Probe International Submission to SCFAIT on Bill C-31 (October 2001)

Probe International’s Brief on Bill C-31: An Act to amend to Export Development Act...
Presented to the House of Commons Standing Committee on Foreign Affairs and International Trade

October 18, 2001
by Patricia Adams

International Trade Minister Pierre Pettigrew made much ado about Bill C-31 when he tabled this proposed Act to amend the Export Development Act in the House of Commons on September 20. The principal change in the bill, stated his Department’s News Release, “is a new legal requirement for the environmental review of projects that the Export Development Corporation (EDC) has been asked to support.” This change, Minister Pettigrew claimed, is “significant.”[i]

After careful examination, Probe International disagrees. Indeed, Bill C-31 is a devious bill drafted to convince the public that EDC is doing something to protect the environment while, in fact, EDC is frustrating efforts to stop its business-as-usual, environmentally damaging activities. This bill is all spin and no substance. But Bill C-31 is worse than spin. It is a downright bad law. Rather than holding EDC to account for the environmental consequences of its operations, Bill C-31, should it become law, will give EDC legal protection to destroy the environment.

But this law will be “actionable,” insist government lawyers, implying that citizens will be able to take legal action if they are concerned about EDC’s activities.

“Actionable,” yes, but ineffective at protecting the environment. Laws assign environmental rights and responsibilities. My Foundation uses regulatory proceedings and the courts to constitutionally challenge environmentally damaging laws, to establish liability, and to stop environmental damage. But under these proposed amendments to the Export Development Act, we would be foolhardy to take legal action to try to stop environmentally egregious EDC projects. Why? Because the rules as laid out in Bill C-31 are rigged to legitimize EDC’s environmentally destructive practices. Here is how the new rules do it.

The drafters of this bill have carefully built in thresholds to almost totally protect EDC from action: if this bill passes intact, EDC will be legally permitted to follow its own self-styled environmental review procedures in which EDC writes the rules, EDC establishes the criteria, EDC defines the terms, EDC assesses itself, and then EDC decides whether or not it is justified in supporting a project that will destroy the environment.

Under these circumstances, in which EDC is in charge of the legal and environmental goalposts, it is highly unlikely that any EDC activity would ever be defined as a legal infraction, let alone an environmental infraction that would give cause for action by citizens. In the end, Bill C-31 will create a paper exercise in environmental review in which EDC will be able to produce – without challenge because EDC sets the standards – its own view of the environmental risks and benefits of a project.

Probe International has run into similar self-serving assessments by international funding agencies on numerous occasions. We have found after years of scrutinizing environmental assessments for projects supported by EDC, CIDA, the World Bank and the other multilateral development banks that, when those agencies want to support a project, they inflate the benefits and discount the costs: no project is too environmentally egregious for them to justify.

For example, in the case of the CIDA and EDC-funded Three Gorges dam in China, the likelihood that sediment would clog the reservoir was discounted, the number of people to be resettled (close to 2 million) was underestimated, and the problem of the 600-kilometer long reservoir turning into a cesspool wasn’t properly evaluated. Meanwhile the benefits from flood control were exaggerated and the kilowatt price of Three Gorges power underestimated.

In the case of the Chalillo dam in Belize, the CIDA-hired environmental consultants, Agra of Montreal, inexplicably failed to assess whether the karst landforms (sinkholes and underground caves) in the area would drain water out of the reservoir, rendering the dam useless.[ii] It also ignored advice that the dam should not be built from its own wildlife consultants, the Natural History Museum of London, who concluded the dam would destroy the habitat for the scarlet macaw, jaguar, spider monkey, and tapir causing “major, irreversible, negative environmental impacts of national and international significance” with no effective mitigation measures possible.[iii] Despite clear and unassailable evidence that the dam is neither environmentally nor economically sound, Agra gave the dam a green light.

When proponents of environmentally damaging projects are protected from financial liability for damages, from market discipline, and from public oversight, risks are discounted and benefits exaggerated with impunity. Holding such agencies to account when they back environmentally egregious projects is difficult at best. The legal protection Bill C-31 would give EDC would make EDC that much less accountable.

Bill C-31 is the culmination of a three-year comprehensive review in which the government was told over and over by the public that it wants EDC to stop supporting environmentally damaging projects. Despite this, the government has proposed a law that will not only allow EDC to avoid environmental accountability, but lend legal legitimacy to EDC’s fatally flawed Environmental Review Framework and to its environmentally destructive practices.

