Brent Rathgeber Maverick Watch

By Aaron Wherry - Tuesday, December 11, 2012 at 10:53 AM - 0 Comments

The Conservative MP approves of the CNOOC and Petronas takeovers, but questions the idea of the federal government judging “net benefit.”

The further reality is that it is not entirely clear to me that governments and not shareholders are in the best position to make these decisions.  Certainly, if you own a small business, you would be able to sell that enterprise to whomever you chose to.  Why should stock certificates in a larger enterprise notionally be any different??    Absent some extraordinary security rationale, shareholders should be able to sell their personal property (shares) to whomever they choose.  Why, in a free market, should they be forced to sell their stock at a discount in a smaller pool of government approved purchasers??

It is for this very reason that, in my view, the net benefit test has an inappropriate reverse onus.  Absent an investment injurious to national security, deference should be given to markets and to the owners of property.  If there is not “Net Harm” to national security, the transaction should be allowed to proceed. The issue of state ownership poses further issues, although more perceived than real.  It is acknowledged that states will occasionally pursue political rather than economic objectives.  That is why I am generally suspicious of Crown Corporations.  But in the case at hand, the costs of bad decisions are bourne by the citizens of China and Malaysia, while the benefit accrues to Canada.  The precious resource, while in the ground, does not belong to the extractor—it belongs to, and is regulated by, the provincial government. I see no net harm by allowing Asian State Owned Enterprises to pay royalties to the Province of Alberta and taxes to the Government of Canada.

Develop the oil sands, or make life difficult for foreign investors

By Stephen Gordon - Monday, December 10, 2012 at 11:36 AM - 0 Comments

(Jason Lee/Reuters)

The proper context for thinking about the CNOOC-Nexen and the Petronas-Progress takeovers is what I described  here: the real economic story of the oil sands is the investment in physical capital—structures and equipment—that is required before production can even start.

These investment numbers are very, very large. The oft-cited estimate of $650 billion in the next decade should be taken with a grain of salt, because we don’t know the assumptions that went into it. Even so, the fact that the costs of a single oil sands installation is measured in billions of dollars suggests that estimates in the hundreds of billions of dollars are at least plausible. (To give you an idea of how big these numbers are, current Canadian GDP is around $1.8 trillion a year.)

A national accounts identity tells us that all investment expenditures must be financed out of the savings of someone, somewhere:

Investment = Private domestic savings + Public domestic savings + Foreign investors’ savings

Let’s look at each component in turn.
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‘All investments are not equal’

By Aaron Wherry - Friday, December 7, 2012 at 5:50 PM - 0 Comments

The Prime Minister’s remarks this evening on the CNOOC and Petronas acquisitions.

“Today the Minister of Industry rendered decisions respecting two foreign investment proposals.

“These decisions will be closely studied.

“It is therefore important that Canadians, and also foreign investors, understand how the government will approach such decisions in the future.

“In particular, Canadians generally, and investors specifically, should understand that these decisions are not the beginning of a trend, but rather the end of a trend.

“Investment is critical to our Government’s focus on jobs and growth.

“And, Canadians expect that we shall approve foreign investments that are of net benefit to Canada.

“But, all investments are not equal.

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Harper government approves CNOOC and Petronas deals

By Aaron Wherry - Friday, December 7, 2012 at 4:59 PM - 0 Comments

In this April 25, 2012 photo, Nexen chief executive Kevin Reinhart addresses the company's annual meeting in Calgary. (Jeff McIntosh/CP)

The Harper government has approved both CNOOC Limited’s $15.1-billion acquisition of Nexen Inc. and Petronas’ $5.2-billion acquisition of Progress Energy Resources Corp., while announcing new guidelines for foreign investment in Canada.

In separate statements released after North American markets closed on Friday, Industry Minister Christian Paradis said he was satisfied that the acquisitions by Malaysia’s Petronas and China’s CNOOC were likely to be of net benefit to Canada. Paradis said both companies had “made significant commitments to Canada in the areas of: governance, including commitments on transparency and disclosure; commercial orientation, including an adherence to Canadian laws and practices as well as free market principles” and “employment and capital investments, which demonstrate a long-term commitment to the development of the Canadian economy.” Initially, Malaysia’s Petronas $6-billion bid for Progress Energy was rejected by the federal government and the company later revised its proposal.

“Our statements today will not satisfy everybody,” Prime Minister Stephen Harper said shortly after the announcements were made. “Some believe you are either ‘for’ foreign investment under all circumstances, or that you must be ‘against’ foreign investment under any circumstance. Practical government rarely permits such simplicity.”

