By EDWARD GREENSPON,
ANDREW MAYEDA, JEREMY vAN LOON and REBECCA PENTY
Stephen Harper was in need of a new friend with a big
appetite for oil. The Americans just werent cutting it.
It was February 2012, three months since President Barack
Obama had phoned the Canadian prime minister to say the
Keystone XL pipeline designed to carry vast volumes of
Canadian crude to American markets would be delayed.
Now Harper found himself thousands of miles from Canada on
the banks of the Pearl River promoting Plan B: a pipeline
from Albertas landlocked oil sands to the Pacific Coast
where it could be shipped in tankers to a place that would
certainly have it -- China. It was a country to which he had
never warmed yet that served his current purposes.
Harper stood before a business audience in a luxury hotel
banquet hall in Guangzhou, capital of Chinas most
populous province, putting on his best pro-China face while
touting his nations virtues. Canada is not just a
great trading nation; we are an emerging energy
superpower, he said surrounded by a phalanx of red
Chinese and Canadian flags.
Oil was top of mind. He noted that a single country -- the US
-- took 99% of Canadas exports, a situation he
described as contrary to Canadas commercial interests.
You know, he said, we want to sell our
energy to people who want to buy our energy. Its that
The Chinese and Canadians in attendance had long waited for
Harper to embrace the Chinese economic juggernaut. They held
him up for half-an-hour posing for pictures. As he finally
took his seat for a group photo with the organizers, he
turned to Peter Harder, a former deputy minister of foreign
affairs and president of the Canada China Business Council.
Do you think the Americans were listening? he
That Harper now found himself in the Peoples Republic
hawking Albertas oil spoke to the depth of his
frustration with Obama. His view, according to people close
to Harper who knew his thinking but arent authorized to
speak, was that sensible Americans would understand the folly
of allowing Canadas massive oil sands reserves,
estimated at 168 billion recoverable bbl, to be sucked up by
China, a rising economic and political rival. Yet if the
Americans -- most particularly a president inclined to
indulge his green base at Canadas expense --
didnt pay heed, then Harper had primed the pump to do
business with the Chinese.
The problem is that, his earlier declarations aside, it
wasnt that simple not then and not now.
Important elements of his Conservative party either shared
Harpers misgivings about Chinas human-rights
record and repression of religion, or were downright hostile
to the country.
In British Columbia, with its zest for environment
alism, green and
aboriginal groups had already emerged hostile to the idea
that its pristine lands ought to be put at risk for a
pipeline, known as Northern Gateway, to feed Chinas
fossil- fuel-propelled growth -- never mind how supertankers
might damage the provinces postcard coasts.
This is the story of how Canadas Plan B rejoinder to
Obamas repeated Keystone delays became mired down,
jeopardizing future oil-sands development and production at a
cost, according to a Calgary research group, of more than
C$400 billion ($365 billion) in lost economic growth over the
next 25 years. It was put together after on- and
off-the-record interviews with more than 60 government and
industry officials, environmentalists and aboriginal leaders.
Some government officials close to Harper asked not to be
identified because they werent authorized to speak.
Jason MacDonald, Harpers director of communications,
said it would be inaccurate to suggest that any one
plan. As for Canadas long-term
relationship with China, MacDonald said he expects the Harper
government in due course to approve an agreement
to promote investment between the two countries. A spokesman
for Chinas ambassador to Canada didnt return
calls seeking comment.
Harper, in a January interview, said he couldnt discuss
Gateway, yet was confident that over time, one of
several projects being proposed to move oil-sands production
to the Pacific or Atlantic coasts will go forward.
Ultimately, Harpers cabinet has the final say as to
whether the 1,177-kilometer, C$6.5 billion Gateway project is
approved. A decision is required by mid June. To kill it
could undermine his arguments that Keystone ought to be
built, arming anti-Keystone factions with a powerful argument
that Canada isnt willing to practice what it preaches
To approve it risks a political and legal brawl. Some green
and aboriginal groups are already sounding warnings of
massive civil disobedience and lawsuits in British Columbia
if Harper says yes. To change the game with
adjustments to the route and revenue sharing, for instance
could conceivably buy peace, at a cost.
