The government should use the China National Offshore Oil Corporationâ€™s takeover bid for Canadian energy company Nexen as an opportunity to finally define what â€˜net benefitâ€™ means in its foreign investment review, says the NDP.
â€œThis is a whole different scale in terms of CNOOC making this large of a takeover proposal. What weâ€™ve seen from state companies in the past have been small takeovers,â€� said NDP MP Peter Julian (Burnaby-New Westminster, B.C.), his partyâ€™s natural resources critic, who described the takeover bid as a â€œwake-up callâ€� for the government. â€œNow we have a huge case with significant ramifications. Theyâ€™ve got to put in place an open and transparent review process.â€�
Mr. Julian told The Hill Times that there needs to be more transparency to the governmentâ€™s process of determining net benefit and approving CNOOCâ€™s bid. He wants a public record of the governmentâ€™s consultations in making the decision.
When the decision is made, there will have been a lot of input and consultation in order to come to a consensus, said Daniel Schwanen, associate vice-president of trade and international policy at the C.D. Howe Institute.
â€œCabinet, and of course the Prime Minister, will certainly have input into this decisionâ€”and maybe decisive input,â€� Mr. Schwanen said. â€œThe Minister of Industry has to consult very, very widely on this, so everybodyâ€™s going to have input into this decision. That includes the provinces and the Competition Bureau.â€�
Natural Resources Minister Joe Oliver (Eglinton-Lawrence, Ont.) told The Hill Times last week that it was up to his colleague, Industry Minister Christian Paradis (MÃ©gantic-Lâ€™Ã‰rable, Que.) to determine whether CNOOCâ€™s proposal was of net benefit to Canada under the Investment Canada Act.
â€œWeâ€™ve got to look at each to determine whether it will be of net benefit for Canada, but weâ€™re in a position where we donâ€™t have the capital to develop the resources, and itâ€™s advantageous for us to do that,â€� Mr. Oliver said. â€œWeâ€™re talking about a company that is potentially going to invest $15-billion, so itâ€™s not a giveaway, and theyâ€™re making this investment because they see the economic advantages of doing it.â€�
Under the Investment Canada Act, the Industry minister is responsible for reviewing foreign investments in Canada that exceed $330-million. Such reviews require determining whether the acquisitions will have an overall net benefit to Canada in terms of job creation, economic activity, international competitiveness, and compatibility with â€œnational economic, industrial, and cultural policies.â€�
Mr. Schwanen said the scale of CNOOCâ€™s bid would require the Industry minister to work with his Cabinet colleagues to determine net benefit â€œby consensus.â€�
â€œThese decisions are made officially by someone, but are typically made by committee. Nobody sits in a room, not even the Prime Minister, I suspect, and makes the decision alone,â€� he said.
Mr. Schwanen added that he did not see a clear reason for the federal government to reject the takeover bid, given the assurances that CNOOC has already made as part of its bid.
The state-owned company has promised to keep Nexenâ€™s North and Central American headquarters in Calgary, retain the companyâ€™s current management team, increase capital investment in Canada, list its own common shares on the Toronto Stock Exchange, and continue with community development initiatives taken by Nexen.
If approved, the takeover will give CNOOC 100 per cent control over the Long Lake oilsands project outside of Fort McMurray, Alta. CNOOC gained 35 per cent control over the site through its acquisition of OPTI Canada last November, and Nexen currently holds the remaining 65 per cent stake in the project.
â€œIn reality the resource is in Canada. Any environmental laws or royalties, not to mention the pipelines that the Chinese need to be moving oil, are a Canadian matter that the Chinese are not going to have a lot of say about,â€� Mr. Schwanen said.
Nexen shareholders will vote on the CNOOC bid on Sept. 21 in Calgary. The companyâ€™s board of directors has already unanimously endorsed the offer as being in the companyâ€™s â€œbest interest.â€� Shareholders are being offered $27.50 per shareâ€”a 61 per cent premium on the stockâ€™s closing price on the New York Stock Exchange as of July 21.
CNOOC has yet to file an application for review with Industry Canada. Once the application is filed, the Industry minister has 45 days to determine whether the bid is in Canadaâ€™s net benefit. The minister can extend the review by 30 days unilaterally, after which further extensions require the ministerâ€™s and applicantâ€™s approval. If the minister does not make a decision within the time limit the investment is approved by default.
In the meantime, Nexen has been actively lobbying in Ottawa. Since the takeover bid was announced on July 23, the company has been in contact with senior bureaucrats at Industry Canada and the Department of Foreign Affairs and
International Trade. The company has also been in contact with Mr. Julian and NDP MPs HÃ©lÃ¨ne LeBlanc (LaSalle-Ã‰mard, Que.), and Dan Harris (Scarborough Southwest, Ont.).
The NDP has urged the House Natural Resources and Industry committees to hold hearings on the takeover bid. Mr. Julian said that hearings would bring transparency to foreign investment reviews in Canada and bring clarity to the definition of net benefit.
â€œWhatâ€™s involved includes the whole system of the Investment Canada Actâ€”how we evaluate net benefit and how we conduct these reviews so that theyâ€™re no longer rubber stamped behind closed doors,â€� Mr. Julian said.
However, Conservative MPs David Sweet (Ancaster-Dundas-Flamborough-Westdale, Ont.) and Leon Benoit (Vegreville-Wainright, Alta.), who chair the Industry and Natural Resources committees respectively, recently rejected the NDPâ€™s request in a joint letter sent on Aug. 2, stating that the Investment Canada Act was already reviewed by the Industry Committee during the 40th Parliament.