During this comprehensive review, the government was also told clearly that the public wants EDC to be subject to the Access to Information Act. In 2000, EDC supported roughly $45 billion in exports and foreign investments on the good faith and credit of the Canadian taxpayer. EDC’s support has gone to some of the world’s most environmentally hazardous and economically unsound projects, as well as those with dreadful human rights violations. The Three Gorges dam in China, the Omai gold mine in Guyana, and the Urra dam in Colombia are just three examples of EDC’s sorry record. We believe that EDC’s exemption from the Access to Information Act shelters EDC’s damaging and costly activities from public view. EDC’s exemption also handcuffs effective public oversight, creates a breeding ground for corruption and cronyism, and spawns a recklessness that creates unacceptable environmental, financial, and social costs. Why then is this badly needed reform conspicuously absent from Bill C-31?

A recent report prepared for the Access to Information Task Force concurred with the public view when it recommended that Crown agencies be subject to the Act.[iv] Does the government appoint more than 50% of the governing body, the consultants asked? Yes, for EDC. Does the government own the entity or underwrite shares? Yes, and yes again, for EDC. Access to information laws encourage organizations to be “demonstrably worthy of public trust,” stated the reports author, Jerry Bartram.[v]

On the other hand, governmental secrecy, says the noted American columnist, George F. Will, breeds stupidity.[vi] But it breeds more than that. It breeds badly informed decisions.

The U.S. Commission on Protecting and Reducing Government Secrecy, headed by United States Senator Daniel Patrick Moynihan, said in its 1997 report “secrecy has significant consequences for the national interest when, as a result, policy-makers are not fully informed, government is not held accountable for its actions, and the public cannot engage in informed debate.”[vii] Greater openness, the Commission argued, fosters the free exchange of scientific information and encourages discoveries that foster economic growth. It allows for a fuller understanding of the past, so that lessons can be learned to make better decisions in the future.

“Secrecy,” concludes Senator Moynihan “is for losers.”[viii]

Our own Former Supreme Court of Canada Justice Gerard LaForest said it eloquently in his Dagg v. Canada (Minister of Finance), [1997] 2 S.C.R. 403 at 432, decision. The overarching purpose of Canada’s access to information legislation, “is to facilitate democracy.”[ix] It does so first by ensuring “that citizens have the information required to participate meaningfully in the democratic process,” and secondly, so “that politicians and bureaucrats remain accountable to the citizenry.”

But when it comes to information disclosure, Bill C-31 leaves the public, once again, at the mercy of a self-serving EDC directive that obliges EDC to release only bare-boned details of its activities and compromised environmental assessments, and beyond that relies on the discretion of EDC and its client corporations to release what they choose and when. Bill C-31 denies Canadian citizens an important tool to find out what they want to know about EDC, and instead it allows EDC to tell the public what it wants the public to know.

What does this all mean for the citizens of Third World nations, who Probe International works with, and whose environment, health and safety are put at risk by EDC activities?

Let me give you the case of the Chamera dams on India’s Ravi River, to put this in the most graphic and clear terms.

In 1984, a Canadian consortium of companies – including SNC and Acres International, Marine Industries of Montreal, and Canadian General Electric – won the contract to build the $1.3 billion Chamera I hydrodam. They won the contract thanks to $645 million in loans from CIDA and EDC – their largest joint loan ever.

In 1998, Probe International filed an Access to Information request to CIDA for details of the dam project. By the year 2000, after an appeal to the Information Commissioner of Canada, Probe International received approximately 1,600 pages of documents including correspondence, internal memos and e-mails, reports by the client (the National Hydro Power Corporation of India or NHPC), and performance and safety reports about this troubled project that were prepared by an independent monitor hired by CIDA.

Here is what the documents revealed:

• As early as 1992 and 1993, Rousseau Sauvé Warren Inc (RSW), hired by CIDA to be the Project Monitor, warned that the integrity of the dam structure is jeopardized by the inherent weakness of rock at the right abutment of the dam near the power tunnel intake. RSW said, "the power tunnel intake structure is founded on and surrounded by rock which had demonstrated several weaknesses and, therefore, may not be competent to support this very important structure without further treatment."[x]

• In July 1994, RSW reports to CIDA that problems with the dam remain. The spillway gates cannot be operated safely due to continuing failure of post tensioned anchors; the eight radial gates display significant leakage; the four sluice gates are not watertight due to damaged seals; significant leakages exist from the power tunnel; water from the pressure shaft infiltrates the valve gallery of the powerhouse; and operations and maintenance manuals have yet to be prepared.[xi] A year later, RSW is still not presented with the manual and warns again "without a comprehensive manual, which is available at all times to operating staff, there is a distinct risk that the safety of the project may be jeopardized some time in the future."[xii]

• In 1994, CIDA agrees to pay for millions of dollars worth of remedial work. In September 1994, CIDA and EDC are concerned about the integrity of the project, given the problems now being encountered in operating the spillway gates safely.[xiii]

