The Narwhal | News on Climate Change, Environmental Issues in Canada

Lone Pine, Company Suing Canada Over Quebec’s Fracking Ban, Aggressively Lobbying in Ottawa

James Wilt — Wed, 25 May 2016 16:34:33 +0000

In April and May alone, Lone Pine Resources Inc. — the oil and gas company that’s currently suing the government of Canada for $118.9 million in alleged damages — lobbied 11 MPs, a policy advisor for the Prime Minister’s Office and the chief of staff for Natural Resources Canada.

The sole subject matter listed for the lobbying efforts was: “Claim against the Government of Canada under the North American Free Trade Agreement (NAFTA) by Lone Pine Resources Inc.”

The company is actively claiming damages for Quebec's 2011 decision to revoke oil and gas exploration licenses located beneath the St. Lawrence River that were granted to its subsidiary, Lone Pine Resources Canada Ltd., via a “farmout agreement” with Junex Inc. The $118.9 figure represents Lone Pine’s estimated sunk costs and lost future profits.

Actual case proceedings haven’t started yet: the last publically available document — a 251 page rebuttal by the Canadian government written entirely in French — is from July 2015.

These recent meetings could mean the company — which Sujata Dey, trade campaigner with the Council of Canadians, dubs “a Canadian company suing Canada through their U.S. tax haven and subsidiary” — is attempting to seek an out-of-court settlement with the government, an option that would allow Lone Pine to avoid mounting legal fees and the unpredictable nature of investment tribunals.

Investor-State Dispute Settlements Can Result In Large Payout, Rollback In Policies

Ben Beachy, senior policy advisor in the U.S. Sierra Club’s Responsible Trade Program, notes some settlements such as the Ethyl Corporation’s successful suit against Canada in the late ‘90s have resulted in weakened policy.

Even if that doesn’t occur, he says such investor-state dispute settlement procedures can create a “chilling effect” on governments: with the looming threat of lawsuits from foreign companies, officials are less likely to implement strong environmental protections.

Beachy said the threat of legal action is concrete: “It clearly is a consideration on the mind of policymakers: ‘Am I going to get sued in front of not a domestic court but three private lawyers whose rulings are unpredictable for millions or billions of dollars?’”

Lone Pine Suing Canada Over Quebec's Fracking Ban, Aggressively Lobbying in Ottawa https://t.co/YlkUqSMPTD @ccpa #NAFTA #cdnpoli

— DeSmog Canada (@DeSmogCanada) May 25, 2016

Canada Argues Claims By Lone Pine Are ‘Highly Exaggerated’

Lone Pine Resources is suing the government via the infamous Chapter 11 of NAFTA for what it describes as the “arbitrary, capricious, and illegal revocation” to frack under the St. Lawrence River “without due process, without compensation, and with no cognizable public purpose.”

The government of Canada has contended: “The measure was enacted by a fundamental democratic institution of Quebec and was preceded by numerous studies that establish that the Act seeks to achieve an important public policy objective, namely, the protection of the St. Lawrence River” and that “the damages claimed by the claimant are highly exaggerated.”

Investment Tribunals Lack Safeguards and Equal Standing, Says Investment Law Expert

Gus Van Harten, associate professor at York University’s Osgoode Hall Law School and expert in international investment law and arbitration, emphasizes that investor-state dispute settlement procedures don’t constitute an actual judicial process, lacking the usual safeguards of independence that judges have in domestic and international courts, or the ensuring of standing for all affected parties.

“It’s obvious that there are some foreign investors — not a lot — that benefit from it,” he says. “What’s usually claimed is ‘we’ll get more foreign investment and that will help the economy’ but there’s a real lack of evidence on that point.”

Over 70 Per Cent of NAFTA Claims In Past Decade Have Targeted Canada

Canada is the most sued country in the “developed” world.

A report published by the Canadian Centre for Policy Alternatives in January 2015 noted that via NAFTA, the government has been sued 35 times since 1994, losing seven cases and paying out over $170 million in damages.

Over 70 per cent of NAFTA claims since 2005 have involved Canada. Two-thirds of the total suits have been related to environmental or resource management policy.