Prime Minister Stephen Harper delivers a statement regarding the federal government review of takeovers on Dec. 7, 2012. (Fred Chartrand/CP)

Under the new guidelines, the acquisition of oil sands companies by foreign state-owned enterprises will only be found to constitute a new benefit for Canada in “exceptional circumstances.” And, despite today’s decision on Nexen, the prime minister seemed eager to draw a line on such investments, saying these decisions marked “not the beginning of a trend, but rather the end of a trend.”

“To be blunt, Canadians have not spent years reducing the ownership of sectors of the economy by our own governments, only to see them bought and controlled by foreign governments instead. That was never the purpose of the Investment Canada Act. It is not an outcome that Canadians would ever support. It is not an outcome any responsible government of Canada could ever allow to happen,” the Prime Minister explained.

Beyond the oil sands, acquisitions by state-owned companies will be reviewed to consider the control or influence to be exerted on the Canadian business, the control or influence likely to be exerted on the larger industry and the control or influence likely to be exerted by the foreign government over the state-owned company.

“In light of growing trends, and following the decisions made today, the government of Canada has determined that foreign state control of oil sands development has reached the point at which further such foreign state control would not be of net benefit to Canada,” Harper said. “When we say that Canada is open for business, we do not mean that Canada is for sale to foreign governments.”

The Conservative government’s decisions drew mixed reviews.

David Detomasi, a professor of international business at Queen’s University, said the two deals forced Ottawa to clarify the Investment Canada Act’s “net benefit” test, which was used to quash the takeover of Potash Corp. of Saskatchewan two years ago. “I think the Harper government was caught a little bit flat-footed when these bids were made,” he says. “I think they realized that whatever precedent they set was going to be something they were going to have to live with. And that’s because there are likely other deals in the offing.”

Even so, it will be a tough balance for Ottawa to strike, according to Detomasi. Recovering crude from the oil sands is a massively capital-intensive business and there aren’t enough deep-pocketed Canadian companies capable of making the necessary investments. And many foreign companies—particularly those in China—are state-owned. “Unfortunately, they’re the ones with the cash.”

The opposition New Democrats declared themselves “profoundly disappointed” with the Nexen deal, suggesting that proper public consultation did not occur before the decision was made. “Canadians should be very apprehensive about the long-term economic and environmental consequences,” Peter Julian, the NDP’s natural resources critic, said in a release. “In the past, these kinds of takeovers have resulted in job losses. In October, the NDP called for the government to reject the CNOOC acquisition.

While saying that the Liberals welcome investment—”we do need investment in the oilsands and in other industries”—Liberal trade critic Wayne Easter also expressed concerns. “There’s still really no clarity. We still don’t know the details. We have no idea what those rules really are,” he said. “Are all state-owned enterprises being handled the same, whether it’s China or any other country? Should there be different criteria, given the strategic planning of some countries versus others? Is there reciprocity here? I’m led to believe there’s not. There should be reciprocity in terms of how Canadian investment in China is handled in a similar way to Chinese investment in Canada.”

Alberta Premier Alison Redford said her government was “pleased” with the Harper government’s decisions, but that Alberta would be seeking clarity on how “exceptional circumstances” will be defined.

Canadian Oil Sands to spend $1.3-billion at Syncrude mine next year

By The Canadian Press - Thursday, November 29, 2012 at 8:47 PM - 0 Comments

CALGARY – Canadian Oil Sands Ltd. says it plans to spend $1.3 billion next year at the Syncrude oilsands mine, about 63 per cent of which will go toward replacing and moving mining infrastructure and cleaning up tailings ponds.

The Calgary-based company (TSX:COS), which owns a 37 per cent stake in the massive mine north of Fort McMurray, Alta., has also earmarked capital for regular maintenance work.

“Syncrude’s major projects are advancing on-schedule and on-budget, and our finance plan for these projects is in excellent shape. Our balance sheet is stronger than we had anticipated exiting 2012,” said CEO Marcel Coutu in a release.

Coutu added that the company plans to maintain its current dividend at 35 cents per share through 2013.

Next year, Canadian Oil Sands plans to complete its Aurora North Tailings Management project to clean up waste from the oilsands extraction process that consists of sand, clay, residual bitumen and water. A plant will be built to separate the solids from the liquids, so that vegetation can be planted where the tailings pond used to be.

