China, Foreign Ownership & B.C. Resources
B.C.’s natural resources are being gobbled up by foreign entities at a record pace. Increasingly, those entities are controlled by governments, such as China’s, that may have motives beyond mere profits. (Return to B.C.'s Top 100 of 2011.)
Former B.C. Premier Bill Bennett said in 1979 that B.C. was not for sale. He made that famous declaration in reaction to news that Canadian Pacific Investments Ltd., the Montreal-based subsidiary of the railway company, was seeking to increase its already large ownership position to a controlling interest in MacMillan Bloedel Ltd., the province’s number one forest products company.
That was too much for Bennett. At the time, CP was already a major player in the province and gaining control of MacMillan Bloedel would make it by far the biggest, with headquarters in Central Canada. Bennett vetoed the deal using the provisions of the B.C. Forest Act, which required government approval for any transfer of forest leases from one corporation to another.
“We’re clarifying government policy in declaring there is a point at which a company can be too large in a certain area,” Bennett told the legislature on June 25, 1979. “That’s the policy of this party and this government . . . that is public policy from the premier of the province of British Columbia.”
Fast forward a couple of decades and many would argue that the province is not only for sale, but large pieces have been sold – and this time with government acquiescence, if not approval. Consider the following:
• With the provincial government’s blessing, MacMillan Bloedel was bought for $US 2.45 billion in 1999 by Weyerhaueser Inc., a huge U.S. forest products company. There was nary a ripple of comment.
• In 2002, North Carolina-based Duke Energy Inc. paid $US 8 billion for control of Westcoast Energy Inc., the company that runs the natural gas pipeline system from northeast B.C. gas fields to the rest of the province, and to export markets in the U.S. There was little public comment.
• Kelowna-based Inland Natural Gas, having just picked up BC Hydro’s natural gas distribution network and the Trans Mountain pipeline system, was bought in 2005 by U.S.-based Kinder Morgan and twice renamed, first BC Gas Inc., then Terasen Gas Inc. Kinder Morgan soon spun Terasen’s natural gas assets off to Fortis Inc., a Canadian company headquartered in Newfoundland. But Kinder Morgan kept the piece it wanted: Inland’s ownership stake in Trans Mountain Pipeline, the company that ships crude oil and refined products to Vancouver from Edmonton. There was no public outcry over this either.
• In a transaction still mired in controversy, the B.C. government in 2004 completed the sale of debt-ridden B.C. Railway Co. to Canadian National Railway Co. for $1 billion. As it is now structured, CN is as much an American company as it is Canadian. There is significant and ongoing public comment on this transaction, although the controversy has less to do with foreign control than it does with politics.
Globalization has expanded the reach of “national” companies everywhere, with many now taking on the more accurate “multinational” moniker. Of course nationalist sentiment still exists – witness the American reaction to a disastrous oil spill in the Gulf of Mexico and the British company, BP Petroleum, that was responsible for it. But governments now seem satisfied that they can control foreign-owned private companies through regulation.
Today, the focus of the debate has shifted from concern over a private-sector change in share ownership to concern over acquisitions and investments by state-owned enterprises and sovereign wealth funds. While a private-sector move is transparent – they all want to make more money – a state-controlled enterprise may have additional agendas that are contrary to the host nation’s interests. Increasingly, these state-owned enterprises are from the People’s Republic of China.
In the last two years, Chinese state investments in Canada have included a $1.9-billion investment by PetroChina Co. Ltd. in Athabasca Oil Sands Corp., a $4.65-billion investment by Sinopec Corp. in oilsands producer Syncrude Canada Ltd., a $1.25-billion investment by China Investment Corp. in Calgary-based Penn West Petroleum Ltd. and a $679-million takeover of Vancouver-based Corriente Resources Inc. by a Chinese consortium.
In addition, it was announced in January 2011 that Sinopec Corp. is among a group of investors providing $100 million to jump-start Enbridge Inc.’s proposed $5.5-billion Northern Gateway pipeline project, designed to carry oilsands crude from Alberta to a tanker port in Kitimat and on to Asian markets.
These kinds of investments are taxing Canada’s foreign investment rules and have already sparked a review. At issue is whether or not the country needs to use different criteria in assessing the benefits of a state-owned company’s investment as opposed to a straightforward private-sector investment.
While there has been some debate on the question of ownership of Canada’s natural resources, nary a word was uttered by any of the political candidates running for office in the May 2 federal election. And very little work has been done to help explain to the general public what the issues are and why they should care.
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