Should the Harper government allow Chinese ownership of Alberta’s oil sands?

Chinese state-owned companies continue to invest billions of dollars in Alberta's oil sands raising fears about Chinese control over Canada's oil industry.

The most recent acquisition came earlier this week when Sinopec International, China's largest refiner, announced it had agreed to buy Canadian based Daylight Energy Ltd. for $2.1 billion US.

The Financial Post reported Chinese companies are poised to make even more significant investments in the weeks and months ahead.

Should the Harper government step in and restrict foreign ownership in our oil industry?

Under Canada's foreign-takeover legislation, known as the Investment Canada Act, foreign acquisitions of companies with assets worth more than $312 million CDN are reviewed by the federal government to determine whether the transaction is a "net benefit" to the country.

As illustrated in a colum in the New York Times, the federal government in the past has nixed several deals involving a foreign purchase or takeover.

In 2004, China Minmetals, a state-owned company, backed away from a takeover of Noranda, then Canada's largest mining company, after a backlash from the public and politicians.

In 2008, the government blocked a bid by Minneapolis-based Alliant Techsystems Inc. in 2008 to acquire the aerospace division of Vancouver-based MacDonald, Dettwiler and Associates Ltd.

And, more recently, the Conservative government used the foreign ownership laws to turn down a bid from BHP Billiton of Australia for Potash Corp. of Saskatchewan.

In a recent interview with Bloomberg, Stephen Harper said Canada needs to balance the need to attract more foreign investment with the goal of developing global industry leaders based in Canada.

"The challenge for a government is one would never want a situation where we liberalize the rules, and the immediate result was the loss of all Canadian presence in the sector, so we're obviously proceeding with some caution," he said adding the government welcomes investment by China and other countries, as long as such acquisitions are "economic in nature and don't have other strategic or political objectives."

Paul Evans, the director of the Institute of Asian Research at the University of British Columbia, however, warns politicians not to underestimate Canadians' dislike of foreign owners.

"This can be the kind of issue that can explode," he told the New York Times.

"Surveys underscore how nervous Canadians are about state-owned enterprises from China."

Ultimately, the Harper government will need to make a decision on whether to let Chinese investments in the oil sands continue.

It won't be an easy decision.

"Supporters of Chinese deals say the cash allows Canada to capture capital to develop resources, leads to new customers for its energy outside the United States, promises higher energy prices," Claudia Cattaneo of the Financial Post writes.

"The wrinkle is that the more Canadian resources are controlled by China, the less say Canadians will have over how they are developed, where they are sold and for how much, putting China in the driver's seat."

(AFP Photo)

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