The government is carefully examining a Dec. 19
report by regulators on Northern Gateway, Natural Resources
Minister Greg Rickford told reporters today in Ottawa. A
regulatory panel recommended approving the pipeline subject
to 209 conditions. The governments decision will be
based on science and facts, he said.
Mixed messages to China by the Harper government have also
frayed relations between the two countries and damped Chinese
enthusiasm for doing business with Canada.
Were long on rhetoric and short on strategic
thinking and planning, said Wenran Jiang, a University
of Alberta China specialist who consults to the Alberta
government and energy industry. You cant engage
the second-largest economy in the world in such a way.
Harpers outreach on that February day in Guangzhou
masked a raw ambivalence toward China and not just over human
rights and religious repression. According to his security
services, Harper also was critical of Chinas espionage
activities and intimidation of dissidents within Canada.
Against this principled Harper stood Harper the realist: The
oil industry, centered in his home province of Alberta,
increasingly recognized it needed new markets for its oil.
When first elected prime minister, Harper had firmly embraced
an anti-China wing of his party, adopting their belief that
China needed Canada and its resources more than Canada needed
China, according to advisers familiar with the strategy who
asked not to be identified because they are not authorized to
This led to an approach often described internally as cold
diplomacy with warm economics. Harper showed his colors on
his first Asia trip in November 2006 for an Asia-Pacific
summit in Hanoi. The plan was for the relatively untraveled
prime minister to keep a low profile, observe and learn,
according to people familiar with the thinking.
Harper, though, had a message to send. Hed said he
believed previous Canadian governments had been too
accommodating to China. On the first leg of the journey, he
wandered to the back of the plane and told reporters
in a reference clearly aimed at China -- Canadians
didnt want his government to sell out to the
The remark, filed by reporters during a refueling stop in
Anchorage, Alaska, landed like a bombshell in Hanoi. Chinese
officials had already taken umbrage over the new Canadian
government granting honorary citizenship to the Dalai Lama
two months earlier.
Now they canceled Harpers scheduled one-on-one with
Chinese President Hu Jintao, pro-forma for a new G-8 leader.
Harper ordered his advisers to get the meeting back in the
book, according to people who were there. The Chinese, still
fuming, played cat and mouse before finally consenting to
what diplomats call a pull-aside. If Harper wanted to meet
Hu, the Chinese said, he could partake of a brief
conversation just outside the mens bathroom.
The Chinese also had a message to send.
Harper, as the Chinese knew, was worked up as well by the
recent jailing of an ethnic Uighur imam, Husseyin Celil, a
refugee from China who had emigrated to Canada in 2001 and
obtained Canadian citizenship. China refused to recognize
Canadas right to consular access.
Outraged, Harper let no opportunity pass to press the case,
broaching it directly with Hu outside the mens room.
Cabinet ministers and diplomats were instructed to protest at
every meeting with a Chinese counterpart. It went on for
years. Diplomats or ministers who didnt toe the line
got a sharp dressing down, according to people familiar with
Six months into Harpers term, as members of the
Canadian business community with Chinese interests began to
question the new tone, a special cabinet session was held to
discuss internal differences over the China policy. The
Foreign Affairs department, as was standard, prepared an
overview to kick off discussions. A group of young political
aides in Harpers office, judging it too tame, took
control of the document and told Foreign Minister Peter
MacKay to substitute their version, according to people
involved in the discussions.
The tone was anything but accommodating: It played up fears
of Chinese territorial ambitions and reached back to 1979 to
critique the one-child policy as symptomatic of a society
lacking moral grounding. Both sides dug in their heels;
MacKay brought forward the version by the young turks. The
session exposed cabinet divisions on China that persist to
As the internal debate over China continued, the second
question - how to get oil to Asia - still hung out there. The
trade route from the oil sands to China ran through British
Columbia. It was as green as you get, being, among other
things, the birthplace of the environment
al group Greenpeace.
Also, few British Columbia aboriginal groups have settled
treaties with the government, meaning the proposed Gateway
route would have to traverse vast swathes of still disputed
land claimed by First Nations, as aboriginal groups in Canada
Gateway was the brainchild of Pat Daniel, who floated it soon
after becoming Enbridge CEO in 2001 and was still on the
scene in 2012, meeting Harper for the first time on the China
trip. Long before anyone else, Daniel could see what he
called a big wave of oil sands crude coming towards
us that the existing marketplace was unlikely to
absorb. A pipeline from the Alberta oil sands to the Pacific
Ocean could change all that.