The company aims to have a project to relocate mining equipment at its Aurora mine 90 per cent complete next year and a project to replace equipment at Mildred Lake 75 per cent complete.

Canadian Oil Sands estimates Syncrude will produce 105 million to 115 million barrels per day, taking into account planned maintenance work that will take place in the second half of 2013.

In releasing its third-quarter results last month, Syncrude said it was expecting annual Syncrude production in 2012 of between 105 million and 108 million barrels.

The company is expecting West Texas Intermediate oil prices, a key north American benchmark that fetches higher prices than the type of crude oilsands companies produce, to average US$85 per barrel next year

The other owners of Syncrude include Imperial Oil Ltd. (TSX:IMO), Suncor Energy Inc. (TSX:SU), Mocal Energy, Murphy Oil, China’s Sinopec and Nexen Inc. (TSX:NXY), which has agreed to be taken over by another Chinese state-owned firm.

Canada is missing the bigger story about the oil sands

By Stephen Gordon - Monday, November 26, 2012 at 9:50 AM - 0 Comments

(Jeff McIntosh/AP Photo/CP)

When we think about the economic importance of the oil sands, it is generally in terms of employment and GDP, but the “mining, quarrying and oil and gas extraction” sector—sector 21 according to the North American Industry Classification System (NAICS)—accounts for only 1.5 per cent of employment, 3.6 per cent of wages paid and only 4.4 per cent of GDP. And even these numbers overstate the importance of the oil sands, because they account for only part of NAICS sector 21. So at first glance, it’s hard to see why we spend so much time talking about it, let alone worrying about how Canada’s economy is becoming too dependent on the oil sands.

The answer is that this sector is enormously capital-intensive, with 16.5 per cent of Canada’s capital stock. On average, an employee in the mining, oil and gas sector is working with $1.4 million in equipment and structures; this capital-labour ratio is more than ten times that of the Canadian average. Installing new capacity and replacing depreciated capital in this sector accounts for 16 per cent of investment in real terms, and over 20 per cent in dollar terms. This wave if investment is not expected to slow anytime soon. According to this list, projects under construction are expected to add another 788,000 barrels per day in in production capacity—about 35 per cent of what is currently in place. It is this investment activity—not the actual production of oil—that is of immediate interest.

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Why environmentalists should be open-minded about the oil sands

By Stephen Gordon - Friday, November 9, 2012 at 3:33 PM - 0 Comments

Pop quiz: What is the socially optimal level of pollution? (Hint: the correct answer is not ‘zero’.)

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The NDP and Nexen

By Aaron Wherry - Thursday, October 4, 2012 at 11:37 AM - 0 Comments

Barring further information, the NDP is apparently compelled to oppose the CNOOC takeover of Nexen. Here was Thomas Mulcair’s assessment on Tuesday.

What we’ve been saying from the start is that we should have public consultations.  That’s our position.  That’s allowed under the Act and we should consult with Canadians.  This is fundamental. This is about whether or not Canadians are going to control their own natural resources. The government says it’s going to have new criteria for looking at investments from other countries.  They added a couple of things today.  They’re starting to talk about security issues.  They’re starting to talk about control over our natural resources when it’s a takeover by a foreign government through a state-owned enterprise of a foreign government.  So we think that those things should have been on the table since the beginning.  They’ve been talking for years about updating those criteria. They’ve never done it.  So that’s the conversation we want to have with Canadians.  We think that those are valid issues. 

If you listened to Don Davies’ question today, he went a little bit further with regard to the fact that there’s protection for Chinese investing in Canada but there’s not reciprocity. Canadian investors would never be allowed to buy the raw natural resources of China.  So there’s something terribly wrong with a government that keeps signing these deals where we pass for chumps, where they get something that we don’t get. 

Stephen Gordon considers Pat Martin’s suggestion of “economic treason.”

Pipeline economics: China needs oil, and Canada’s got it

By Colby Cosh - Tuesday, September 25, 2012 at 11:34 AM - 0 Comments

Jianan Yu/Reuters

The UC Berkeley economist Brad DeLong has said that Deng Xiaoping may have been “quite possibly the greatest human hero of the 20th century.” It’s a tough-minded, utilitarian judgment; DeLong knows that Deng, as leader of China, ordered the Tiananmen massacre of 1989. In the other pan of the balance, however, is the successful transformation of China into a free-market industrial power. That transformation, over three decades of Deng’s leadership, multiplied per-capita GDP 50-fold and lifted somewhere between 200 million and 400 million people out of poverty.

