Federal government insured Suncor’s Middle East misadventures

The excerpted article was written by  | The Globe and Mail

The federal government paid Calgary-based Suncor Energy as much as $600-million to compensate for Middle East oil and gas assets and income lost since the Arab Spring in 2011.

On Wednesday Suncor disclosed in its quarterly financial results that it had received $300-million in “risk mitigation” payments relating to its Libyan operations. This followed a separate $300-million payment linked to its Syrian enterprise in 2012. Suncor declined to answer questions about the payments.

Suncor reported a profit of $3.3-billion on revenue of $38.98-billion for the 12 months ended Dec. 31, 2018. With an enterprise value of $76-billion at the end of last year and daily production capacity of about 830,000 barrels, Suncor by any measure ranks among Canada’s largest energy companies.

Export Development Canada (EDC), the national export credit agency, has long offered political risk insurance. That insurance protects EDC’s customers against the dangers of doing business in high-risk emerging markets, such as expropriation, political violence and the inability to transfer or convert local currency. The insurance cushioned the blow for Suncor, which wrote off assets worth billions of dollars from its former Middle East operations.

Political risk insurance is a niche product, and Suncor’s claims are massive by both Canadian and international standards. The U.S. Overseas Private Investment Corp., one of the world’s largest political risk insurers, has paid out 300 settlements since it was established by president Richard Nixon in 1971; the combined value of those claims was only US$977.4-million.

Although a handful of commercial insurers have offered the product, the Crown corporation is known for taking risks the private sector would never entertain. In the years leading up to 2011, EDC charged a premium of around 1 per cent or slightly less for this insurance. EDC has typically earned around $10-million to $20-million in premiums annually from selling political risk insurance; at that rate, it would take decades to cover Suncor’s claims.

EDC underwrote Suncor’s insurance policy in 2006 at a time when Petro-Canada (which merged with Suncor in 2009) produced crude oil in Libya and was pursuing a new natural gas development in Syria, having just sold a portfolio of mature assets there. Petro-Canada began developing the Ebla natural gas project in Syria in the late 2000s, where it saw “significant upside potential.” Meanwhile, it also established itself as one of Libya’s larger oil producers through Harouge Oil Operations, a joint venture with that country’s national oil company.

The company pumped hundreds of millions of dollars in capital spending into the two countries. But it knew its overseas assets were threatened by unrest, economic and legal sanctions and war, and purchased political risk insurance from EDC and commercial insurers to mitigate those perils.

EDC, meanwhile, wanted to encourage more Canadian foreign direct investment. One way to accomplish that was by offering increased volumes of political risk insurance to Canadian companies interested in doing business in volatile emerging markets. In 2006 EDC broadened its political risk insurance program to cover a wider variety of investments. That year it underwrote $4.8-billion in political risk insurance, substantially beating its own target.

Canadians had little way of knowing about Suncor’s insurance policy. Although EDC disclosed most of its financing transactions since 2001, it reveals political risk insurance policies only when the beneficiaries were lenders such as banks. In 2006 it disclosed political insurance policies in Mauritania, Jamaica and Mexico, but none in the Middle East. EDC declined to answer most of The Globe’s questions about the Suncor policy. “We are obligated to respect the confidentiality of our policy holders and their policies with us,” it said in a statement.

EDC continued expanding its insurance business in the Middle East and Africa throughout the late 2000s, and by the dawn of the Arab Spring, 37 per cent of its political risk insurance portfolio resided in that region – by far its largest regional exposure.

The timing proved unfortunate.

Things soured quickly in February, 2011, when what began as anti-government rallies in Benghazi grew into an armed uprising against the government of Moammar Gadhafi. Meanwhile, pro-democracy protests in March, 2011, in southern Syria also mushroomed into widespread unrest throughout the country, prompting a crackdown by President Bashar al-Assad and, ultimately, civil war.

