Translating the printemps érable

Maxime Duchesne       July 27, 2012

Original French text: http://quebec.huffingtonpost.ca/maxime-duchesne/ile-anticosti-petrole_b_1708848.html?utm_hp_ref=canada-quebec

There have been so many scandals in Quebec in recent years that nothing surprises us anymore. When front-page headlines announce that a Liberal minister handed out juicy contracts to generous party contributors, it seems so banal and normal we don’t even bother to read the article. But among all these presumed scandals, there’s one subject in particular that raises some serious questions: the transfer of Anticosti’s oil exploitation rights to the private sector.

Recent studies have shown that the subsoil of Anticosti Island could contain the equivalent of 30 to 40 billion barrels of oil. At more than 100 dollars a barrel, that amounts to almost 4,000 billion dollars of oil. For the sake of comparison, Quebec’s debt is “only” 250 billion. Since 1987, many geologists have noted the possibility of large oil reserves due to the island’s composition.

In 2002, Bernard Landry’s government outlined a plan for exploration to be undertaken by Hydro-Québec, estimated at 330 million dollars, and leading ultimately to the extraction of Anticosti’s oil. Exploration would be carried out between 2002 and 2010 to locate oil reserves that, at the time, were already estimated in the tens even hundreds of billions of dollars for Anticosti Island alone. The minister of energy at the time, Rita Dionne-Marsolais, recently told Le Devoir that her department knew there was oil under Anticosti, contrary to what Charest’s government claims today. Explorations carried out by Hydro-Québec also confirmed the presence of oil under the Island.

 Fast-forward to 2003 and the election of Jean Charest’s Liberal government. Right out of the gates the Liberals put the brakes on exploration work. In 2005, less than two years after being elected, Charest’s government decided to halt explorations under the pretext there was no oil to be found in Anticosti, after having invested only 10 of the 330 million budgeted for the project. They said the expense represented a risk the government wasn’t willing to take.

Note the inconsistency: the same government that is willing to spend 200 million for an amphitheatre in Quebec City, with no guarantee they will even have a hockey team, refuses to invest 300 million for a reserve estimated at the time in the hundreds of billions of dollars. In 2007 and early 2008, Hydro-Québec discretely ceded the rights of exploration and exploitation to Pétrolia and Junex. The deal included secret clauses that even former minister Nathalie Normandeau didn’t want to divulge. Shortly thereafter, in 2008, the government decided to abolish Hydro-Québec’s Oil and Gas Division. In the meantime, several Hydro-Québec employees quit their jobs and took up positions at Junex and Pétrolia on the Board of Directors or as employees. In other words, the Hydro-Québec employees who ceded the exploitation rights to these two companies were now working for them. The companies’ operating licences, at 10 cents/hectare, amount to nothing for Quebeckers. On top of that, Junex and Pétrolia continue to benefit from subsidies and tax credits at Quebec taxpayers’ expense.

Junex and Pétrolia

Charest’s government likes to point out that the companies that will be exploiting our natural riches are Québécois and we should take pride in their success. The catch, however, is that a large percentage of these companies’ shareholders are foreign investors, so the oil extracted (for which the eventual royalties are still unknown) will benefit foreign interests more than Quebeckers’. As for the royalties, if the Plan Nord is any indication, we can assume they will be equally low for oil: mineral royalties are calculated on profit rather than on the extracted product. This means, with a few adjustments to the balance sheets, the vast majority of mining operations already pay no royalties to the province, even as we speak.

The two companies’ rosters of employees also merit attention: Junex CEO Jean-Yves Lavoie generously contributed thousands of dollars annually to the Quebec Liberal Party between 2004 and 2010, according to Elections Quebec statistics. Also, as mentioned above, numerous members of the Boards of Directors and other employees used to work for Hydro-Québec: André Caillé (former HQ Chairman), Jacques Aubert, Peter Dorrins, and many others are all former employees of Hydro-Québec. But are they actually guilty of anything? Nothing has been proven and it might seem normal that a geologist, unemployed after the dismantling of Hydro-Québec’s Oil and Gas Division, would end up in a similar job in the private sector. Nonetheless, it does raise questions as to when they were approached, whether the companies engaged in lobbying or pressure tactics on Hydro-Québec, and whether the latter divulged privileged information prior to the abolition of the Oil and Gas Division.

The licencing issue also raises questions: those who ceded the exploration and operating rights now work for the very companies to whom they were ceded. On a similar note, ex-Liberal minister Nathalie Normandeau left the department of natural resources to become vice-president of the public accounting firm Raymond Chabot Grant Thornton, where she now advises clients implicated in the Plan Nord. The ethical reforms adopted by Charest’s government would seem to be very flexible, in spite of all the Liberal scandals, including Anticosti.

Why the secrecy around the deal? Why the downplaying of expectations?