The revolution is still ongoing, and it runs on oil. Enter Canada. Hearings into Enbridge’s proposed Northern Gateway pipeline, which would link the town of Bruderheim, Alta., to the Pacific Rim at Kitimat, B.C., are being held now in Alberta and will soon shift to British Columbia. The B.C. phase of the hearings will see Enbridge challenged on whether it can successfully protect B.C. wildlands and the port of Kitimat from environmental disasters like the spill that affected the Kalamazoo River in Michigan in 2010.

But in Edmonton, the topic of discussion has been the basic economic rationale for the pipeline. Put in its simplest form: China needs oil, and Canada’s got it. In truth, however, that pretext could be stood on its head. Canada needs alternative markets for its oil, and China is the obvious one. Right now, the oil sands are more or less forced to take a U.S. Midwest price for their product. With the sudden reflation of U.S. oil reserves, Alberta has been getting an increasingly raw deal. Enbridge consultant Neil Earnest explained to hearing attendees at a Holiday Inn in south Edmonton that it costs about $7 in pipeline tolls to move a barrel of Western Canada Select crude to the Gulf of Mexico. “But the price [of WCS] today at Edmonton is not the Gulf Coast price minus $7,” he explained. Owing to the huge oversupply of crude in the U.S., “it’s the Gulf Coast price minus $30.”

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How do you solve a problem like China?

By Aaron Wherry - Monday, September 17, 2012 at 11:30 AM - 0 Comments

The cabinet is apparently divided over how to deal with China.

CNOOC Ltd.’s groundbreaking $15.1-billion deal for Calgary’s Nexen has revealed a continuing fault line in the Conservative caucus, pitting the more ideologically driven members who distrust the undemocratic regime in Beijing against their colleagues who want to expand trade and investment ties with the fast-growing Asian powerhouse.

The split has even surfaced in cabinet, according to several sources close to the government. Finance Minister Jim Flaherty, who has made it a personal priority to build commercial relations with China, has spoken in favour of judging the CNOOC deal on its merits rather than allowing broader political differences to derail it. Immigration Minister Jason Kenney – with his anti-communist roots and promotion for religious freedom – voiced his concerns that China is not a trustworthy economic partner.

Carney questions the diagnosis

By Aaron Wherry - Friday, September 7, 2012 at 2:17 PM - 0 Comments

Mark Carney takes on the Dutch Disease debate.

Some regard Canada’s wealth of natural resources as a blessing. Others see it as a curse. The latter look at the global commodity boom and make the grim diagnosis for Canada of “Dutch Disease.” They dismiss the enormous benefits, including higher incomes and greater economic security, our bountiful natural resources can provide. Their argument goes as follows: record-high commodity prices have led to an appreciation of Canada’s exchange rate, which, in turn, is crowding out trade-sensitive sectors, particularly manufacturing. The disease is the notion that an ephemeral boom in one sector causes permanent losses in others, in a dynamic that is net harmful for the Canadian economy.

While the tidiness of the argument is appealing and making commodities the scapegoat is tempting, the diagnosis is overly simplistic and, in the end, wrong. Canada’s economy is much more diverse and much better integrated than the Dutch Disease caricature. Numerous factors influence our currency and, most fundamentally, higher commodity prices are unambiguously good for Canada. That is not to trivialise the difficult structural adjustments that higher commodity prices can bring. Nor is it to suggest a purely laissez-faire response. Policy can help to minimise adjustment costs and maximise the benefits that arise from commodity booms, but like any treatment, it is more likely to be successful if the original diagnosis is correct.

Is Nathan Cullen out of order?

By Aaron Wherry - Wednesday, August 29, 2012 at 4:44 PM - 0 Comments

The Justice Department doesn’t think Nathan Cullen’s request to address the joint review panel considering the Northern Gateway pipeline is in order.

Here is Mr. Cullen’s letter outlining his request. Here is the letter from the Justice Department outlining its objections. And here is Mr. Cullen’s response to the Justice Department’s objections. And here is the website for the Northern Gateway review panel.

Update 6:27pm. Joe Oliver’s office passes along a statement from the Natural Resources Minister.

“The Joint Review Panel independently makes all decisions respecting its proceedings. Our officials will answer any questions that the independent panel deems relevant. Nathan Cullen is seeking to politicize the work of the panel instead of waiting to hear the independent experts report.”

