from 663 to 100 percent) of the costs of service of any future Canadian pipeline built from Dawson to Whitehorse. The costs allocated to U.S. shippers are to be determined in accordance with a complex formula designed to create an incentive for Canadian regulatory authorities to reduce cost overruns below projected levels.

The Agreement provides that the supply of goods and services to the pipeline project shall be on generally competitive terms, and establishes procedures for coordination between the two Governments in the construction of the pipeline. The Agreement also sets out principles governing the imposition of any direct charges by public authorities, or of any other costs, to the pipeline.

Background Information on Negotiations

The United States entered into negotiation of the Agreement as an element in the process, mandated by the Alaska Natural Gas Transportation Act of 1976, for reaching a Presidential and con

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gressional decision on the construction of the best possible Alaska natural gas transportation system.

Prior to negotiation of the Agreement, the U.S. and Canada had signed the Agreement Concerning Transit Pipelines ("the Pipeline Treaty") which established general principles of nondiscrimition and noninterference with throughput applicable to all United States and Canadian Pipelines. Although the Transit Pipeline Treaty's provisions would be applicable to any natural gas pipeline carrying Alaska gas to the contiguous United States, the Treaty did not address the specific details (such as route, capacity, or timing) of any particular Alaska gas pipeline crossing Canada. At the time the Treaty was signed, agencies and regulatory bodies in both countries were considering competing pipeline proposals, and neither country could commit itself to a specific project. The Treaty accordingly established general principles rather than the details of a single transit pipeline.

On May 1, 1977, the Federal Power Commission recommended an overland route across Canada to the President as the preferred transportation system for Alaska natural gas, but the Commission divided evenly in supporting two alternate proposals. On July 4, the Canadian National Energy Board approved one of these proposals, but with substantial modifications.

Intensive negotiations were then initiated to establish the terms and conditions for a single pipeline system acceptable to the Governments and regulatory bodies of both countries. These negotiations proceeded rapidly, in order to establish the costs to consumers of the pipeline system prior to the deadline for the President's decision on a transportation system under the Alaska Natural Gas Transportation Act.

The Agreement was signed on September 20, and it was incorporated into the President's Decision and Recommendation to Congress under the Alaska Natural Gas Transportation Act on September 22, 1977.

Legal Authority

[The Agreement] . . . was submitted to Congress as an integral part of the President's Decision and Recommendation under that Act, which was approved by Congress in H. J. Res. 621 of November 8, 1977.

Dept. of State File L/T.

On November 15, 1977, the United States and Canada concluded an interim agreement concerning the civil uses of atomic energy, which implements a number of the nuclear policy announcements made by President Carter on April 7 and 27, 1977. The agreement ensures that, pending renegotiation of the 1955 Cooperation Agreement between the United States and Canada, as amended, U.S.-Canadian cooperation will conform to the requirements of immediately appli

cable export conditions contained in pending nonproliferation legislation. It provides in substance that nuclear material and equipment transferred by one party to the other and special nuclear material produced therefrom will not be retransferred without the prior approval of the transferor party. Also, the agreement establishes that nuclear material transferred by one party to the other and special nuclear material produced through its use will not be reprocessed without the prior approval of the transferor party.

In addition, this 1977 interim agreement extends the term of the Interim Arrangement relating to Safeguards on Uranium Imported by the United States from Canada (TIAS 8287) entered into by an exchange of notes on March 18 and 25, 1976. The 1977 interim agreement permits material subject to that agreement, previously required to be held at the Energy Research and Development Administration (ERDA) facilities now under the aegis of the Department of Energy, to be transferred to fuel fabrication, conversion, reactor, and spent fuel storage facilities in the United States.

The 1977 interim agreement also eases the problems created by multiple supplier controls by providing that if a U.S. recipient country notifies the United States that Canada has approval rights equivalent to those of the United States over the same nuclear items, the United States will obtain Canadian agreement before granting U.S. approval. In such an event, Canada may authorize the recipient country to check only with the United States, while Canada preserves the substance of its veto rights. If the recipient country does not give such a notification, the United States is required only to consult Canada prior to granting approval.

Set forth below are portions of the November 15, 1977, note sent by Thomas O. Enders, U.S. Ambassador to Canada, to Donald G. Jamieson, Canadian Secretary of State for External Affairs, who responded with a note of acceptance on the same date:

I wish to acknowledge Canada's leadership role in the field of preventing nuclear proliferation. Both Canada and the United States are parties to the Treaty on the Non-Proliferation of Nuclear Weapons. Both countries have committed themselves to ensure that any source materials, special nuclear materials, equipment or heavy water transferred pursuant to the 1955 Cooperation Agreement, including all materials transferred pursuant to the Agreement embodied in the Exchange of Notes which entered into force on March 25, 1976, and including such items subsequently retransferred pursuant to agreements for cooperation between the United States and other nations, and any special nuclear materials produced therefrom, including subsequent generations derived from the above-mentioned special nuclear materials shall not be used for research on or de