• In June 1995, RSW warns that data collected about dam behavior is not being interpreted. Failure to do so "may prove to be catastrophic." RSW notes an unusual vibration when the emergency gate was opened concurrently with the service gate, and unexpectedly rapid sediment accumulation.[xiv]
• In May 24, 1996, a major landslide occurs. The landslide reveals, in RSW's words, that the "depth of the overburden immediately downstream from the dam is much greater than generally reported." RSW continues, "in view of the foregoing, the Monitor considers the signs of instability extremely serious." Any further signs of structural unsoundness, slides, increasing seepages into the dam and downstream of the dam, vortices on the reservoir "must be considered as being potentially catastrophic requiring the immediate, controlled lowering of the reservoir and, eventually, the shutting down of the power plant and the notification of NHPC Management, Government of India and all concerned administrative authorities in the area."[xv] The Project Monitor reminds CIDA that it warned of this geological instability in 1993 and feels "it is regrettable that the opinion expressed in this report had received so little attention at that time."[xvi] RSW alerts CIDA to "serious symptoms of instability" and warns: "Degradation of the already precarious situation could lead to a catastrophic event involving not only a major shortage in power production but, more important than all, potential losses of lives in the communities installed downstream of the dam."[xvii]

• As of June 1996, a complete manual for operation and maintenance, which covers all components, is still not available.[xviii]

• At an October 1996 meeting of RSW experts, Indian experts and others it is recommended that an elaborate program of instrumentation, monitoring and geologic mapping of the abutment and slide area be carried out "religiously and thoroughly" for "the life of the project."[xix]

• In May and June of 1997, Units #1 and #2 are affected by an obstruction upstream, possibly by chunks of concrete.[xx]

• On July 17, 1997, RSW warns CIDA of the potential risk of powerhouse flooding caused by failure of concrete lining in the hydraulic passage. If left untreated, RSW warns "the failed lining may result in a sudden and potentially catastrophic collapse with every possibility to not only damage the turbines but, by the debris accumulating in the inlet valves, prohibit the isolation of the powerhouse in case of emergency and flood it with fatal consequences to the operating personnel."[xxi] One such incident in the life of a hydroelectric project, RSW explains in their technical assessment, may be dismissed as a highly unusual event. "The second incident brought us considerable cause for concern and now the third similar incident has increased that level of concern to the point where we believe that CIDA should be advised in writing of the potential dangers."[xxii] In a follow up letter to CIDA about the failure of the concrete lining, RSW concludes, "we, as Project Monitor, are of the opinion that the continued operation of this power plant by subjecting the units to such abuse amounts to dereliction of duty by NHPC towards the public that entrusted the operation and maintenance of this facility to it."[xxiii]

Probe International has sent copies of these documents to Indian citizens groups who are now reviewing them with independent engineers to assess the risk to residents downstream.
This is a triumph of the Access to Information Act for Canadian citizens concerned about this project and for the Indian citizens affected by it, you say. We should be happy. So why am I raising this with you now? Because Probe International received these documents – vitally important documents to the public health and safety of thousands of Indian citizens – only because CIDA, which is subject to the Access to Information Act, funded part of the project. If EDC had been the sole funder of Chamera I, we would have seen none of these documents. EDC’s Directive on Disclosure would be useless as a means of securing the disclosure of these crucial documents.

In 1999, EDC’s Board of Directors approved a $175 million loan to build Chamera II, another dam a mere 30 kilometers upstream of the troubled Chamera I dam. Chamera II is now under construction. Bill C-31 does nothing to protect the rights of Canadian or Indian citizens to know about the risks posed to the lives of people living along the Ravi River by EDC’s Chamera II project.

Let me also add that when Chamera I was getting underway in 1987, CIDA lauded it as “the most cost effective hydro project in India .”[xxiv]“Project Identification Memorandum (PIM) - Annex ‘A’,” Canadian International Development Agency, April 4, 1987, Access to Information Chamera II page 9. As it was nearing completion in 1994, according to the documents disclosed to Probe International, the National Hydro Power Corporation of India told Canadian authorities that the “cost of producing hydroelectric power at Chamera will be more costly than any other hydroelectric plant in India.”[xxv]

Because Bill C-31 has not committed to make EDC subject to the Access to Information Act, the Canadian public will never know all the economic boondoggles that EDC leaves in its wake.

Lastly, let me address this bogus argument of EDC’s that it must balance the views of all its “stakeholders” when drafting environmental review and information disclosure rules. The implication here is that the two stakeholder groups – its corporate beneficiaries and its public master – have equal rights. They do not. EDC may have legal contracts with its corporate clients and be responsible to adhere to those, but it is not accountable to them beyond that. It is, however, accountable to those who backstop every dollar EDC borrows and thus give EDC its wherewithal to carry on business; that is, to Canadian taxpayers. Equating the two only serves to blur and confuse the parties’ rights and responsibilities.