Captain Canada v. Northern Gateway

By Aaron Wherry - Tuesday, August 28, 2012 at 3:51 PM - 0 Comments

Former NHL star Scott Niedermayer, captain of Canada’s 2010 Olympic hockey team, reiterates his objections to the Northern Gateway pipeline.

With your voice behind us, WWF and the Coastal First Nations have sounded powerful messages about the unacceptable risk this project poses to the Great Bear, our Canadian treasure.  We’ve urged provincial and federal decision-makers to understand what is really at stake here. We’ve helped voice the concerns of communities, leaders, artists and studentsfrom across the country.  And we’ve spoken out for whales, bears, and other animals that cannot do so on their own…

And today, right now, we need your voice more than ever. August 31^st is the deadline for public comment to the Joint Review Panel .  This body is charged with assessing whether the Northern Gateway project is in Canada’s best interest.Please take a few moments to register your comments online right now.

Science and oil

By Aaron Wherry - Monday, August 27, 2012 at 1:31 PM - 0 Comments

Federal scientists have concerns about the expansion of the Jackpine oil sands mine.

In their final submissions to the Canadian Environmental Assessment Agency, several federal departments say they still have questions about Shell’s plans. They include how growth in the industry has outpaced the company’s assessment of cumulative effects, how changing flow in the Athabasca River will affect contaminant levels and how well Shell is able to control effluent from artificial lakes that will be used to store tailings …

Shell has failed to look at the overall picture of how total development has already affected wildlife habitat, let alone the impacts of further expansions, says Environment Canada. Its document goes on to say that where those impacts are measured, Shell’s assessment minimizes them. For example, Shell says the amount of high-quality caribou habitat destroyed is of “low magnitude,” even though the company acknowledges the amount of those losses total about 40 per cent. “It is unclear how Shell Canada defines a 40 per cent loss … as a low-magnitude effect,” Environment Canada says.

And a scientist with the Department of Fisheries, whose job might be eliminated, is concerned about Northern Gateway and Enbridge’s planning for a potential spill.

Enbridge Inc.’s response plan for a potential spill of Northern Gateway oil into the pristine waters off British Columbia doesn’t take into account the unique oil mixture the pipeline would actually carry, documents show … Kenneth Lee submitted a research proposal last December saying the matter requires further study because Enbridge’s plan had “strong limitations due to inaccurate inputs.” ”The Northern Gateway pipeline proposal lacks key information on the chemical composition of the reference oils used in the hypothetical spill models,” wrote Lee, head of DFO’s Centre for Offshore Oil Gas and Energy Research, or COOGER.

Time to have a plan for the next commodities bust

By Andrew Hepburn - Thursday, August 23, 2012 at 11:18 AM - 0 Comments

(Getty Images)

Andrew Hepburn is a former hedge fund researcher. He writes on commodities, the stock market and the financial industry – but without the jargon. Follow Andrew @hepburn_andrew 

The global financial crisis created its fair share of villains. But it also produced a few superstars, those who saw the crash coming, bet accordingly and made a fortune.

People like Michael Burry, David Einhorn, and Canada’s own Prem Watsa saw their material and reputational worth skyrocket as a result of immensely contrarian investment decisions they made linked to the credit crisis.

Then there’s Agustin Carstens.

Who?

Let’s take a brief trip down memory lane.

It’s the summer of 2008. Oil prices are soaring, eventually touching $147 per barrel. Some forecasts predict a continued surge in prices to $200. For oil-producing countries, times are beyond good.

Enter Carstens, minister of finance for Mexico, a major oil producer. As the price of oil remains high even as the global economy deteriorated, he decides that Mexico’s state oil company, PEMEX, should protect itself against the possibility of collapsing energy prices.

So around late August, PEMEX starts buying put options* on its 2009 oil exports. (*Put options are financial insurance contracts. In exchange for a premium, it gives the buyer the right to sell something at a future date at a given price.)

The credit crisis eventually sends crude prices diving, but Mexico has locked in an average price of $70 per barrel for 2009. The options cost $1.5 billion. They produce a windfall of $5 billion.

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Bitumen and/or bust

By Aaron Wherry - Monday, August 20, 2012 at 10:00 AM - 0 Comments

Esquire dispatches John Richardson to report on Fort McMurray, the oil sands and the Keystone XL pipeline.

So what does the damn stuff look like? I’ll show you, Tom says. In a long rectangular building with lots of tubes, he opens a faucet at a station and fills a paper cup with pure bitumen. Thick as melted chocolate, it smells like tar. ”That’s our product,” he says. To the touch, it’s lighter than it looks. Mix it with liquid natural gas and it flows. This is what goes into the pipeline under the name “dilbit,” short for diluted bitumen. ”That’s what it looks like,” he says. “That’s what all the fuss is about.”