Over 70% of #NAFTA Claims In Past Decade Have Targeted Canada https://t.co/YlkUqSMPTD @TheEnergyMix #oilandgas #fracking #cdnpoli

— DeSmog Canada (@DeSmogCanada) May 25, 2016

Nine foreign investors are currently suing Canada via NAFTA.

Beachy — who wrote and researched the Sierra Club’s recent report “Climate Roadblocks: Looming Trade Deals Threaten Efforts to Keep Fossil Fuels in the Ground” — notes that 2015 featured the largest number of investor-state dispute settlement cases launched globally, double the number from just five years before.

In 2014, half of new cases globally were challenging policies related to oil and gas extraction, mining or power generation.

Investor Suits May Increase In Number With Implementation of New Trade Deals

Beachy describes the Lone Pine case as being similar in significance to TransCanada’s $15-billion suit against the United States for blocking its proposed Keystone XL pipeline as both “serve as a wake-up call that deals like the Trans-Pacific Partnership would undermine our efforts to keep fossil fuels in the ground.”

Dey notes the ratification and implementation of the Trans-Pacific Partnership would add nine countries to the list in which companies could incorporate or set up legal vehicles in and sue Canada via investor protection clauses.

Beachy adds there are investors currently fracking in a dozen states that would gain new rights to sue the United States via proposed trade deals like the Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership.

“This one is clearly not hypothetical because of Lone Pine,” Beachy says. “We are anxiously looking at the Lone Pine case given that more and more states in the United States are trying to do what Quebec and New York have already done to protect their citizens from the dangers of fracking.

“It’s a really ironic time to be handing more power to fossil fuel companies, just after the world committed to curb greenhouse gas emissions and transition to green energy in Paris,” he says.

Lone Pine Filed Notice of Arbitration Three Weeks Before Announcing Its Restructuring

Lone Pine Resources has had a rough few years. In December 2012, Moody’s Investors Service downgraded Lone Pine’s “corporate family rating” to Caa1 due to “strained liquidity and sharply declining production and reserves.”

Two-and-a-half months later, the company fired its CEO and CFO.

By January 2014, it completed financial restructuring and emerged from creditor protection, a process started in September 2013 (less than three weeks after it filed its notice of arbitration to the government).

In the process, it cut long-term debt obligations by over four times and rescinded its position as a publically traded company in Canada and the United States. As a result, it’s impossible to tell what Lone Pine’s net earnings are looking like these days and the potential significance of a $118.9 million settlement for the company.

Regardless of the outcome, Dey contends it’s a deeply troublesome example of what’s wrong with investor-state dispute settlement: “This is completely undemocratic,” she says. “It takes power from elected people and puts them into a supranational system that gives rights to corporations. It has nothing to do with democracy.”

“This is a corporate rights system that is even higher in position that our own democratically elected governments.”

Image: Mysterious foamy water collected after heavy rainfall near a fracking site. Joshua B. Pribanic/Public Herald.

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Canada Risking Environment By Playing Along With Trans Pacific Partnership

Tim McSorley — Wed, 12 Feb 2014 17:00:00 +0000

The recent leak of the environmental chapter of the Trans Pacific Partnership (TPP) — a massive free trade deal being negotiated by 14 countries, including Canada — only serves to strengthen the argument that such economic deals pose a threat to the environment. That's the message being sent by Canadian environment and trade activists following Wikileaks' release of the secret draft chapter in early January. The TPP has been in the works since 2010 and encompasses many of the largest economies on the Pacific rim, including Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Its breadth and scope is being compared to trade agreements like the Free Trade Area of the Americas and the Security and Prosperity Partnership, both of which were sunk due to political deadlock and public opposition.

