Keystone: Why the White House Delayed the Pipeline Project and Its Impact on the Canadian-U.S. Relationship

Just three days after the White House announced the delay of the Keystone pipeline, a $13 billion dollar cross-border project that would have transported crude oil from Alberta’s oil sands all the way to Houston, Texas, President Barrack Obama and Prime Minister Steven Harper sat down in Hawaii to show bi-lateral relations remain strong.

As reported by CBC, Prime Minister Harper has attributed the Keystone delay, and other recent White House decisions, to America’s upcoming presidential election:

"This is simply the political season in the United States and decisions are being made for domestic political reasons that often have little or nothing to do with what other countries may think."

Obama's administration recently revived its "Buy American" provisions, potentially costing Canadian businesses billions of dollars in U.S. sales, and in the budget proposal he tabled last week the president proposed a $5.50 "passenger inspection fee" for Canadian air travellers.

On Thursday, the State Department ordered TransCanada to reroute its proposed pipeline and subject it to further environmental assessment.

The 2,700-kilometre pipeline would bring crude from the new oilsands expansions in northern Alberta to be turned into gasoline and other fuels in Texas, the hub of the American refining industry.

Canada has lobbied hard for an expanded pipeline to be built, saying it would provide jobs and economic benefit to both countries.
…
"We have already indicated of course that we are disappointed," Harper said. "Nonetheless, I remain optimistic that the project will eventually go ahead because it makes eminent sense.

"I would also point out — I think it's important to note — that there has been extremely negative reaction to this decision in the United States because this pipeline and this project is obviously what's in the best interests of not just of the Canadian economy but also the American economy."

Nevertheless, he said the decisions also underscore the need for Canada to secure access to Asian markets for its energy products. 

"That will be an important priority of this government going forward," he said, noting he raised the issue with Chinese President Hu Jintao on Saturday.

Yet, Christopher Sands—a Canada-U.S. relations expert—takes a harsher line against the Keystone delay:

Christopher Sands, a specialist in Canada-U.S. relations at the Hudson Institute, a think-tank in Washington D.C., argues the White House simply "messed up" and is now in a serious jam over an issue that threatens to derail Obama's re-election hopes. 

Environmentalists were looking for an issue to grasp, he said, and the pipeline seems to offer something for several green groups because there are concerns about land, air, water and climate change. 

"It's just a sign of how badly the president is concerned about his reelection hopes, that he can't afford to upset his constituency," Sands said. 

"The delay we're now stuck with is because the president mishandled the file."

But, whether or not the White House made the right call on Keystone, the political reasons for the delay are significant:

But the delay, which will very likely place a final Keystone decision well after the presidential election a year from now, was the culmination of a remarkable few weeks that saw the president take an increasingly personal interest in the issue. That interest, many observers believe, makes it clear this was a political decision, made by a White House eager to hold on to a base of young environmental-minded voters who were instrumental in handing Barack Obama the presidency.

“I am sure the Obama campaign did not like the idea of their campaign offices being occupied by a bunch of people who were against the pipeline,” said Jane Kleeb, the Nebraska campaigner who was instrumental in stirring up that state’s opposition. “And I’m sure they were tired of the high-level donors saying, ‘No we’re not going to donate until you do something on this pipeline.’”

Mr. Obama’s growing interest was evident over the past few weeks. There was the Oct. 26 event in Denver where, in response to a heckler, Mr. Obama stopped mid-speech and responded: “I know your deep concern about [Keystone],” he said. “We will address it.”

Finally, and surprisingly absent from the Canadian news sources, is the fact that the environmental concerns regarding Keystone are not limited to the White House or State Department. As reported by Reuters:

The State Department's environmental assessments of the Keystone are also being challenged by another lawmaker, whose committee has oversight of such reviews. Barbara Boxer, the chairman of the Senate Environment Committee, asked Secretary of State Hillary Clinton on Friday to answer a series of questions about the environmental assessment by November 14, probing whether the firm had a conflict of interest.

Boxer asked whether the Keystone decision will be delayed until the State Department knows the results of an independent engineering evaluation of spill detection measures and valves.

And this is not to mention the laundry list of complaints from the Natural Resources Defense Council, Sierra Club, National Wildlife Federation, and Friends on the Earth, that were lobbing legal challenges to what they considered a rushed State Department review . Among the groups’ complaints are (1) their contention that additional pipeline infrastructure is not necessary, (2) inadequate safety analysis, (3) an incomplete study of the green house gas and other air pollutant effects of the project, and—finally—(4) insufficient public review of the project.

Tim Hortons in Hot Water: How a Pending Class Action Lawsuit Illustrates the Difference of Canada’s Good Faith and Fair Dealing Doctrine

By Justin McNeil
Senior Editor

Tim Hortons dominates the Canadian fast food industry to the tune of $2.536 billion (CDN) in revenue last year alone. Its blend of coffee, fresh doughnuts, and connection to that most Canadian of sports has helped cement its own reputation as quintessentially Canadian. An organizational strategy embraced by other fast food chains, but not the other North American coffee giant, is Hortons’ reliance on franchising. The role this corporate structure has played in the success of the company seems somewhat evident, and now a class action lawsuit that is currently before the Ontario Superior Court of Justice may demonstrate the degree of importance franchises have played in Hortons’ rise. Inherent in this contractual relationship, are notions of good faith in negotiations between franchisor and franchisee. The legal concept of good faith and fair dealing, and how it is both defined and applied by the court may make the difference in whether the suit is ultimately successful or not.