The companies that obtained exploration and operating rights are careful not to divulge the details of the agreement with Hydro-Québec and they avoid speculating on possible gains. And for good reason: most investors being from outside Quebec, there is still uncertainty concerning the eventual mining operation itself. The general impression is that a change of government could result in an automatic nationalization without compensation. On the other hand, the population could also demand a moratorium if the conditions of the deal with Hydro-Québec are revealed to be unfavourable.

So the game plan, it would seem, is to downplay expectations when addressing the Media and do the opposite when addressing shareholders. In any case, they definitely don’t want to divulge any details before beginning exploitation. Why? Because once a company has begun full mining operations, it can demand generous compensation for its shareholders in the case of nationalization, a scenario that harks back to another era when Quebec paid generous sums to hydroelectric companies to avoid alienating foreign investors. Companies are assured a much larger payback if the project is nationalized during the exploitation phase. So they probably don’t want to divulge anything before beginning exploitation, leaving Quebeckers faced with a fait accompli (too late for a moratorium) and, at the same time, ensuring themselves generous sums in “damages” from the state in the event of nationalization.

They are also careful not to mention how much oil they expect to extract, reiterating simply that the deal is very advantageous for Quebeckers. Even though the total is estimated at around 4,000 billion dollars, it is actually impossible to extract 100% of the oil. With current technologies, up to 15% of Anticosti’s oil could be extracted (amounting to a non-negligible total of 600 billion dollars—2.5 times Quebec’s debt). Nonetheless, future technological advances could allow for the extraction of larger quantities.

Conclusion: are we being robbed?

While calling this theft may be a little premature and possibly defamatory, the situation does raise a number of very serious questions that Quebeckers need to address. The relations between Hydro-Québec and these companies should be carefully examined to determine if former employees of Hydro-Québec are in fact guilty of conflicts of interest. It should also be determined if these employees knew there was oil before handing over the rights to the private sector without a word to Quebeckers. On the political level, the government’s decision to cede the rights is quite simply incomprehensible. Considering the Charest government’s numerous ethical shortcomings, the dismantling of Hydro-Québec’s Oil and Gas Division reeks of scandal. Nathalie Normandeau’s dubious ethics lend credibility to accusations made by a number of activists, such as Daniel Breton, current PQ candidate for Sainte-Marie–Saint-Jacques and better known as the founder of the movement MCN21, who qualifies the Anticosti operation as nothing less than “the steal of the century.”

Whether it qualifies as outright theft or not, one fact remains: Quebeckers are having an incredible source of wealth pulled out from under them. Norway, a country that Bernard Landry looked to for inspiration for the exploration program, has made more than 560 billion dollars in oil exploitation. However, in other countries with even larger oil reserves, mining operations are often controlled by a minority and benefit foreign interests. Jean Charest is following the latter model: contributing to the wealth of a handful of individuals instead of to society as a whole. This issue is vital to the future of Quebec and should be at the centre of the next election campaign. Today’s middle class is overburdened with taxes. Meanwhile, the debt has increased 70 billion dollars in the nine years of Liberal government. Quebec needs a government that considers the interests of all Quebeckers not just the interests of the private sector.

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Junex responded to this article with the following information:

Full Original French text: http://quebec.huffingtonpost.ca/dave-p/anticosti-petrole_b_1724327.html?utm_hp_ref=canada-quebec

“After abandoning the idea of investing in exploration, Hydro-Québec ceded its Anticosti exploration rights to the company Pétrolia. The details of this agreement have never been made public. While Mr. Duchesne’s article raises very legitimate questions that are, with reason, of concern to Quebec citizens, it includes some unfortunate factual errors with respect to this transaction. He states that Junex also struck a deal with Hydro-Québec to obtain its Anticosti permits. This is false: Junex has never signed any deal with Hydro-Québec concerning Anticosti exploration rights. We obtained our south island permits, available to any interested party, from the Ministère des ressources naturelles et de la faune. The agreement the author is referring to concerns Pétrolia and not Junex.”

“The large majority of Junex shareholders, close to 90%, are Québécois, and include Investissement Québec and the CDPQ (Caisse de dépôt et placement du Québec).”

Anticosti, steal of the century? Junex responds (The Huffington Post)

Dave Pépin, Vice-President of Corporate Affairs and Chief Financial Officer of Junex

July 31, 2012

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Translated from the original French by Translating the printemps érable.

*Translating the printemps érable is a volunteer collective attempting to balance the English media’s extremely poor coverage of the student conflict in Québec by translating media that has been published in French into English. These are amateur translations; we have done our best to translate these pieces fairly and coherently, but the final texts may still leave something to be desired. If you find any important errors in any of these texts, we would be very grateful if you would share them with us at translatingtheprintempsderable@gmail.com. Please read and distribute these texts in the spirit in which they were intended; that of solidarity and the sharing of information.