PM provides energy clarity

Harper’s decision sets clear boundaries for future oilpatch takeovers

When Stephen Harper announced on Friday that the partially state-owned Chinese energy company CNOOC could swallow up Nexen, and that another state-owned entity, Malaysian-based Petronas, could acquire Progress Energy Corp., the prime minister managed to perform a high-risk tight-wire act and did so mostly successfully.

The prime minister’s decision — and no one should doubt it was ultimately anything other than his decision on a major file such as this — navigated the various interests and strong opinions without wrecking the country’s growing interest in opening up Canada to more foreign investment and more foreign trade with Asia.

Such interests and opinions included mistaken nationalists who think any foreign investment is undesirable; shareholders in Nexen and Progress and ultimately every other company who would like to sell their shares at a premium; the Chinese, who risked being given great offence if, after recent courting by the Canadian government, that same government turned down the very first major deal; and the ever-present general Canadian interest for more foreign capital that has always and will always be necessary to develop and renew Canada’s industries, including those far beyond just the energy sector.

The Conservative government likely made the right decision in allowing CNOOC and Petronas to take over the two companies they desired, while yet asserting that future takeovers of any major energy company by a stateowned business are a nonstarter (they will be allowed minority stakes only). That latter allowance was smart because it means that even state-owned companies will be allowed to dabble in Canada’s energy sector and make a buck; they just won’t be able to overwhelm it, and by so doing, introduce the potential for undue political influence from abroad.

In addition, through the revised net benefit guidelines, and through the prime minister’s statement on Friday, it is also now clear that free enterprise calculations are part of any future net benefit test. That is also important because, as the prime minister pointed out, given that Canada took decades to exit itself from too many state-owned companies — Petro-Canada, Air Canada and Canadian National Railway being the most dramatic examples — to now reverse course and allow too much state influence from foreign governments in the energy sector, would be a throwback to an earlier, undesirable age. Now, with any luck, the Harper government’s new guidelines should have foreign governments asking themselves why they have state-owned companies to begin with.

Tha t Ot t a wa made the correct call is evident by considering the alternate scenario: a complete denial of the already-proposed takeovers by CNOOC and Petronas. Had that happened, Canada would have sent this signal to foreign investors: we’ll talk a good game of welcoming foreign investment, but after you’ve already spent millions on a potential deal, we’ll kill it on an undefined net benefit whim. Foreign investors would then have been correct in wondering what banana republic planet politicians in Ottawa inhabit.

If there is a useful criticism of Ottawa here, it is that the government that has been in power for almost seven years and must have been aware of other, more minor oilpatch takeovers by government-owned enterprises in the past, was caught so flatfooted by both the CNOOC and Petronas bids. It is no secret in Calgary, nor in Ottawa, that Industry Minister Christian Paradis and the Prime Minister’s Office had not thought clearly or deeply in advance about the murky net benefit test that has most often been applied in ad hoc fashion to proposed major takeovers. The result of that was an artificial delay in both recent proposals that had everything to do with Ottawa’s inability to think in advance and little to do with the companies’ original proposals.

In allowing these two bids to proceed — this time, but by drawing a line in the sand on future takeovers — the Harper government has, belatedly, made the net benefit test much more clear. The world had a right to expect such clarity from a major G7 country.

It appears such clarity has arrived.

The world had a right to expect such clarity from a major G7 country. It appears such clarity has

arrived.