Export Development Canada: How billions are transferred to Enbridge and TransCanada without substantive disclosure

| October 18, 2013
photo: flickr/chrisyakimov

The Enbridge Line 9 hearings are in process this week in Toronto. In Ontario, the reversal of that pipeline, to transport fuel from Western Canada eastward rather than refined fuel from Eastern Canada westward, has sparked public concerns.

These centre upon the risks that arise from moving corrosive diluted bitumen -- as opposed to refined products -- through populated areas, as well as the proposed 25 per cent capacity increase of the pipeline from 240,000 to 300,000 barrels per day.

Opponents of Line 9 join a significant opposition against Alberta Tar Sands production. Due to sweeping changes to the regulatory review process under the 2012 Canadian Environmental Assessment Act, public participation opportunities have been significantly reduced.

Various challenges to the changed participation rules are in the offing, including a recent legal suit which argues that they restrict the right to free speech and thus violate the Canadian Charter of Rights and Freedoms. One of the financial institutions providing vast backing to Enbridge is Export Development Canada (EDC), the Canadian government’s export credit agency. For the most part, the socio-environmental reviews of the activities financed by EDC remain corporate secrets.

Restrictions on access to information as well as on avenues for public intervention manifest a regulatory "race to the bottom" in energy projects across the country. In practical terms, industrial calamities exemplify this downward trend.

In 2013, these included the horrifying explosion at Lac Megantic, the continuous seepage of crude from CNRL SAGD operations in the Tar Sands and a leak of 9.5 billion litres of toxic 'produced water' in Dene Tha territory. Another 450,000 litres of oil leaked from a shipping operation in Sept-Îles, Quebec, coating five kilometres of coastline in toxic slick.  

The Plains Midstream spill in Alberta in 2011 was never properly cleaned up, and was soon followed by the Rainbow Lake oil spill in Northwestern Alberta. Various of these have specific implications for environmental racism and are shaped by Canada’s colonial past and present.

South of the border, 2010 delivered BP’s Deepwater Horizon Accident in the Gulf of Mexico, and the Enbridge Line 6B Kalamazoo pipeline spill. Enbridge’s spill at Kalamazoo was the largest onshore pipeline spill in U.S. history, costing over one billion U.S. dollars to clean up.

The specifics of the technologies and processes employed to remediate these accidents, and in some cases their size, remain corporate secrets. But there is one thing we do know: while pipeline spills have devastated landscapes across the continent, EDC transferred billions of dollars in funds to TransCanada and Enbridge, two of the largest North American pipeline companies.  

Founded in 1944, EDC is a Crown Corporation whose mandate is to support the Canadian exports of Canadian companies, in order to "develop Canada’s competitiveness in the international marketplace." The initial funds to EDC were provided via Canadian taxpayers.

Given that national export credit agencies like EDC support risky endeavors, which would otherwise face high commercial bank rates, EDC funding provides -- as described by the Canadian civil society coalition the Halifax Initiative -- "an inherent subsidy from government." 

While EDC's mandate is to finance Canadian commercial activity abroad, the relative size of financing to Enbridge, Trans-Canada and other oil and gas exporters stands out among listed transactions. This particularly so given the profitability of these firms specifically, and Canadian oil and gas exporters in general.

In May of this year, Enbridge received funds in amounts roughly equivalent to the enormous cost of the clean-up of their accident at Kalamazoo, Michigan -- somewhere between 500 million and one billion dollars.

In April 2013, Enbridge benefited from EDC financing to the U.S. Alliance pipeline in a range of between $25-50 million to finance pipeline transmission and distribution systems. Since 2009, Enbridge has received one to three billion dollars towards projects and financing, according to the range presented in individual transaction reporting disclosed by EDC. 

In 2012, Enbridge was the beneficiary of at least four separate transactions from EDC, amounting to between 225-500 million dollars. Enbridge’s 2012 earnings were 943 million dollars according to its annual report.

Similarly, the amount channeled to TransCanada from EDC over the past several years is remarkable, totaling 365-875 million dollars between 2009 and 2013. While 100-250 million was given in the form of foreign direct investment for the Keystone-XL pipeline, the rest financed foreign direct investment in the U.S. and sales of Canadian pipeline system in Mexico.

According to their reporting, in 2012 TransCanada’s net income was 1.472 billion dollars. This support to TransCanada activities, and the Keystone-XL pipeline in particular, offers an angle on Prime Minister Harper’s recent statement that Canada wouldn’t "take no for an answer" from the U.S. on the Keystone.

 

EDC, transparency and environmental reviews

As EDC is a "self-sustaining" financial institution, information concerning its activities is protected under corporate competition policy. In July 2012, we submitted Access to Information Requests specific to Enbridge and TransCanada funding. 

The hundreds of pages of material returned to us was largely redacted, mirroring the results of the work conducted by the Halifax Initiative and Probe International on EDC’s projects and disclosure practices.

Exemptions received through the Access to Information Act (ATIA) and the Export Development Act (EDA) as indicated in the redacted responses to our ATIP requests, largely nullify any objective analysis of the application of EDC’s Environmental and Social Review Directive (ERD) (See Norris, 2013).

According to the ERD only certain categories of financing, deemed "projects," require disclosure of environmental review. For those activities which are not deemed "projects," the EDC is required to disclose virtually no information regarding transactions.

Furthermore, the corporate-driven environmental reviews are intended to cover the specific activity described under the transaction (for example, delivery of pipelines or other equipment), but not the actual infrastructural project that will be built with these inputs, let alone the lifecycle emissions associated with the transfer of product or the ultimate construction of such infrastructure.

Also noteworthy is that critique of EDC processes could be subject to legal action under section 24.2 of the EDA: In the past, Probe International has received communication from EDC legal counsel "requiring that they cease and desist from the use of EDC’s trademarks."

Our experience seeking access to specific information on EDC financing to TransCanada and Enbridge flies in the face of any notion of substantive transparency. In matters where such data is not public, there is simply no way for the research community or public to monitor EDC environmental diligence let alone to dispute what dimensions of corporate activity are examined under such reviews [the] conceivable result is regulatory capture by the interests of the oil and gas industry.

This is an abridged version of the original article. The full version is available at the Antipode Foundation.

Our thanks to Mark Winfield for helpful suggestions on the extended version of this article and Tim Groves for his advice regarding the ATIP process. All errors are ours.

 

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