Another big winner from CETA: The Tar Sands

There are a lot of connections between the Harper government's trade and energy agendas. From dropping barriers to foreign investment in natural resources, to signing investment treaties that (intentionally) make regulating energy and mining projects more difficult, to making it easier for resource companies to import temporary labour – the interrelated objective is the continued rapid expansion for export of oil, gas and minerals.

Enter CETA.

The proposed Comprehensive Economic and Trade Agreement with Europe is not just about cheaper cheese and Mercedes cars. Like all free trade agreements of the past 30 years, CETA is about consolidating corporate power over the creation and allocation of wealth. That includes corporate control over resources, which are, under free trade logic, things be dug up and put onto “the market” with minimal if any interference from government or the communities most affected by their extraction.

The rate at which this exploitation happens is determined by market price more than any reasonable domestic need for the resources, let alone the imperative to conserve those resources. Applied to projects like the Alberta tar sands, the results have been catastrophic for communities, ecosystems and the global climate.

The Canada–United States Free Trade Agreement locked in a period of deregulation of the Canadian oil and gas sector, as well as its associated infrastructure (e.g. pipelines), that had started several years earlier through Conservative reforms in Ottawa. The FTA provided a stable regulatory and investment environment for U.S. energy firms, which promoted an explosion in tar sands output, 60 per cent of which is exported south of the border. The current quantity and direction of output also locked in by NAFTA rules that say we cannot limit exports, even to divert production into a strategic reserve, unless there is a proportional reduction in domestic use.

A phase out, scaling down or even modest re-regulation of tar sands development would inevitably attract costly investor-state lawsuits under NAFTA’s investor rights chapter and extra-legal dispute settlement process. National or provincial environmental and conservation policies are ostensibly safe as long as they do not violate the investment rules in NAFTA. It’s up to three paid arbitrators, not the courts or legislatures, to decide if public policies meet that test, and how much the Canadian government will have to compensate the oil industry for what they would call the “regulatory expropriation” of their rightful profits.

The fear of investor-state disputes and the uncertainty these treaties, of which there are thousands globally, create around what types of policies are acceptable have put a chill on effective environmental regulation and climate policy everywhere.

The Harper government knows this. Canadian negotiators told their European counterparts this year that they did not want the investor-state dispute settlement process in an eventual CETA to apply to financial services because it might deter emergency measures to try to avoid or mitigate financial crises. Canadian and Alberta policy makers, who have been captured by tar sands corporate interests, don’t care if the same policy “chill” affects the ability of government to respond to climate change. In fact they are counting on it.

The European and Canadian energy industry knows this, too. For at least three years, the main corporate lobby group promoting a Canada-EU free trade agreement – the Canada-Europe Roundtable for Business (CERT) – has twice annually organized Energy Roundtables in Calgary and London. The London event this year happens November 19 at Canada House in Trafalgar Square, home of the Canadian Consulate to the UK. Natural Resources Minister Joe Oliver is once again a keynote speaker, next to a host of energy interests.

The second session at this year’s London meeting is called “Unconventional energy development – lessons from across the Atlantic,” and is described as follows:

Panelists will examine the risks and the rewards in the energy sector in this time of tremendous change. Discussions will cover areas of growth in energy markets, including how firms on both sides of the Atlantic can work strategically together on energy infrastructure, production and technical innovations in the heavy oil, shale gas, tight oil and advanced energy technologies. The session will also address on the public policy decisions that are being made to diversify Canada’s oil and gas exports and offer reflections on efforts to ensure security of supply in the UK and continental Europe.

The Canada-EU deal must be understood as one of those policy options for diversifying tar sands exports, and to make sure the European Union remains an open market for tar sands and shale gas products. This will happen in several ways, some of which were touched on in news reports since Prime Minister Harper and President Barroso signed a declaration on October 18 of a “deal in principle” on the four-year-old CETA negotiations.

Bloomberg news writes that by increasing the threshold below which foreign takeovers of Canadian firms will not be reviewed to $1.5 billion from $1 billion (it was $300 million a few years ago), CETA will attract more European investment in Canadian resources.

“Increasing the threshold to C$1.5 billion opens up the playing field for entities trying to get into Canada,” says Jeremy McCrea, an analyst at AltaCorp Capital Inc. in Calgary, in the article. “If you’re going down that path, and looking to make a sizable investment in Canada, at least you have some comfort that it’s not going to be subject to review.”

Another CEO, Patrick Ward of Painted Pony (PPY), which owns natural gas assets in British Columbia, had this to say:

Anything that opens it up without government interference is always good for business… We’re not actively having the company for sale or anything at this point, but people are always looking for shareholder value, so it certainly does weigh on people’s decisions, how open Canada is for business.