Responding to international sanctions, Suncor suspended operations in both countries. In Syria the suspension proved indefinite, and the company filed a claim to EDC in 2011. The following year, Suncor reported receiving $300-million in “risk mitigation” payments relating to its Syrian operations, without identifying the source. Meanwhile, EDC disclosed a $300-million claim without identifying the customer. “EDC had the largest political risk insurance claim charge in its history as a result of the turmoil in North Africa and the Middle East,” Pierre Gignac, EDC’s then-chief risk officer, mentioned in a 2013 commentary.

Another was coming.

Suncor’s withdrawal from Libya unfolded in a less straightforward manner. After Mr. Gadhafi was removed from power and murdered in 2011, Suncor was optimistic it could continue doing business under the new government. It resumed production later that year. But beginning in July, 2013, Suncor found its Libyan oil shut in again, a situation that worsened after export terminals it relied on were closed. The result was the same: As unrest escalated, Suncor concluded it could no longer operate in Libya, either.

Suncor received its second $300-million payment earlier this year. The company noted it might have to repay some of that sum “dependent on the future performance and cash flows from Suncor’s Libyan assets.” But as of press time, Suncor said continuing political risk continues to impede its production in Libya. As the latest payment has yet to appear in EDC’s financial statements, it’s not clear the Crown corporation paid the full balance.

In the years following Suncor’s monster Syrian claim, EDC disclosed additional political risk insurance exposures across the Middle East, including $300-million of liability in each of Tunisia, Qatar, Algeria and Yemen. EDC continues to offer this type of insurance, but in 2017 its total exposure fell below $1-billion for the first time in years, and its Middle Eastern liability had fallen to 10 per cent of its total portfolio.

EDC says it is self-funding. However, as a Crown corporation, its benefits from the federal government’s triple-A credit rating.

EDC declined to discuss whether it had changed its underwriting or risk management practices as a result of Suncor’s claims.

Jim Carr, the Minister of International Trade Diversification, bears primary responsibility for supervising the Crown corporation. In a statement, his office said: “In these cases, the political risk insurance was purchased under the previous government and these payments were simply following the contracts signed under those agreements.

“We will continue to work with the agency and their new CEO to ensure that they uphold the values of openness and transparency that Canadians expect. ” (Former long-time Bombardier executive Mairead Lavery was appointed EDC’s new president and CEO on Feb. 5, replacing Benoit Daignault, who held the post five years beginning in 2014. She is the first female to hold the position.)

In addition to Suncor, other Canadian companies have historically also experienced significant losses while operating abroad – often because of expropriation.

Robert Wisner, a lawyer with McMillan LLP in Toronto who specializes in international arbitrations, said disputes between companies and governments involving political risks are increasingly resolved under international investment treaties. “In that field there have been billion-dollar awards, including for Canadian companies,” he said. Prominent Canadian examples include Canadian mining companies operating in Venezuela such as Crystallex International Corp., Rusoro Mining Corp. and Gold Reserve Inc. that lost properties through expropriation in Venezuela.

“Obviously the billion-dollar cases are at the very high end,” he added, “but there have been other cases where awards have been paid out for hundreds of millions of dollars.”

What to expect when the Canada Revenue Agency contacts you

Scammers posing as Canada Revenue Agency (CRA) employees continue to contact Canadians, misleading them into paying false debt. These persistent scammers have created fear among people who now automatically assume that any communication from someone representing the CRA is not genuine.

This tax tip will remind Canadians that the CRA does indeed contact taxpayers by phone, email and mail for legitimate reasons. The following tips will help Canadians identify legitimate communications from the CRA.

Before giving money or personal information over the phone

Make sure the caller is a CRA employee

  • Ask for, or make a note of, the caller’s name, phone number, and office location and tell them that you want to first verify their identity.
  • You can then check that the employee calling you about your taxes works for the CRA or that the CRA did contact you by calling 1‑800‑959-8281 for individuals or 1-800-959-5525 for businesses. If the call you received was about a government program such as Student Loans or Employment Insurance, call 1-866-864-5823.