Little is known about the TPP apart from some broad details since, as with most trade agreements, it is negotiated behind closed doors until it is submitted to parliament for review. Many civil society groups have called for more openness so the public can weigh in on what is being decided. Wikileaks has taken up this cause, vowing to release any documents it can access; last November, the whistleblower group also leaked the TPP's Intellectual Property Rights chapter. So what does the environmental chapter tell us? "Clearly what the document shows is that everything is on the table with this government, which could lead to significant changes to environmental regulations in Canada. That's not something [government negotiators] have the mandate to do," John Bennett, president of Sierra Club Canada, told DeSmog Canada. "Our concern is not so much what will change [because of the environment chapter], but what isn't there. These are very weak regulations, superceded by other parts of the document," he said. Green Party MP Elizabeth May and Council of Canadians campaigner Stuart Trew echo those sentiments. "[What the leak shows us is that] Canada is taking its typical position when it comes to the place of the environment in trade deals, which is that they make a lot of nice noises about protecting the environment and making sure trade is sustainable, but they're not intersted in forcing that," Trew told DeSmog. "They're not interested in really getting serious with reducing emissions or holding governments to account for breaking their own environmental laws." Upon releasing the leaked chapter, Wikileaks also published an analysis by New Zealand trade expert and academic Jane Kelsey. In it, she highlights the United States is an "outlier" in these negotiations — pushing for more stringent environmental regulations and enforcement mechanisms, and being pulled back by other parties. At issue, Kelsey writes, is that the U.S. is pushing for the same binding arbitration process that regulates economic disputes arising from the treaty to apply to the environment chapter. No other country, including Canada, is in favour of such a stipulation. "I think the TPP has shown us that there is quite a bit of pressure on the Obama administration to do better for the environment, to treat violations of the environmental chapter as strictly as, and using the same dispute process as, what exists in the TPP for other chapters. Canada is very much opposed to doing that," Trew said. A trade agreement isn't necessarily the right place to negotiate environmental safeguards, Trew said, but the issue is that other aspects of the trade agreement, such as rules to protect the interests of investors and corporations, offer more robust enforcement mechanisms, rendering trade agreements more potent than multilateral agreements meant to protect the environment, such as the Kyoto Accord. None of this is surprising, Saanich-Gulf Islands MP Elizabeth May said. Trade negotiations have traditionally included weak wording around environmental regulations, but what is concerning is that the environment component of the TPP appears even weaker than previous agreements, she said. In the past two years, leaked government documents have shown an increase in international lobbying pressure from the Canadian government on behalf of Canadian extractive industries, including oil, gas and mining. "There's always been an aspect of Canadian diplomacy helping resource industries. But I've never seen anything to the degree of the tax dollars now being spent by the government," May said. On January 31, the Council of Canadians participated in a North America-wide day of action to mark the anniversary of the North American Free Trade Agreement — which marked the start of large, corporate focused free-trade agreements in the Americas — and to raise the alarm about the TPP. Even so, for a treaty that's been in negotiations for four years, there has been little public outcry. That's not surprising, Trew said, since the lack of public information means there is little to concretely organize around. Trew, May and Bennett all see the real possibility of growing public outcry over the TPP as more details are leaked. However, how to engage in the debate is an open question. "We are concerned that the important contribution that civil society has made to the development of protecting the environment and our resources is being deliberately eroded, and international trade agreements are part of that whole process," Bennett contends. "We have to figure out where we fit in and what we can best be effective at — and that's a complicated question these days."

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Van Harten: Canada “Recklessly” Entering Trans-Pacific Partnership, FIPA

Carol Linnitt — Thu, 13 Dec 2012 19:05:24 +0000

Last week Foreign Affairs and International Trade Canada announced Canada had "officially joined the latest round of Trans-Pacific Partnership (TPP) trade negotiations" after more than two and a half years of talks by previously engaged nations. The 15th round of talks, involving Australia, Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam, wrapped up yesterday in Auckland.

