“This is a whole different scale in terms of CNOOC making this large of a takeover proposal. What we’ve seen from state companies in the past have been small takeovers,” said NDP MP Peter Julian (Burnaby-New Westminster, B.C.), his party’s natural resources critic, who described the takeover bid as a “wake-up call” for the government. “Now we have a huge case with significant ramifications. They’ve got to put in place an open and transparent review process.”
Mr. Julian told The Hill Times that there needs to be more transparency to the government’s process of determining net benefit and approving CNOOC’s bid. He wants a public record of the government’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.
“Cabinet, and of course the Prime Minister, will certainly have input into this decision—and maybe decisive input,” Mr. Schwanen said. “The Minister of Industry has to consult very, very widely on this, so everybody’s going to have input into this decision. That includes the provinces and the Competition Bureau.”
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 (Mégantic-L’Érable, Que.) to determine whether CNOOC’s proposal was of net benefit to Canada under the Investment Canada Act.
“We’ve got to look at each [investment] to determine whether it will be of net benefit for Canada, but we’re in a position where we don’t have the capital to develop the resources, and it’s advantageous for us to do that,” Mr. Oliver said. “We’re talking about a company that is potentially going to invest $15-billion, so it’s not a giveaway, and they’re making this investment because they see the economic advantages of doing it.”
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 “national economic, industrial, and cultural policies.”
Mr. Schwanen said the scale of CNOOC’s bid would require the Industry minister to work with his Cabinet colleagues to determine net benefit “by consensus.”
“These 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,” 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 Nexen’s North and Central American headquarters in Calgary, retain the company’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.
“In 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,” Mr. Schwanen said.
Nexen shareholders will vote on the CNOOC bid on Sept. 21 in Calgary. The company’s board of directors has already unanimously endorsed the offer as being in the company’s “best interest.” Shareholders are being offered $27.50 per share—a 61 per cent premium on the stock’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 Canada’s net benefit. The minister can extend the review by 30 days unilaterally, after which further extensions require the minister’s and applicant’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 Hélène LeBlanc (LaSalle-Émard, 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.
“What’s involved includes the whole system of the Investment Canada Act—how we evaluate net benefit and how we conduct these reviews so that they’re no longer rubber stamped behind closed doors,” 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 NDP’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.
Original Article
Source: hill times
Author: CHRIS PLECASH
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