The federal government is considering privatizing Canada’s port authorities, a move that could further hinder public oversight and control over the export of commodities such as coal and crude oil.

On Nov. 14, the federal government announced the hiring of Morgan Stanley Canada to "provide financial advice to the Government related to the recommendations [contained in the Canada Transportation Act Review] concerning ports, including receiving proposals from institutional investors or private equity investors."

(Until 2015, an investment unit of Morgan Stanley was the owner of the largest terminal at the Port of Montreal.)

The recommendations contained in the review included "examining the feasibility and viability of adopting a share-capital structure for Canada Port Authorities.”

The review also stated that Canada “must make some hard choices and inject private sector discipline into the process” in order to “go to the next level and position itself for the lon­ger term.”

It’s no coincidence the entity responsible for hiring Morgan Stanley was the Canada Development Investment Corporation, which specializes in the “divestiture of assets of the Government of Canada.”

This possibility is concerning on both the climate change front — with terminal owners already able to export fossil fuels effectively unchallenged to other jurisdictions — and for public health reasons, given the potential for increased diesel particulate matter, spills, coal dust and noise exposure.

“I don’t know what they’re thinking,” says Peter Hall, director and professor of urban studies at Simon Fraser University and expert on port institutions. “Privatizing them would go against everything that we know about the way ports operate in such a huge country.”

Privatization of Ports Would Further Hinder Transparent Decisionmaking

Since the introduction of the 1998 Canada Marine Act, the country’s 18 Canada Port Authorities (CPAs) been have run as “non-share capital corporations,” with board appointments finalized by the federal transport minister.

There are already many criticisms of the entities, mostly related to mixed mandates — they serve as both promoters and regulators of trade — and a board nomination process that grants considerable power to port users (for instance, only one of 11 board members represent the 16 municipalities within the Port of Vancouver’s jurisdiction while port users have seven seats).

Kevin Washbrook, director of Voters Taking Action on Climate Change, says it’s currently a challenge to ensure the public interest is met by port authorities. But he says it currently remains somewhat possible due to being able to acquire port documents with access to information requests; there are also changes underway, he says, to require lobbyists to log communications with senior employees of port authorities in the federal lobbying registry.

Those would no longer be options if port authorities are privatized. All decision-making about the permitting of terminals like Port of Vancouver’s Roberts Bank Terminal 2 Project, a proposed container terminal feared to have potential species-level impacts of migratory bird populations, would be even further in the shadows.

“Ports are the vehicle for delivering the federal trade agenda,” he says. “We are already struggling with that trade agenda here on the West Coast, whether it’s fossil fuel terminals or massive expansion of container ports. It’s hard enough as it is to have public input into those decisions. How is that possibly going to happen if ports are privatized?”

Current System of Port Authorities Ensures Competition Between Major Terminals

Hall says there’s been an ongoing move towards the “corporatization” of ports since the 1970s, echoing port reform that has represented a “definitive shift to the economic right” in other countries like Australia, New Zealand and Britain.  

Canada’s port authorities retain considerable independence as the government can’t “direct or influence” their day-to-day actions. However, the government can amend the Canada Marine Act. The 2014 budget implementation omnibus bill, for instance, amended the legislation to permit the destruction of documents by ports and exempted federal land bought by port authorities from species protections and federal environmental assessments.

Hall says while imperfect, the current port authority system assures that competition between major terminals is “mostly fair,” ensuring the otherwise competing supply chain actors have a place where they have to collaborate.

“Why would we want to give up on that?” he asks. “And if all they mean by privatization is that they’re going to take these long-term leases and let Morgan Stanley turn them into tradable financial instruments in order to make the books look good in the short-term, well then shame on them. This has been tried around the world and it hasn’t been very helpful.”

Privatizing Canada’s Ports An ‘Invitation for More Conflict’ on #FossilFuel Exports https://t.co/75NoOyxW5J #bcpoli #coal #cdnpoli

— DeSmog Canada (@DeSmogCanada) December 2, 2016

Privatizing Would Mostly Benefit Major Terminals and National Railways, Not Public

Liquidating ownership would indeed generate short-term cash flow for the government.

But Hall says this move would mostly end up benefitting large terminal operators and the two national rail companies, CN and CP, which service the terminals: “They will look at that and say: ‘How fantastic is that? I’ve now got an opportunity to be if not the monopolist, one of the very small number of service providers without this very powerful authority agency looking over my shoulder.’”

Port authorities already have strained relationships with local hosting communities. Major conflicts have emerged over permitting authority in recent years; the Vancouver Fraser Port Authority is currently being sued by two organizations and two municipalities for allegedly approving a thermal coal export terminal without proper consultation.

The Canada Transportation Act Review noted that a move towards privatization would be "accompanied by legislation to protect the public and national interests." But according to Transport Canada, CPAs already “operate in the public interest.”

It’s a notion that people like Washbrook disagrees with given that he doesn’t see the export of polluting commodities as automatically more in the “public interest” than species protection or clean air.