The TPP has already been the cause of significant concern in the U.S. where citizen groups and elected leaders have argued the agreement is shrouded in secrecy, leaving the American public to speculate about its consequences. This summer, after members of Congress complained corporate access to the trade documents superseded their own, leaked portions of the agreement began to circulate online. At the time Lori Wallach, director of Public Citizen's Global Trade Watch, said, "the outrageous stuff in this leaked text may well be why U.S. trade officials have been so extremely secretive about these past two years of [trade] negotiations." During those two years, while Canada was vying for a seat at the TPP table, America made arguments that seemed to anticipate the furor Canadians would soon feel after the announcement of the Canada-China Foreign Investment Protection and Promotion Agreement, or FIPA. Much like FIPA, the TPP grants unprecedented power to corporate entities with access to international tribunals that have the authority to overrule Canadian decisions regarding domestic policies that may apply to environmental regulation or reform, finance and labour policies and First Nations rights. International investment lawyer and trade agreement expert, Gus Van Harten told DeSmog that Canada is currently on track to become "the most locked in developed country in the world in investor-state arbitration." He added, Canada is "proceeding recklessly" into this enfeebling agreement which will give "almost all foreign corporations in the country exceptional leverage to pressure governments behind closed doors." The Harper government is selling out Canada's long term sovereignty and prosperity in what appears as a thoughtless gamble, without so much as a financial risk assessment. As Van Harten puts it below, "We do not intend to slip on the sidewalk in winter, but we still check for ice." I asked Professor Van Harten 5 questions about the TPP and its relation to the politically-contentious FIPA.

Carol Linnitt: What is the significance of Canada's entry into the TPP? Gus Van Harten: Alongside the Canada-China FIPA and the Canada-Europe CETA [Comprehensive Economic Trade Agreement], the TPP is very significant for Canada. These are part of the trio of trade or investment deals now pursued by the government and they are the most significant such deals for Canada since NAFTA. CL: Is the TPP Agreement made public in Canada, either to citizens or elected officials? In other words, do we know what the TPP entails for Canada? GVH: A version of the TPP investment chapter was leaked over the summer. Other parts of the TPP may also have found their way on the public record. But, other than through such leaks, the TPP text would not be public or available to elected members of the legislature, in general, until the negotiations were concluded and agreed text was made public. So we can speculate, or rely on leaked documents, about the content of the treaty in order to analyze its potential implications. CL: You have mentioned before that entry into trade agreements of this nature force disputes of national interests to be settled by international arbiters. GVH: That is correct. The TPP, as proposed, would include an investor-state arbitration mechanism like the one in NAFTA Chapter 11 and, as proposed, in the Canada-China FIPA and the Canada-EU CETA. If Canada agrees to these various deals, it will be the most locked in developed country in the world in terms of investor-state arbitration. This is in contrast the movement by some countries, such as Australia, India, and South Africa, away from investor-state arbitration due to its negative impacts on governments. CL: Does the TPP favour corporate interests and trade expediency over national self-governance? Is Canada in danger of loosing its decision making authority over its own resources and trade preferences? Are we in essence giving up that control to corporations? GVH: Through this network of investor-state mechanisms Canada would give almost all foreign corporations in the country exceptional leverage to pressure governments behind closed doors and, if the companies were unsuccessful in this arm-twisting, to take their claims to arbitration tribunals where the process favours the corporate interest over those of governments, domestic companies, and other domestic constituencies. It is a dangerous and unfortunate development, especially in light of how corporations have used these arbitration mechanisms to frustrate legitimate policy measures on the economy, financial regulation, taxation, public health, and the environment, for example. CL: What are the similarities between FIPA and TPP? If Canadians are concerned about FIPA should they also be concerned about the TPP? GVH: The key similarity is that both contain an investor-state arbitration mechanism that gives special rights and protections to foreign companies to challenge any government decision outside of the Canadian legal system and Canadian courts in arbitration processes that are not independent, open, and fair in the manner of a court. The difference lies in which country's foreign companies obtain these new rights and protections under each treaty. For the government to rush into the FIPA or the TPP, without doing proper risk assessments and legal analyses and without working out the constitutional issues that arise for provincial powers and First Nations rights is irresponsible. Other governments have pulled back from these arbitration mechanisms after they were hit with major lawsuits by major corporations; Canada has a chance to learn from this experience and avoid these outcomes but is proceeding recklessly in the face of evidence about the serious risks to taxpayers and constraints on voters. For example, the federal government indicated, when asked, that it had not done a fiscal risk assessment of the Canada-China FIPA (although it raises a risk of multi-billion dollar awards against Canada) because it had no intention of violating the treaty. This was not a good answer. We do not intend to slip on the sidewalk in winter, but we still check for ice. Moreover, Canada has in various cases been found to have violated NAFTA and ordered to pay compensation to foreign companies, as have other countries under treaties with similar arbitration mechanisms. Image Credit: PMO Photo Gallery

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