To protect yourself from scams, verify your tax status and make sure the CRA has your current address and email

  • Confirm your tax status through one of the CRA’s secure portals, My Account, My Business Account, or Represent a Client, or through the MyCRA and MyBenefits CRA mobile web apps
  • You can also call the CRA’s Individual Tax Account Balance Automated Service at 1-866-474-8272. This automated phone service provides information about your tax account balance, as well as your last payment amount and date. To use this service, be ready to give your social insurance number, date of birth and the total income you entered on line 150 of your 2017 or 2016 tax return.
  • Call 1-866-864-5823 to update your address or contact information for government programs that you owe money to, such as student loans or employment insurance.

When in doubt, ask yourself

  • Why is the caller pressuring me to act immediately? Am I certain the caller is a CRA employee?
  • Did I file my tax return on time? Have I received a notice of assessment or reassessment saying I owe tax?
  • Have I received written communication from the CRA by email or mail about the subject of the call?
  • Does the CRA have my most recent contact information, such as my email and address?
  • Is the caller asking for information I would not give in my tax return or that is not related to the money I owe the CRA?
  • Did I recently send a request to change my business number information?
  • Do I have an instalment payment due soon?
  • Have I received a statement of account about a government program I owe money to, such as employment insurance or Canada Student Loans?

Some of the reasons the CRA may call

They wrote to you previously or any of the following situations apply:

  • you owe tax or money to a government program. A collections officer may call you to discuss your file and ask you to make a payment. In this case, you may need to provide some information about your household financial situation.
  • you did not file your income tax and benefit return. A CRA officer may call you to ask you for the missing returns.
  • the CRA has questions about the tax and benefit records or documents you sent. A CRA officer may call you for more information.
  • you are a small business and the CRA is offering a Liaison Officer visit.

More information on tax scams and fraud can be found at canada.ca/taxes-fraud-prevention.

To report scams

To report scams, go to antifraudcentre.ca or call 1-888-495-8501. If you think you may be the victim of fraud or you unknowingly provided personal or financial information, contact your local police service, financial institution, and credit reporting agencies.

Stay connected

Follow:

More information
CRA media contact list

SOURCE Canada Revenue Agency

Ontario consulting on municipalities’ worries on ‘liability chill’

TORONTO — Ontario is taking a look at municipalities’ concerns about a legal rule that they say causes “liability chill” and leads some to ban activities such as street hockey and tobogganing.

In a speech Monday to the Rural Ontario Municipal Association, Premier Doug Ford said the province will launch consultations about “the joint and several liability” rule, which says that if one party is found to have only some responsibility, they would still be liable for total damages if other liable parties were unable to pay.

“We have heard your concerns about increasing insurance costs and the impact that these costs can have on property taxes, on municipal taxpayers, and on the average Ontario resident,” Ford said.

“We will look at the evidence and develop a solution that makes sense.”

Rural municipalities have long been calling for reforms, saying they fear the legal convention could mean they face steep costs from lawsuits for even minor injuries on public property, being forced to pay 100 per cent of the cost in an accident in which they were only found to bear minimal responsibility.

If a drunk driver has no insurance, lawyers could go after the municipality, arguing that the road surface was partially responsible for a collision, the Association of Municipalities of Ontario says.

“Victims of any type of accident obviously have to be fairly compensated, we get all that,” said Gary McNamara, warden of Essex County and a past AMO president. “They should be treated fairly and with respect. We get that, but it shouldn’t be solely on the backs of municipal taxpayers. We can’t be held accountable 100 per cent. It just doesn’t make sense.”

It is costing municipalities across the province more than $300 million to insure their communities, McNamara said. In his community of Essex, insurance costs increased 41 per cent in one year as a result of one claim, he said.

Some communities have even taken to banning street hockey and tobogganing, and it’s unfortunate, said McNamara.

“When an eight-year-old child has got a toboggan in tow and he goes up to that hill and then somebody, a bylaw enforcement officer, says, ‘Sorry but you can’t toboggan down this hill’ — why? Because there’s a massive lawsuit in Hamilton that’s driven other municipalities to say, ‘Can we take the risk?” McNamara said.

Tobogganing was banned for years in Hamilton, where a man won a court settlement of nearly $1 million after his toboggan hit a snow-covered drainpipe and he injured his spine.