It is the duty of you, our elected representatives, to see clearly through that confusion and to translate the public will into effective legislation. Bill C-31 is a bad piece of legislation: it will not empower the public, but doom its attempts at legal action. It will create a pretense of environmental oversight and be used by EDC spin doctors to justify environmentally reckless behavior. What is worst about Bill C-31 is that it so sorely undermines the confidence of Canadians in our law-makers to do the right thing.

[i] “Minister Pettigrew tables legislation in Parliament to update Export Development Act, News Release, International Trade, September 20, 2001.
[ii] Belize Electricity Company (BECOL) Macal River Upstream Storage Facility Environmental Impact Assessment, Part 1 - Main Report, AMEC E & C Services, August 2001.
[iii] Wildlife Impact Assessment of Macal River Upper Storage Facility, Natural History Museum (London), May 24, 2001 in Belize Electricity Company (BECOL) Macal River Upstream Storage Facility Environmental Impact Assessment, Part 2 - Support Documents, AMEC E & C Services, August 2001
[iv] “The scope of The Access to Information Act: Developing consistent criteria for decisions respecting institutions,” Jerry Bartram & Associates, The Government of Canada, 2001.
[v] “Study urges expansion of information access laws,” by Jim Bronskill, National Post, July 21, 2001.
[vi] “Secrecy and stupidity,” by George F. Will, Newsweek, October 12, 1998.
[vii] Commission on Protecting and Reducing Government Secrecy, Secrecy: Report of the Commission on Protecting and Reducing Government Secrecy (Washington, D.C.: Government Printing Office, 1997).
[viii] Daniel Patrick Moynihan, Secrecy (New Haven, Yale University Press, 1998). p.1.
[ix] Annual Report: Information Commissioner 1999-2000, Information Commissioner of Canada, 2000.
[x] “Chamera Hydroelectric Project, Stage 1, Power Intake Structure,” RSW Inc., May 20, 1993, page 4 of report, Access to Information page 116.
[xi] Letter to: Mr. W. Fisher, Energy Specialist, CIDA, from: John B. Jutasi, Project Coordinator, RSW Inc., July 18, 1994, Access to Information pages 1597 - 1599.
[xii]“Monitoring Programme visit by Monitor team to site May 8 - 10, 1995,” RSW Inc., June 12, 1995, page 28 of report, Access to Information page 366.
[xiii] Telex to: DELHI, from: Peter Hoffman, CIDAHULL, November 21, 1994, Access to Information page 131.
[xiv] “Chamera Hydroelectric Project Monitoring Programme visit by Monitor team to site May 8-10, 1995,” RSW Inc., June 12, 1995, page 2 of report, Access to Information page 340.
[xv] “Chamera Project Monitoring Programme visit by Monitor team to site, May 27-29, 1996,” RSW Inc., June 26, 1996, page 4 of report, Access to Information page 286.
[xvi] Ibid, page 14 of report, Access to Information page 296.
[xvii] Letter to: Peter Hoffman, CIDA, from: Raymond Garneau, RSW Inc., June 28, 1996, Access to Information page 333.
[xviii] “Chamera Project Monitoring Programme visit by Monitor team to site, May 27-29, 1996,” RSW Inc., June 26, 1996, Access to Information page 312.
[xix] “Notes of 11 October Meeting in Faridabad with NHPC,” Inter-office memo, to: John Jutasi, RSW Inc., from: A.I. Imrie, BC Hydro, November 29, 1996, Access to Information page 1554 - 1555.
[xx] E-mail to: Colin Lovegrove, CIDA, May 5, 1997, Access to Information page 1418 and Fax to: Mr. Bernard Delisle, GEC Alsthom, from: S.D. Tripathi, NHPC, June 25, 1997, Access to Information page 1422.
[xxi] “Potential risk of Powerhouse Flooding due to Failure of Concrete Lining in Hydraulic Passage,” Letter to: Mr. Robert Woodhouse, CIDA, from: John Jutasi, RSW Inc., July 17, 1997, Access to Information page 1452 - 1453.
[xxii] “Risk due to Foreign Objects entering the Turbines,” RSW Memorandum, to: John Jutasi, from: Donald Coulson, July 17, 1997, Access to Information page 1454.
[xxiii] “Failure of Concrete Lining in Hydraulic Passage,” Letter to: Mr. Colin Lovegrove, CIDA, from: John Jutasi, RSW Inc., August 21, 1997, Access to Information page 1458.
[xxiv] “BPRC Minutes - March 24, 1987,” Government of Canada Memorandum, from: Anne Sutherland, March 25, 1987, Access to Information Chamera II page 3 and
[xxv] Telex to: CIDAHUALL, from: DELHI, January 25, 1994, page 5 of telex, Access to Information page 13.