Enbridge recently launched a renewed attack on Canadian environmental organizations, demanding the panel overseeing the Northern Gateway Pipeline hearing squeeze funding information from the project’s critics.
In early 2012, a campaign – coordinated by the conservative government, the oil industry and the astroturf Ethical Oil Institute – sought to undermine the credibility of groups opposing the pipeline by suggesting they are “foreign interest groups” that “threaten to hijack our regulatory system to achieve their radical ideological agenda” as Natural Resource Minister Joe Oliver so forcefully put it.
Now Enbridge is renewing that egregious attack by requesting the panel investigate funding granted to Canadian environmental groups from a number of prominent American foundations renowned for their work in social and environmental equity, including poverty reduction, aboriginal issues, conservation, resource management, international development, and children and peace initiatives.
But Enbridge’s ploy to redirect public attention away from tar sands, pipeline and oil spill issues toward the meddling of foreign interests in Canadian affairs is misguided, to say the least. The lion’s share of foreign funding that guides the Canadian resource economy does not come in the form of conservation or environmental efforts: it comes through foreign investment in the resource sector.
And in the instance of the tar sands and related pipelines, foreign investments can be a politically, environmentally and socially dangerous affair.
Enbridge’s current application for the Northern Gateway Pipeline highlights the partnership structure of the project, where Enbridge’s stake is limited to 50 per cent. The additional 50 percent belongs to private investors, a number of whom remain undisclosed.
According to documents filed with the National Energy Board, the project’s partners will include French oil giant Total, MEG Energy, Cenovus, Sinopec, China’s largest oil company, and Nexen, the company China’s state-owned China National Offshore Oil Co. (CNOOC) recently pledged $15.1 billion for in a takeover bid.
Since 2010, China has bought up $13 billion worth of investments in the Alberta tar sands, with the goal of securing long-term energy resources for the world’s second-largest and fastest growing economy.
Minister Joe Oliver recently told Reuters the Canadian energy industry is looking to obtain $560 billion in investment over the next decade, the majority of which is expected to come from foreign countries. Alongside China, Minister Oliver anticipates India – the fourth largest oil importer in the world – could also play a large investment role.
According to Gus Van Harten, professor at Osgoode Hall Law School and PhD in International Investment Law from the London School of Economics, this level of foreign investment in Canada’s resources is risky business. The nature of these high-profile investment agreements, called ‘treaties,’ places Canada at a disadvantage when making decisions about the management of its own resources.
According to Van Harten, investment treaties, like the one outlined in the China-Canada deal allows investors, in this case the Chinese government, to sue Canada outside Canadian courts, in a secretive international tribunal arbitrated by corporate lawyers. Under this design, the Chinese can sue Canada for improvements to resource management law or environmental legislation designed to control global warming emissions, protect water sources or conserve wildlife habitat, for example.
Conversely, neither the federal Canadian government, nor provincial governments can in turn sue the investor, even if they have engaged in illegal behavior.
Within the trade agreement, according to Van Harten, Canada’s government is hamstrung, held hostage to a secret international court. At the Harper government’s behest, the dealings of this international court can be kept secret from the Canadian public.
“By implication,” Van Harten recently wrote in the Toronto Star, “we shall have to assume in time that there are hidden Chinese lawsuits against Canada. We will not know why we have been sued or who is deciding the case. We will not know what the government is arguing on our behalf. And we will not know if Canada has been ordered to change government decisions.”
For this reason, China’s stake in the Northern Gateway pipeline is of great significance.
Hypothetically speaking, even if China were to own a minority stake in the pipeline as a shareholder, the country’s impact on decisions regarding that project could be dramatic, says Van Harten.
He outlines three possible scenarios:
If B.C. Premier Christy Clark decided to withhold electricity from the line, for example, China could sue for a violation of Article 6 of the treaty which states Canada may not treat China ‘less favourable’ than other Canadian companies. This means for projects China plays a role in, no priority treatment can be given to Canadian businesses.
More seriously, if B.C. denies permits for the pipeline project, China could sue under Article 4 of the treaty by suggesting ‘fair and equitable’ treatment was not given to the permit request, compared to other approved permits. According to Van Harten this Article 4 argument has evolved over time, with arbitrators requiring governments to fulfill the investors’ ‘legitimate expectations’ and guarantee a ‘stable regulatory framework’ during the lifespan of a project. That potentially means no adjustments or improvements to environmental legistlation could be made.
If B.C. decided to block the pipeline after its approval, the federal government would be required to protect Chinese investors, granting them ‘full protection and security’ according to Article 4. This means Canada’s federal government could be forced to protect Chinese interests over and above the interests of Canadians, regardless of the circumstances.
Van Harten calls the China-Canada deal “a recipe for more conflict, not less, since governments in B.C. and other provinces will not capitulate easily on their basic responsibilities of representative government.”
As Van Harten makes clear, the significance of foreign investment in Canadian resources like the tar sands goes far beyond issues of domestic energy supply, or even engaging growing global economies; it comes down to fundamental issues of Canadian sovereignty, democratic values and the freedom to manage Canadian resources in a way that reflects those values.
So, Enbridge wants to talk about the influence of foreign funding? Let’s get the conversation started.