But Allen Wynperle, the president-elect of the Ontario Trial Lawyers Association, said there were no other defendants in the Hamilton case, so it was not a matter of joint and several liability. Municipalities appear to be concerned about liability overall, and while certainly a challenge, joint and several liability is a specific issue, he said.

“Very few cases have this problem where the municipalities end up paying more than their liability in the case, but they’re usually very, very serious cases,” Wynperle said.

“In a joint and several liability case, remember, the municipality has been found at fault for conduct or an omission and so a person already has an assessment of damages in that situation and the municipality has been found at least partly at fault.”

The trial lawyers hope Ontario holds compensating accident victims as the top priority, Wynperle said.

 

 

Yes, climate change is a crisis: surveys

The results are in.

After many people were buzzing about a new Angus Reid poll that concluded most Canadians believe the country faces a crisis due to a lack of pipelines, we did a few informal surveys of our ownto ask the public some questions that we felt had been left out.

Twenty-four hours later, we have received about 800 votes and have some overwhelming results.

We must admit that our tongues were firmly planted in our cheeks as we proceeded, but we believe that these issues are no laughing matter. And while our own poll wasn’t scientific, we’d challenge Angus Reid to do the same survey with our questions (we used a similar wording to what they used but changed the topic) and see what happens.

Now one question we didn’t ask was about how all of the issues surrounding pipelines relate to Indigenous rights, protected under the Constitution. We made a deliberate choice not to include it as a poll question because we don’t think that human rights are the sort of issue that should be decided based on a popularity contest.

In fact, history has shown us that rights need to be enshrined in our laws to protect the minority.

In the meantime, here are our results.

Out of 223 votes, 86 per cent of the respondents said that the Alberta Energy Regulator’s internal estimate of $260 billion in financial liabilities for the oilpatch is a “crisis.”

Out of 182 responses, a whopping 96 per cent said that a recent scientific assessment by the United Nations IPCC ( Intergovernmental Panel on Climate Change) that said the world had only 12 years left to prevent some of the worst impacts of climate change is a “crisis.”

Out of 193 responses, 89 per cent said that the Ontario government’s recent decisions to cancel green energy policies is a “crisis.”

And finally, out of 181 votes, 96 per cent said that the fact that large portions of Canada’s forests are at risk of dying off as climate change aggravates wildfires, droughts and infestations is a “crisis.”

Have we mentioned yet that the Insurance Bureau of Canada has just sent out some warnings about a new report that estimated severe weather caused $1.9 billion in insured damage in 2018?

“Climate change is costing Canadian taxpayers, governments and businesses billions of dollars each and every year,” said Craig Stewart, vice-president of federal affairs for the Insurance Bureau of Canada, in a statement. “We must take the necessary steps to limit these losses in the future. The cost of inaction is too high.”

Are the billions of dollars in losses from climate-related catastrophes a “crisis or not?”

Well, as Alberta Environment Minister Shannon Phillips wrote on Twitter, this is the “Insurance Bureau of Canada, everybody.”

Read more here:

 

Alberta Has Spent $23 Million Calling BC an Enemy of Canada

By Bryan Carney Today | TheTyee.ca

The Alberta government has spent more than $23 million — twice as much as previously revealed — in a campaign designed to turn the rest of Canada against B.C., The Tyee has learned.

The “KeepCanadaWorking” ad and PR campaign’s top “principle” states, “This is not B.C. vs. Alberta, this is B.C. vs. Canada,” according to documents obtained under a Freedom of Information request.

The documents show how an “ethnic campaign” targeted residents of the Lower Mainland, Toronto suburbs and Ottawa who speak “Spanish, Mandarin, Cantonese, Filipino, Punjabi.”

Work first began in January, 2018 to create the campaign that promotes expanding the Kinder Morgan Trans Mountain pipeline, which would triple the volume of Alberta bitumen sent through the port of Vancouver.

The Alberta government has spent more than $23 million — twice as much as previously revealed — in a campaign designed to turn the rest of Canada against B.C., The Tyee has learned.