Even with Keystone XL, Canadians still would not get
full international pricing for their oil. Gateway goes to the
real market, the world market, rather than just the US
market, Daniel, 67, said in a recent interview.
If youre an energy superpower and youve
only got one market, one country, youre not truly an
energy superpower because people have too much control over
The oil executives, however, would soon discover they had a
lot to learn about British Columbias raucous
environmental and aboriginal politics. In August 2009, Daniel
and his pipeline president John Carruthers landed in a float
plane at Hartley Bay, a sprawling cove of dark water hemmed
in by fir-clad mountains. Supertankers would have to pass
here from Gateways terminus point at Kitimat as they
collected heavy crude for voyaging across the Pacific.
The Enbridge executives were to meet the leadership of a
First Nation tribe called the Gitgaat to talk up the
virtues of the project. Centered in Hartley Bay, the
Gitgaat are known for three things: their courage,
hospitality and a visceral love of their lands and water.
One of their hosts was a local councilor named Marven
Robinson. He had played a central role in a March 2006
incident when a ferry carrying 101 passengers and crew, the
Queen of the North, ripped open its hull 16 kilometers (10
miles) from Hartley Bay. The Gitgaat rushed out to sea
in the dead of night in small fishing boats and recreational
vessels, saving all but two passengers.
Robinson, who had shuttled many of the survivors to shore,
now wanted Daniel to understand why his people felt the
waters around the village, with their warren of narrow
channels, rocky islands and submerged reefs, constituted an
inappropriate venue for supertanker traffic. Robinson, in an
interview, said he told Daniel, We see exactly how this
kind of thing will be dealt with and thats why
were so against tankers in our territory.
As was their custom, the Gitgaat wanted to lavish their
guests with hospitality. Daniel and Carruthers, fearing the
weather was worsening, chose to get back on their Twin Otter
and skipped a tour of historical sites, further alienating
the locals, according to people familiar with the incident.
Over the next several weeks, Carruthers, who confirmed he and
Daniel left early, said he called to ask how he could help
persuade the Gitgaat to change their defiant no to
Northern Gateway into a yes. The answer was he couldnt.
Today, the community of 200 is plastered with no
tankers signs along the wooden boardwalks. The foyer of
the school is adorned with ceremonial canoe paddles,
cedar-fiber weavings and student presentations encouraging
fellow residents to defend our planet against attacks
by corporations like Enbridge.
The depth of the disdain runs deep. British Columbia Premier
Christy Clark, who has kept her distance from the project
, recalled the feedback she
got from a Grade 6 student when she visited a school to talk
about debating. Dear Ms. Clark. Thank you for coming
and speaking to us about debating. Its really going to
help me get a good mark. And also, I hope you will decide you
want to hate Enbridge, the student wrote.
If the Enbridge team saw its overtures rebuffed,
Harpers people were faring little better in their
belated effort to get Gateway moving. In January 2012, just
as Obama rejected Keystone, regulatory hearings into Northern
Gateway were set to begin. Natural Resources Minister Joe
Oliver had already caused a stir six months earlier, in what
may have been a slip of the tongue, by citing the project as
being in the national interest. Environmentalists accused the
government of bias.
Oliver raised the temperature further on the eve of the
hearings by releasing an open letter denouncing
environmental and other radical groups for trying
to hijack the countrys regulatory system by exploiting
any loophole they can find, stacking public
hearings to ensure delays that would kill good
projects and using funding from foreign special
interest groups to undermine Canadas national economic
Olivers broadside, at a time when the government was
trying to shore up support, only fomented more criticism,
both inside and outside government. By attacking all
the groups that were raising environmental concerns, those
groups were branded as radicals, pretty much described as
enemies of Canada, said Grand Chief Stewart Phillip,
president of the Union of British Columbia India
n Chiefs. Oliver would later
try, unsuccessfully, to persuade Phillip into supporting the
governments resource-development agenda. The chief told
the minister, its a little late in the day.