Awe seems the appropriate response. This greasy black gunk with the protean powers of money itself, able to metamorphose into everything from my iPhone to the fancy petroleum-based REI jacket I am wearing, a staggering combination of chemistry and human ingenuity. And yet, according to one credible and centrist study, if Canada caps the oil sands at 1.6 million barrels a day, the world has only a 50 percent chance of keeping CO₂ in the atmosphere below 450 parts per million — the target most scientists think will keep the earth from warming more than a few degrees in this century. Current approved flow is already 1.6 million barrels a day. Projects in construction bump that to 2.3 million. Projects announced or in application send it to more than 5 million barrels a day. So the bottom line is: If the production of oil sands keeps on growing at the rate it is now growing, the temperature of the world could go up 11 degrees by the end of the century. You look down at the cup, a sludge the color of hot chocolate. Is this the way the world ends?

The Northern Gateway chronicles

By Aaron Wherry - Monday, August 20, 2012 at 8:00 AM - 0 Comments

So the Prime Minister publicly deferred to science, but the Department of Fisheries might not be able to provide proper scrutiny of Northern Gateway’s impact.

The marine contaminant group that would have been involved in a spill in B.C. has been disbanded and the fisheries and environmental legislation gutted, said Otto Langer, a retired fisheries department scientist. “[Harper] says the science will make the decision. Well he’s basically disembowelled the science,” said Langer. “It’s a cruel hoax that they’re pulling over on the public.”

Former federal Liberal fisheries minister David Anderson agrees. Given the Dec. 31, 2013, deadline set by the federal government, Anderson said scientists in the Fisheries Department simply don’t have time to complete any substantial scientific study of the project. “You can’t do these studies on the spur of the moment. It takes time to do them,” Anderson said. “And the federal Fisheries have just been subjected to the most remarkable cuts, so you’re in the throes of reorganization and reassessment and re-assigning people, and on top of it you throw them a major, major request for resources and work. It can’t be done.”

Meanwhile, David Black’s suggestion that a refinery might be the answer was met with questions, concerns and criticism, but Thomas Mulcair seems to see promise in refining our own oil.

In a radio interview Saturday, Mulcair suggested that efforts to add new refining jobs in Canada would become a “win-win” situation for the oilsands industry and the rest of the country. “But I think that overall, the idea of adding the value in Canada, developing, upgrading, processing, refining, our own natural resources is a good one,” Mulcair told the CBC’s weekly politics show, The House. “That’s what we should be working on together.”

Conservative strategist Rod Love says Enbridge should suspend its application. And the United Church joins other religious groups in opposing the project.

Our Chinese oil sands

By Kate Lunau - Wednesday, August 8, 2012 at 9:53 AM - 0 Comments

Xinhua News Agency/Eyevine

In June, the Alberta government launched a website publicly outing employers who haven’t paid their workers—an online hall of shame. Among these “deadbeat bosses,” as the media quickly dubbed them, the worst offender was a subsidiary of China Petrochemical Corp. (Sinopec), a Chinese state-owned oil giant. That same subsidiary, along with others, is facing charges after the deaths of two Chinese workers flown in to work on a site near Fort McMurray, Alta., in 2007. After much delay, the trial begins this fall.

It’s the kind of bad press Chinese firms can’t afford as they seek to buy up swaths of Alberta’s oil patch and attempt to win over Canadian regulators and a wary populace. Last week, Chinese state interests went after two Calgary-based companies. China National Offshore Oil Corporation (CNOOC) Ltd.’s $15.1-billion bid for Nexen Inc. got the most attention by far: it’s the biggest-ever takeover of a Canadian company by a state-owned entity. On the same day, Talisman Energy Inc. said it would sell a 49 per cent stake in its U.K. North Sea outfit to Sinopec for $1.5 billion. “Virtually overnight, Chinese investment in the energy sector has doubled to over $30 billion,” says Wenran Jiang, director of the Canada-China Energy & Environment Forum. Although the deals have yet to be approved, it’s a sign of things to come.