The “KeepCanadaWorking” ad and PR campaign’s top “principle” states, “This is not B.C. vs. Alberta, this is B.C. vs. Canada,” according to documents obtained under a Freedom of Information request.

The documents show how an “ethnic campaign” targeted residents of the Lower Mainland, Toronto suburbs and Ottawa who speak “Spanish, Mandarin, Cantonese, Filipino, Punjabi.”

Work first began in January, 2018 to create the campaign that promotes expanding the Kinder Morgan Trans Mountain pipeline, which would triple the volume of Alberta bitumen sent through the port of Vancouver

Here’s how CPP, EI and small business taxes are changing in 2019

Global News: By 

Your paycheque might see an adjustment come 2019 as new Canada Pension Plan (CPP) and Employment Insurance (EI) rates kick in.

For many Canadians, the changes will be slight, considering CPP’s cut is rising while EI is falling.

Small business owners will see additional changes: the tax rate is set to fall, but passive investment income will be taxed more heavily.

Here’s a breakdown of some of Canada’s 2019 tax changes.

EI premium rate lowers thanks to strong employment numbers

Canada’s unemployment rate has dropped to 40-year lows, resulting in reduced demand for EI and allowing Ottawa to shrink the amount it collects to keep the fund afloat.

EI rates that employees pay are dropping by four cents per $100 of insurable earnings from $1.66 to $1.62. In Quebec, the rates are dropping five cents per $100 of insurable earnings from $1.30 to $1.25.

The amount employers contribute, which is 1.4 times what employees pay, will also be reduced.

The changes, announced in September, go into effect Jan. 1.

“This will be the lowest EI premium rate since 1980 — and for most Canadian workers, the lowest they have paid since entering the workforce,” Finance Minister Bill Morneau and Social Development Minister Jean-Yves Duclos said in a joint statement.

The EI rate is set by a commission that has been in place for 75 years. The rate is adjusted according to a seven-year break-even mechanism that aims to provide stable rates as well as to ensure the premium collected goes only to EI purposes.

CPP set to increase annually 

The CPP is being “gradually enhanced” over the next seven years by way of increased contributions — meaning you gradually pay more now in order to get more later on. The overall aim is to grow the amount you will receive to one-third of average work earnings, up from a quarter.

In 2019, the amount you contribute will increase to 5.1 per cent, up from 4.95 per cent, for earnings between $3,500 and $57,400. These contributions are matched by your employer.

Here’s how much that works out to, according to a Canadian Federation of Independent Business (CFIB) estimate:

  • Someone earning $27,450 will pay $36 more annually,
  • Someone earning $55,900 will pay $79 more annually,
  • Someone earning $85,000 will pay $83 more annually.

The changes will only impact those currently paying into CPP. Eligibility for CPP is not impacted, nor is the amount people are currently receiving.

You can see how much EI and CPP you are likely to pay by using the Government of Canada’s online payroll deductions calculator.

The EI and CPP changes will likely make the biggest impact on small businesses and self-employed Canadians, says Monique Moreau, VP of national affairs at the CFIB.

“What the Canadian may see on their pay stub may not seem like a lot to them but they’re not seeing the other end of it, which is what their employer pays on their behalf,” said Moreau.

“You have to keep in mind that anyone who is self-employed actually pays it twice…so those business owners are going to be feeling it even more.”

Small business tax changes

Small business owners are set to get a tax break this year by way of a reduced overall tax rate, falling to nine per cent from 10 per cent.

This will result in annual savings of $7,500 for small businesses, according to CFIB.

Meanwhile, a businesses’ income over $50,000 from passive investments such as real estate, stocks and bonds will be hit with higher taxes. The more a business holds, the more their small business deduction limit will be reduced.

With these changes, along with new carbon taxes, Moreau predicts that it’ll be over a year from now when business owners find themselves “holding the bag” over these “complicated tax changes.”

“We know that the average small business owner doesn’t know a lot about these changes,” said Moreau.

“While it may not impact a whole many of them, the government hasn’t done a particularly great job in communicating what those changes mean to business owners who do use it.”

Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from ILSTV

You have Successfully Subscribed!

Pin It on Pinterest