IN THE NEWS ~ No security review for Nexen deal

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Nexen security review receives no challenge

Heather Scoffield, The Canadian Press

The opportunity for Ottawa to undertake a formal national security review of the CNOOC-Nexen proposal has lapsed without a challenge.

New federal regulations brought in by the Conservative government in 2009 allow for a national security review of any foreign takeover and critics of the deal have frequently raised concerns about foreign control of Canada's oil.

But the 45-day window to review the $15.1-billion friendly takeover of the Calgary oil company by a state-controlled Chinese firm has already closed, with no mention of anything that may have triggered a national security concern.

In effect, the expiry of the review period means CNOOC has essentially bypassed a major hurdle, Ottawa insiders said on the basis of anonymity. (The approval process is so sensitive no one involved is free to speak about anything related to the proposal.)

"There is absolutely no doubt that [national security] should have been a consideration," said Peter Julian, the NDP natural resources critic who opposes the deal.

CNOOC has acted as a foreign-policy arm of the Chinese government in the past and this pattern of behaviour needs to be taken into account, he said.

"I would not be able to understand any green-lighting on this front."

In the House of Commons, Julian accused the government of having "dropped the ball." But Industry Minister Christian Paradis said the government "will always act in the best interest of Canadians."

Legal experts say that just because a process has been left dormant does not mean regulators are ignoring national security. They say the ongoing "net benefits" test of the deal is broad enough that national security could be considered in the wider context of whether the takeover is good for Canada.

"Arguably, the net benefit test is so broad, if there was a real national security concern I think they could work it into that analysis, said lawyer Catherine Pawluch, a partner at Davis LLP in Toronto.

But several government sources say while the deal remains controversial among decision-makers for many reasons, national security does not figure prominently in internal debates.

"There are no national security issues that are really being discussed," one Conservative said on condition his name not be used. "By that I mean China as a potential adversary. Instead it's being viewed in terms of markets and what's best for the Canadian economy."

A letter from Conservative MP James Bezan made public this week by ipolitics.ca lists several concerns about the deal, but national security is not among them.

CNOOC - controlled by the Chinese National Offshore Oil Corp., which is wholly owned by the Chinese government - and Nexen Inc., put the terms of their deal before federal regulators in August.

Under the Investment Canada Act, regulators have to approve the deal based on whether it meets a net benefits test and follows guidelines for state-owned enterprises. They have been granted two extensions for this review. The next deadline: Dec. 10.

ILLUS: Jeff Mcintosh, Canadian Press / A Nexen oilsands facility photographed from a helicopter near Fort McMurray, Alta. in July.