One barrier (foreign investment) to further tar sands and shale gas expansion overcome, the EU deal is also seen as a way to fix the perceived problem of labour shortages. The Globe and Mail reports that Canada and the European Union could speed up parts of their planned free trade deal related to tariffs and labour mobility, even before the European Parliament has a chance to vote on the whole package.

EU Ambassador to Canada Marie-Anne Coninsx told the paper, “We are counting that the real entry into force [of CETA] might be 2015, but it’s not excluded  – and that we are verifying too – that a provisional entry into force of some of the parts might be possible."

The example offered to the Globe by Canadian trade lawyer Lawrence Herman is that Ottawa and the European Commission could act early on temporary entry for foreign workers, so that Total SA, a French energy firm invested in the tar sands, could quickly fill vacancies at its Alberta facilities with workers from any EU country.

“That could be done easily, I think, between Alberta and Canada,” says Herman. “And it would be a good idea to do it.”

Ambassador Coninsx completely agrees.

“They [Alberta] have a shortage of high-qualified personnel workers – in particular, I would say, in the energy sector – and would be extremely keen of having temporary workers coming from Europe,” she told the Globe. “You know the situation of employment in some European countries is not so good. It’s good in certain countries, but not so good in other countries and there will be a big interest. The CETA gives the possibility for temporary movement mobility.”

Finally there are the extreme investor “rights” mentioned already. If signed and ratified, CETA will include an investor-state dispute settlement process as in NAFTA. It will be the first time the European Union, or any EU member state for that matter, has entered into an investment treaty with a developed country, one that houses a large number of global energy companies looking to expand the tar sands but also to open up unconventional gas, and dig new mines, in Europe.

Mineweb reports this week on the possibilities of this chapter in CETA for mining companies operating in Europe. They quote Peter Kirby, a lawyer with the firm Fasken Martineau based in Montreal, who has been a counsel in several investor-state arbitrations under NAFTA. He says governments should have the right to regulate for environmental protection – with conditions:

The question is, when a government causes damage, for whatever reason, to a private party, is it always required to compensate or can it do so without any requirement for compensation? To me it's pretty basic stuff. If you want to take my house, you ought to be able to pay me even if you're taking it for the very best reason. (Italics mine.)

The Mineweb article adds, “In place of house, of course, you could read mineral deposit.” Kirby adds that even where a company is not assured a win at the investment arbitration stage, these protections in CETA, NAFTA and other treaties, can be useful as a kind of blackmail. “It's a lobbying tool in the sense that you can go in and say, ‘Ok, if you do this, we will be suing you for compensation.’”

The high-profile example of this in action comes from Quebec, where Lone Pine Resources is using NAFTA’s investor “rights” chapter to sue Canada because a moratorium on shale gas drilling under the St. Lawrence Valley has, according to the firm, expropriated its profits and violates minimum standards of treatment guaranteed by the treaty. With Canadian and U.S. mining companies looking to cash-in on fracking in Europe, despite already overwhelming and growing opposition to the process, CETA would give companies the upper hand where communities are saying “no.”

Other chapters in CETA on technical barriers to trade, regulatory cooperation and domestic regulation of services will all serve interests of corporations by limiting the public policy and regulatory options of Canadian and European governments, and that will include in the energy sector. But even the basic market access for goods rules could get in the way of Europe’s climate policies.

As the CETA sustainable development chapter is still being negotiated, it’s difficult to know yet whether the EU will try to shield its Fuel Quality Directive from the agreement’s market access and investment rules. If it doesn’t, Canada, Alberta and the oil and gas sector they work (and lobby) for would have new weapons to frustrate European efforts to block unconventional, highly polluting forms of energy from their market. If the Fuel Quality Directive made planned tar sands refineries in the UK unworkable, then investors would have a good case for compensation under CETA’s investment rules.

The Harper government barely mentioned the environment in its celebration of the conclusion of EU trade and investment negotiations, but it is there, way down at the bottom a 44-page promotional booklet for CETA:

In CETA, Canada and the EU have committed to seeking high levels of environmental protection, enforcing environmental laws and not waiving or derogating from these laws in order to promote trade or attract investment.

You would fairly guess the oil sector-sponsored 2012 omnibudget changes to the Navigation Waters Protection Act and Fisheries Act, which remove federal environmental assessments from many projects that cross now unprotected waters, would count as derogating from national environmental laws to attract investment. West Coast Environmental Law thinks these changes violate the environmental side agreement in NAFTA and has asked the Commission for Environmental Cooperation to look into it.

But you would clearly be wrong. As in NAFTA, there will be no honest means in CETA to enforce even a government’s responsibility to abide by its own legislation. As of earlier this year, Canada was resisting any link between CETA’s trade obligations and the obligations of countries to meet their climate obligations. Just more investment in unsustainable energy resources, more hurdles for communities and government to overcome to regulate its production and trade, and more rights for corporations to attack even modest attempts to bring us from the brink of a climate change disaster.

We would be right to reject CETA on its environmental consequences alone.