Oliver, now finance minister, said the letter wasnt him
going rogue or off message. The industry has done a poor job
parrying green criticisms, he said. We needed to get
peoples attention and say, Well wait a minute,
thats been the prevailing narrative but its
simply not true.
The emerging coalition of environment
alists and aboriginals
opposing the Harper governments economic imperative of
getting oil-sands production to market was driving the
projects proponents to distraction. They would soon be
joined by celebrities.
Progressive Conservative Alison Redford, who had won a
surprise victory in October 2011 to become Albertas
premier, said in an interview that she remembered looking up
at the television late one night after her victory as she
puzzled over all the pipeline opposition.
Shocked, she saw a trailer scrolling across the bottom of a
news channel with a headline, Redford opposes Northern
Gateway. An ardent Gateway backer, Redford, who stepped
down in March for unrelated reasons, said she was beside
herself, fearing some remark made by her rookie team had been
misconstrued. We screwed up big time, she
Actually, it was actor Robert Redford.
All sides agree on one point. Enbridge, accustomed to oil-
friendly Alberta with its capillary veins of pipe running in
all directions, misjudged the temperament of British
Columbia, and particularly the green, anti-oil leanings of
the First Nations peoples.
In late 2012, Al Monaco replaced Daniel as Enbridge CEO.
Though Calgary-based Enbridge has made subsequent overtures
to the Gitgaat and other tribes, opposition has if
anything hardened. The company remains persona non grata in
Premier Clark, according to people close to her, has quietly
ducked every opportunity to meet with Monaco or other
Enbridge executives. Even pipeline champion Oliver has his
limits. While attending an energy conference in Houston last
year, the consulate had scheduled him for a photo op with
Monaco. He was willing to meet but made it clear there would
be no photo, according to a person privy to the conversation.
Monaco, in an interview, conceded mistakes were made.
There are things we could have done differently,
he said. We probably should have spent more time
Enbridge has adjusted how it engages communities, according
to Monaco, pointing to establishing community advisory boards
and taking opponents to Michigan to see how it has dealt with
a serious 2010 spill into a tributary of the Kalamazoo River.
On the China front, things remained complicated.
Harpers embrace of China had been long in coming and
short on his normal all-in gusto. In 2008, he had taken a
controversial pass on the Beijing Olympics and he did not
arrive for his first visit until December 2009 -- almost four
years after coming to power.
The biggest influence on his evolving attitude, say people
familiar with his thinking, was the 2008-09 economic
meltdown. It made plain that China was simply too influential
to keep at arms length. Canadas share of trade
and investment were falling and the Chinese leadership had
withheld an economically significant tourism designation from
After the financial crisis, we recognized that China is
too important not to treat more subtly, said Mark
Cameron, a senior Harper policy
adviser who shared the
initial aversion to China. We had that luxury in the
early years. The economy was going well. Now we had to talk
to them on their own terms.
The 2009 trip started with a verbal settling of scores.
This is your first visit to China and this is the first
meeting between the Chinese Premier and a Canadian prime
minister in almost five years, then-Premier Wen Jiabao
publicly scolded Harper. Five years is too long a time
for China-Canada relations and thats why there are
comments in the media that your visit is one that should have
taken place earlier.
According to David Mulroney, Harpers hand-picked
ambassador, China was frustrated by Canadian policy. It had
invested in Australia with positive results and wanted to
diversify to Canada. It had been waiting for Harper to come
Post-Guangzhou, Harpers changed tone had become clear.
In 2007, upon a visit by the Dalai Lama, he made a big fuss
over him, including a rare photo-op in his Parliament Hill
office, despite knowing it would annoy the Chinese. Now, in
2012, with the Dalai Lama again in Ottawa two months after
the Guangzhou speech, Harper kept it to a private
courtesy meeting a brisk 20 minutes on a Friday
afternoon. The Harper policy
looked much like all those
other countries beating a path to China.
Then came the drama over Nexen. In November 2011, when Obama
phoned Harper to tell him of the Nebraska-related Keystone
delay, Oliver, a former investment banker, had already had
been working China both as a market and a source of
investment. Word was that Harper had immediately dispatched
Oliver to China but actually, I was already
there, Oliver recalled.