The proposed Nexen deal would be the latest—and by far the largest—in a string of acquisitions. Last fall, Sinopec bought Calgary-based Daylight Energy Ltd. for $2.1 billion, the first time a Chinese state-run company made a successful bid for a North American energy firm. Earlier this year, PetroChina bought Athabasca Oil Sands Corp., giving China its first full ownership of an oil sands project. The Nexen deal takes things to another level. It’s worth more than all of China’s direct investment in Africa in 2011 ($14.7 billion), according to Gordon Houlden, director of the University of Alberta’s China Institute. Jiang says China’s interest in Canada is ramping up partly because we’ve become more welcoming. Prime Minister Stephen Harper once vowed not to sell Canadian values to the highest bidder and bestowed honorary Canadian citizenship on the Dalai Lama, to China’s chagrin; lately he’s softened his stance. In January, after the U.S. rejected the Keystone XL crude oil pipeline from the oil sands to the U.S. Gulf, Harper courted the Chinese more aggressively, visiting Beijing to discuss oil sales as part of a trade mission. (With the vast majority of Canada’s crude oil going to the U.S., he’s said he’s keen to diversify.) The controversial Northern Gateway pipeline, if approved, will tap into the surging demand in Asia.

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‘They’re looking to shift the blame to Enbridge’

By Aaron Wherry - Friday, August 3, 2012 at 1:58 PM - 0 Comments

Tim Harper, Reuters and the Globe pick up on James Moore’s comments about Enbridge and the Northern Gateway pipeline.

“This project will not survive scrutiny unless Enbridge takes far more seriously their obligation to engage the public,” he told a radio show Wednesday. Mr. Moore did not agree to an interview on Thursday.

The federal government staunchly supports Northern Gateway, and the opposition New Democratic Party said Mr. Moore’s comments may have been designed to keep B.C. voters happy. ”It’s damage control,” said NDP MP Peter Julian, who is the party’s natural resources critic and represents the B.C. riding of Burnaby-New Westminster. ”The Conservatives have been pushing this for months, and now that opinion has turned against it in B.C., they’re looking to shift the blame to Enbridge.”

Northern Gateway in the pages of the Rolling Stone

By Aaron Wherry - Friday, August 3, 2012 at 11:15 AM - 0 Comments

Rolling Stone takes note of the pipeline debate in Canada.

Harper also went after those who oppose the pipeline. Days before Obama’s decision on Keystone, Harper’s minister for natural resources was denouncing “environmental and other radical groups” who “hijack” regulatory bodies and “use funding from foreign special interest groups to undermine Canada’s national economic interest.” Just to make sure environmentalists got the message, Harper issued a budget that gutted protections for endangered species and pushed through new laws requiring nonprofit groups to “provide more information on their political activities, including the extent to which these are funded by foreign sources.”

In reality, it’s not environmental groups that are funded by foreigners – it’s the companies eager to exploit the tar sands. Many of Canada’s biggest energy companies – firms that are headquartered in Canada and trade on Canadian stock exchanges – are in fact largely owned by foreign interests, including Suncor (57 percent), Canadian Oil Sands (57 percent) and Husky Energy (91 percent). All told, some 70 percent of all tar-sands production in Alberta is owned by non-Canadian shareholders.

‘There’s a difference, I think, night and day between a company that gets public engagement, Aboriginal engagement, environmental stewardship and Enbridge’

By Aaron Wherry - Thursday, August 2, 2012 at 4:13 PM - 0 Comments

Heritage Minister James Moore was interviewed by Bill Good yesterday on CKNW in British Columbia about the Northern Gateway pipeline. Mr. Moore was first asked to respond to criticism of how little BC Conservatives have said in response to Christy Clark’s demands and then asked specifically for his thoughts on the proposed pipeline.

Bill Good. So do you think that British Columbia needs to get a much bigger share of the revenue that will be generated by a pipeline if it ever came to be?

James Moore. Well, that’s Christy Clark’s demand and she hasn’t been clear on what actually constitutes a fair share or where the fair share would come from. She’s put five demands on the table, or requests, and many of them, frankly, were already well on their way to being addressed. She knows that. The provincial government knows that. The first three, with regard to environmental assessments, environmental considerations while on land and on the water, those are all things that the federal government has been moving on, we are moving on, and I think those will all be addressed. The aboriginal consultation part is something that coastal First Nations have been very vocal about, will continue to be vocal about, and that needs to be addressed, for sure, by Enbridge, in order for the project to go forward. On the money side, it certainly, of course, it sounds great, as a British Columbian, to say British Columbia should get our fair share and I understand that. But Premier Clark hasn’t been specific about what she’s talking about, how much or where it would come from, so until she’s clear on that, it’s kind of an empty zone to have a debate about this. But I do understand, certainly, the reaction by the rest of the country, when you have one province, who is, geographically, the Pacific gateway for the entire country to the markets of the Asia-Pacific, the perception of us closing the door to the rest of the country doing business with the largest emerging markets in the world, it’s something that’s cause for concern. On the other hand, Christy Clark is very much, I think, in the right in terms of her responsibility to represent British Columbians. To make sure that the rest of the country understands that just because British Columbia is physically the Asia-Pacific gateway, it doesn’t mean that we’re the doormat for companies like Enbridge to think that they can go ahead and do business without having due diligence and taking care of the public’s interest. 

