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Challenging the Harper government’s handling of CNOOC takeover of Nexen

On December 7, Prime Minister Stephen Harper approved the first two complete takeovers of Canadian-owned energy firms by foreign state-owned companies in our country’s history. He gave permission to CNOOC of China to purchase Nexen Inc., with its global conventional oil and shale gas assets, and to Petronas of Malaysia for its purchase of Progress Energy Resources Corp., a natural gas firm with operations in British Columbia and Alberta.

The Prime Minister did this without the support of the Canadian public, whose opposition to both foreign takeovers crossed traditional political and party lines.

Instead of listening to the public, or even those within the Conservative Party who opposed the CNOOC deal in particular, the Prime Minister used sleight of hand to trick Canadians into thinking these were “exceptional” cases, to be repeated only cautiously in the future. He made changes to the Investment Canada Act that raised the general threshold under which there would be no review of foreign takeovers to $1 billion while leaving it at $330 million for bids by state-owned firms. He appeared to close the door to ownership of the tar sands by companies controlled by foreign governments.

But he didn’t close it at all. He left it wide open and signalled to China, Malaysia and other countries that Canada’s strategic energy resources were entirely for sale, not just to the highest bidder but to any bidder at all. Foreign ownership of the tar sands, whether state-owned or otherwise, was to become the norm, not the exception.

This deceit will have lasting repercussions on our ability to manage Canada’s natural heritage, to protect our ecosystems that are already threatened by oil and gas development, and to uphold basic Indigenous, human and labour rights.

Canada is already familiar with foreign ownership of energy companies, though the oil, gas and mineral resources and their management are, under the Constitution, the sole property and responsibility of the Crown. Treaty rights also guarantee Indigenous title to the land and what is underneath it, as well as a right to be consulted on any project or international treaty that threatens to undermine those rights.

But Canada is also party to trade and investment treaties, for example the North American Free Trade Agreement (NAFTA), which give foreign-owned energy companies rights to challenge the way resources are managed, as well as other government measures, including environmental policies, that interfere with profits. Even Indigenous treaty rights are undermined by the “right to invest” in these trade and investment deals.

The Harper government has signed and is on the verge of ratifying a Foreign Investment Protection and Promotion Agreement (FIPA) that extends NAFTA-like investor rights to Chinese firms operating in Canada. Resistance to the FIPA with China has been as fierce and cross-sectional as to the CNOOC purchase of Nexen.

Conservative pundits, labour unions, Indigenous communities, environmentalists and opposition party politicians of all stripes have said the FIPA should not be ratified, or that it should be studied publicly for the effects it might have on our ability to manage public resources like the tar sands, natural gas projects or proposed trans-Canada oil pipelines in the public interest. Our experience with investment treaties should have made this public review period automatic.

Canada has been sued many times by U.S. firms using NAFTA’s investment chapter. The federal government has paid out about $160 million in fines and settlements, often in cases where environmental or conservation decisions were challenged. Investor lawsuits were successfully launched against a ban on the export of PCB waste, as well as a ban on the inter-provincial trade of gasoline containing the suspected neurotoxin MMT.

More recently, Lone Pine Resources, a U.S.-owned oil and gas firm with multiple Canadian holdings, filed notice against Canada under NAFTA for the Quebec government’s decision this year to ban hydrofracking, or shale gas exploration, in the St. Lawrence Valley. The company is asking for $250 million in compensation for the lost profits it was expected to make had the fracking gone ahead. The Quebec government banned gas development in the region because of the environmental risks and community opposition. NAFTA’s investment chapter allows the firm to punish Canada for its prudence.

If the Harper government truly believes that foreign state-owned companies should not be given excessive control over the tar sands, he has the responsibility to say no to the FIPA with China. In fact, the Prime Minister has backed himself into a corner. There is nowhere for him to turn.

First, as we’ve seen, the treaty will give CNOOC, Sinopec, PetroChina and other established Chinese firms the right to challenge environmental, conservation or others measure affecting their energy investments. It doesn’t matter if the policy treats foreign and national firms exactly the same. The state-owned or controlled energy companies have a right to be free from so-called indirect or regulatory expropriation, and to certain “minimum standards of treatment” that are defined by paid arbitrators, not the government.

But more importantly for the Prime Minister, if the FIPA is ratified there will be no way to review further takeovers of Canadian companies by these firms. Canada would retain the right to screen foreign takeovers from China-based companies. But once established, these firms must be treated exactly the same as national firms, or as well as or better than foreign private firms. If ExxonMobil can gobble up smaller Canadian players with attractive tar sands holdings or important new technologies, Canada must, under a FIPA with China, grant CNOOC that same right.

Harper should naturally reject the FIPA with China if he believes what he said on Friday about state-owned enterprises in the tar sands. But of course he doesn’t believe it. His government’s main objective is expansion of the tar sands and shale gas, regardless of the environmental costs or of which companies are doing the damage.

So it’s once again up to Canadians to force the Prime Minister to make the right decision. We need to flood this government with phone calls and letters opposing the FIPA. You can do it directly from the Council of Canadians website (http://canadians.org/action/2012/Canada-China-FIPA.html).

We need to do this not because we are opposed to Chinese investment but because we reject the idea that corporations from any country, whether state-owned or otherwise, should be able to sue us when Indigenous rights or community choice or environmental measures come before profits – which they should, always.

We shouldn’t have to pay for our democratic right, and the rights of Indigenous communities, to control the way Canadian resources are managed.