One of the major deliverables from the February 2012 China
visit had been a Foreign Investment Promotion and Protection
Agreement, a pact Harper hailed following a meeting with
Premier Wen in the Great Hall of the People. It needed only
its ts crossed and is dotted.
At the same time, Oliver and a handful of energy industry
CEOs were meeting Wang Yilin, chairman of Cnooc, Chinas
biggest offshore oil explorer. Seven months earlier, Cnooc
had purchased Opti Canada, a failed petroleum producer with a
minority stake in an oil-sands project in Long Lake, Alberta.
Oliver and Wang waxed enthusiastic over possible deals, Wang
assuring the Canadian that Cnooc was run on market
principles. Calgary-based Nexen owned the rest of the Long
Lake project. Throughout the five-day trip, Harper hammered
home the message about a new era of energy relations. Cnooc
interpreted the pitch alongside Olivers effusiveness to
mean the Canadian government wouldnt stand in the way
if Cnooc tried to acquire Nexen, according to a person
familiar with the companys thinking.
In the previous seven years, Chinese state-owned enterprises
such as PetroChina and China Petrochemical
Corp. had put $11
billion into minority positions in oil-sands project
s. Cnooc decided the time
had arrived for a bold stroke. On July 23, 2012, five months
after the Harper visit, the company launched a $15.1-billion
offer for Nexen, the biggest Chinese foreign takeover attempt
in the world.
The Conservative political base recoiled at the prospect of
Canadian resources falling into the hands of Chinese
state-owned enterprises and Harpers old doubts about
China resurfaced, according to people privy to his thinking.
The leading cabinet naysayer was Jason Kenney, who, first as
Harpers parliamentary secretary and later immigration
minister, had built enough influence through his courting of
Conservative-leaning ethnic communities to be touted as a
leading contender to eventually succeed Harper.
He took it upon himself to investigate how Cnooc might be
blocked, organizing a meeting with investment bankers,
corporate lawyers and the grandees of the oil industry at the
venerable Calgary Petroleum Club. A consensus emerged that
further incursions by Chinese state-owned enterprises would
imperil Canadian control over the oil sands -- jeopardizing
jobs in Calgary and technological leadership over
unconventional oil recovery methods.
Eventually, Harper held his nose and approved the deal,
worried that to kill it would send the wrong message to other
foreign investors. He made plain though that any future
takeovers in the oil sands by state-owned enterprises would
only be approved in the most exceptional of circumstances.
To be blunt, he told a press conference televised
live, Canadians have not spent years reducing the
ownership of sectors of the economy by our governments only
to see them bought and controlled by foreign governments
And to date, more than two years after Guangzhou, the Foreign
Investment Promotion and Protection Agreement remains
unratified by the Harper government, something the University
of Albertas Jiang cites as an irritant to China.
Former Ambassador Mulroney says the February 2012 visit was
the high water mark of relations. While many nations struggle
with how to deal with China, he said its very
acute in Canada. Reflecting back on Guangzhou, he
added, One speech does not a strategy make.
Meanwhile, there is a Plan C should Gateway be stalled. It
involves shipping oil-sands production through a series of
existing and new pipelines across Canada to the large Irving
on the Atlantic Coast for
export, along with a proposal to twin an existing pipeline
that runs from Alberta into the port of Vancouver. Along with
oil-by-rail and increases in capacity to other US-bound
pipelines, the oil sands is feeling some temporary relief.
Rookie Prime Minister
Still, eight years after a rookie prime minister first laid
out his energy vision for Canada, the country remains more
energy warehouse than energy superpower, said Wendy Dobson, a
former senior finance department official and pipeline
company director who runs the Institute for International
Business at the University of Toronto. She and former
Ambassador Mulroney both see a real risk of changes in the
Chinese energy market occurring before Canada gets its ducks
in a row on Gateway. Jiang adds the Chinese will not sit
around waiting. They are actively pursuing everything
at the same time.
As with Keystone, the stakes are high for Canada and for
Harpers energy superpower goal. Oliver, who has lived
the issue more closely than anyone, considers the pipeline
challenges pivotal to our economic future.
Without a major new outlet for the oil sands, which is
unthinkable, the resources are stranded and the legacys
lost. There will be negative, if not dire, economic