“The notion that ‘well, we’re a trading country so it’s all good’ is wrong,” he says. “Canada’s interests are much broader. For this government to say ‘we’ve chosen trade over protecting the environment’ can’t be justified.”

Liberals Pursuing Privatization Agenda in Other Sectors

Washbrook suggests the federal government shouldn’t proceed with a very narrowly focused review by Morgan Stanley. Instead, it should opt for a broad-based consultation process that attempts to find out public opinion on the roles and governance of port authorities, and how local and regional interests should be balanced with national interests.

Hall echoes this sentiment, suggesting the government must ensure the inclusion of a wider range of actors, including local authorities and governments.

But it doesn’t look like the Liberals are interested in such discussions.

What was once heralded in the Liberal Party’s platform as an “largest new infrastructure investment in Canadian history” has turned out to be an attempt to attract billions in private investment from international firms, which Martin Luckas of the The Guardian dubbed a “giant corporate giveaway” and Tom Parkin of the Toronto Sun called a “bait-and-switch on infrastructure.”

In September, the government also hired the services of Credit Suisse Canada to examine the potential privatization of the country’s eight largest airports, which the CEO of the Vancouver Airport Authority predicted would lead to cutbacks in maintenance and cleaning, as well as increased crowding in airports. There are ongoing calls for the Liberals to consider privatizing Canada Post.

Yet Hall suggests that privatizing ports will only make that relationship more tense: “Think of the conflicts we’re about to have here over the pipelines,” he says. “You remove public oversight, you further push this in a private direction: it’s an invitation for more conflict.”

Washbrook agree: “People are frustrated. And I don’t think they’re going to be less frustrated if the government privatizes their ports.”

Image: Robert Banks Terminal via Port Vancouver

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Coal, the fossil fuel that largely sparked the industrial revolution, may be facing the beginning of the end — at least in terms of generating electricity.

There are increasing signs of the demise of the world’s dirtiest fossil fuel, from a global oversupply to plummeting prices to China starting to clean up its polluted air.

Last week, the Carbon Tracker Initiative published an analysis — Carbon Supply Cost Curves: Evaluating Financial Risk to Coal Capital Expenditures — identifying major financial risks for investors in coal producers around the world.

Saying the demand for thermal coal in China, the world’s largest emitter of toxic greenhouse gases, could peak as early as 2016, the analysis also highlights $112 billion of future coal mine expansion and development that is excess to requirements under lower demand forecasts.

“In particular it shows that high cost new mines are not economic at today’s prices and are unlikely to generate returns for investors in the future,” said an accompanying media release.

“Companies most exposed to low coal demand are those developing new projects, focused on the export market . . . With new measures to cap coal use and restrict imports of low quality coal in China, it appears the tide is turning against the coal exporters.”

The analysis added that China’s desire to reduce imports will impact prices and asset values for export mines in the U.S., Australia, Indonesia and South Africa.

“King Coal is becoming King Canute, as the industry struggles to turn back the tide of reducing demand, falling prices and lower earnings,” Anthony Hobley, CEO of Carbon Tracker Initiative, said.

A recent article in Mining Weekly also says the coal industry is indeed facing tough times.

The article noted Coal Association of Canada president Ann Marie Hann agreed that about half of the global coal output at current pricing was being produced at a loss.

“Until a global rebalance between demand and supply takes place and the global economy rebounds, the coal industry will unfortunately probably see some more bad news over the coming months,” Hann said.

The story added that the prices for thermal coal, which is used to generate electricity, had fallen in recent years from about $190 per tonne in mid-2008 to $75 per tonne this year, while metallurgical coal (used to make steel) had dropped from a high of more than $300 per tonne in late 2011 to less than $120 per tonne.

To perhaps make matters worse for the coal industry, it is being publicly attacked by the oil and gas sectors, which are trying to position themselves as cleaner fossil fuels.

According to the Responding to Climate Change website, a number of the world’s leading oil and gas companies voiced their concerns about climate change at last week’s UN Climate Summit, arguing they can offer a future coal cannot.

“One of our most important contributions is producing natural gas and replacing coal in electricity production,” Helge Lund, Statoil’s chief executive, was quoted as saying.

Kevin Washbrook, a director for Voters Taking Action on Climate Change, a Vancouver organization that has fought against a proposed new coal export facility at Fraser Surrey Docks, agrees the thermal coal sector is in decline.

“I think coal is in everyone’s sights these days because coal is climate change,” Washbrook told DeSmogBlog. “Coal has to be on the chopping block for sure.”

Washbrook added the UN, the International Energy Agency, big banks and insurance companies are acknowledging that the vast majority of coal must stay in the ground if humankind is to avoid catastrophic, runaway climate change.

“We need to see this current downturn [in the thermal coal sector] for what it really is — our last good opportunity to leave coal behind and start the transition to emission-free energy sources.”

Photo Credit: Arnold Paul, Wikimedia Commons

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