Bill Good. A lot of people would be asking why we are even talking about doing business with Enbridge right now, given their track record, their recent environmental disasters, their what seems to be lack of procedures when it comes to oil spills. Why are we even talking about doing business with that particular company?

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Romney: North American energy independence by 2020

By Luiza Ch. Savage - Thursday, August 2, 2012 at 10:15 AM - 0 Comments

Evan Vucci/CP Photo

On the road today in Colorado where Mitt Romney is trying to turn the page form his fraught foreign trip with a laser focus on the economy.

His aides say he will announce a 5-point “Plan for a Stronger Middle Class.” From the sounds of it, the plan is a repackaging of the same economic policies Romney has already outlined in his campaign — cuts to income taxes and corporate taxes, deregulation, and reducing government spending to 20% of GDP.

Interestingly, the first plank of the “new” plan is a goal of achieving “North American energy independence by 2020.” It’s not an easy goal — that in practice would likely require both increases in production and reductions in energy consumption (and expensive investments in new technologies).

The Romney campaign said it would be done through increased domestic US production and building more infrastructure (including Keystone XL) within North America.

North American energy independence was for a long time the notion that Canadian representatives would pitch in Washington.

That changed with Stephen Harper’s comments on the subject during his April visit to Washington when he said continental independence was not in Canada’s interests any longer:

I’ve got to say that Canada’s interests  here are a little bit different, and particularly—I might as well be frank with you—in light of the interim decision on Keystone.  What it really has highlighted for Canada is that our issue when it comes to energy and energy security is not North American self-sufficiency; our energy issue is a necessity of diversifying our energy export markets.

We cannot be, as a country, in a situation where really our one and, in many cases, almost only energy partner could say no to our energy products. We just cannot be in that kind of position.

And the truth of the matter is that when it comes to oil in particular, we do face a significant discount in the marketplace because of the fact that we’re a captive supplier.

So we have made it  clear to the people of Canada one of our national priorities is to make sure that we have the infrastructure and the capacity to export our energy products outside of North America. Now, look, we’re still going to be a major supplier to the United  States. It’ll be a long time, if ever, before the United States isn’t our number one export market. But for us, the United States cannot be our only export market. That is not in our interests either commercially or even, as I say, in terms of price.

‘People understand what we’ve been saying’

By Aaron Wherry - Monday, June 25, 2012 at 11:00 AM - 0 Comments

Thomas Mulcair rallies in Saskatchewan.

“I know that the vast majority of people in Saskatchewan believe that polluters should pay,” he said. “It’s not sustainable development to let people use the air, the soil and the water as an unlimited dumping ground that they don’t pay for. You have to include those costs whenever you have any form of production, whether it’s a factory or a natural resource … It’s a false debate to oppose economy and environment; the two go hand in hand.

“The basic question is do we allow companies now to receive subsidies to develop natural resources, especially extractive industries, without assuming the cost in this generation. We think that’s wrong,” he added, reiterating that a Canadian dollar inflated due to resource development has “caused the hollowing out of the manufacturing sector.”

More here and here.

‘We’ll look to eliminate it’

By Aaron Wherry - Friday, June 8, 2012 at 11:39 AM - 0 Comments

The Prime Minister’s response yesterday to a question about a Sun report that various environmental groups have received government funding.

I think what most Canadians believe and understand is that you have to put a priority both on growth and economic development, and also on environmental protection. This government and most Canadians understand that if you act prudently and appropriately, you can serve both of those interests. There are obviously some organizations that oppose development on principle, and I think that is way out of the Canadian mainstream. You’re asking me if, and I don’t know all of the facts, we’re certainly trying to comb through our spending to make sure it’s all appropriate. If it’s the case that we’re spending on organizations that are doing things contrary to government policy, I think that is an inappropriate use of taxpayers’ money and we’ll look to eliminate it.