The debate centers on this relationship and alleged misrepresentations over the costs of a new freezing process for doughnuts that are no longer baked in store. A recent article in Macleans takes a look at the dispute and lays out the contested information that has Hortons franchisees bringing suit. While the factual background is immense, the legal challenge which entails multiple causes of action may hinge on a claim that senior management breached the duty of good faith and fair dealing when they introduced the new flash freeze doughnut process. Franchisees say that management misrepresented how much the new technique would end up costing per doughnut. With costs now higher and margins lower than were expected, the franchisee plaintiffs feel the agreement they made was not presented to them with the requisite good faith that is inherently implied in contract negotiations. Now, they seek damages totaling $1.95 billion (CDN).

In most of Canada, good faith and fair dealing exists through the same common law recognition that is found in the U.S., as it is not afforded the strength of legislation (although the U.S. Uniform Commercial Code does codify the duty of good faith for the enforcement of commercial contracts). Only Quebec, in the civil tradition and inspired by French provisions with the same aim, has codified good faith in multiple articles of the Civil Code of Quebec. See Article 6; Article 7 (speaking to abuse of right); Article 1375. Instead, the common law provinces largely rely on the application of other doctrines to invoke breach of good faith and fair dealing, including unconscionability and fiduciary duties. Despite these differences between jurisdictions and legal systems, the concept is often applied in a very similar manner, yielding somewhat corresponding results. Even in Canadian common law though, courts have chosen to invoke the duty of good faith for a myriad of different reasons. Additionally, the duty has been employed differently depending on whether the issue involves contract negotiation, contractual performance, or contract enforcement. In response to this disparity, the increasing prevalence of the doctrine being asserted in legal claims, and its lack of a precise definition, there have been calls for a clear, bright-line rule in Canadian law that can be applied uniformly and provide for more predictability in the bargaining process.

Others have come to different conclusions regarding the relative benefits of applying good faith and fair dealing. In another common law country, it has been argued that the doctrine is neither required nor necessary for the proper operation of New Zealand contract law. The difficulty in arriving at a common definition for the doctrine, its differing application in distinct areas of the law, and justifications of its theoretical underpinnings that vary country by country are all arguments put forward to demonstrate the impracticality of relying on it. Reasons for why the doctrine is unnecessary in New Zealand include inter alia that adequate remedies are already in place—statutory, common law, and equitable—to protect contracting parties, the duty would reduce parties’ freedom to contract, the creation of a good faith duty is left to the legislature, the problems created by extending a general duty throughout diverse areas of contract and societal groups who may not need the protection, and a fear of the flood of litigants that will overwhelm the courts arguing a breach of good faith. Though these are all valid concerns, Canadian courts may continue to be more influenced by the similar codified rights of Quebec, and the traditional recognition the duty enjoys in American common law when grappling with the exact definition and authority to be extended to good faith in the future.

Legal claims aside, the class action suit is further complicated by allegations of impropriety on both sides in another Macleans article that more comprehensively addresses the turbulent recent history of the company and the motivations that animate the lawsuit. The lead plaintiff, Archibald Jollymore, is a store owner, former executive vice-president, and cousin of the former owner and co-founder of Tim Hortons, Ron Joyce. The current owners maintain that Joyce is both funding the plaintiffs’ fees in bringing this action and coloring the character of their claims, continuing a power struggle that began soon after Joyce sold the company to U.S.-based Wendy’s in 1995. With other family relationships involved, as well as different contingents of franchisees loyal to either the current or previous owners, the exact determination of what “good faith and fair dealing” means in this context will likely prove pivotal in the disposition of the case. Such an evaluation may have implications beyond this decision, due to the high level of publicity it already enjoys and the possibility of massive damages.

While the outcome of this case may not drastically alter the contract law of Canada, it may well serve as an impetus in further delineating the boundaries of its good faith and fair dealing doctrine. A reliance on the doctrine may move this area of Canadian common law closer to the law of the U.S., in that the duty is broadly recognized but largely uncodified. Whatever the result, effects will certainly be felt among franchisees of Tim Hortons, and possibly those of other Canadian chains. Any impact on the application of good faith and fair dealing in the U.S., or other common law jurisdictions, will be much more difficult to gauge. In a future post, I hope to follow up with new developments in the class action suit, as well as more fully explore distinctions in the doctrine’s application between Canadian and American law.

Accessing the Impact of Jack Layton’s Death on the Newly Empowered NDP and What Does Having this Party as Official Opposition Mean to Canada-US Relations?

By Erwin Braich
Staff Writer

Before becoming Prime Minister, in a speech to the conservative American think-tank Council of National Policy, Stephen Harper described Canada’s New Democratic Party (NDP), in the following way, “basically a party of liberal Democrats, but it's actually worse than that, I have to say. And forgive me jesting again, but the NDP is kind of proof that the Devil lives and interferes in the affairs of men.”[1] Since its founding in the early 1970s, this unapologetic left-leaning party Harper seems to scorn, has been an integral part of the Canadian political order. In fact, it was the NDP’s first leader Tommy Douglas who introduced universal healthcare, something that today you cannot leave out in the very first sentences describing Canada. More recently, the party was led from 2003 until this past summer by Jack Layton. Throughout his tenure, Layton passionately promoted his party’s principles while at the same time attracting more voters.[2] His savvy leadership translated to huge political gain for the NDP. In the federal election this past spring they surprised everyone. Layton was able to secure 103 seats for his party, and even oversaw a massive victory in Quebec, a place that the NDP had never even attempted to contend in.[3] Ultimately, Layton’s party leadership led to the utter collapse of one party (Bloc Quebecois) and the taking of the throne for Canada’s center-left spotlight, from the other (Liberals). But tragically, as the nation’s political scene was being reshaped by the emergence of the NDP as the Official Opposition, Layton succumbed to cancer in August. Which leads to the question: who will get behind the wheel of this reinvigorated political party? And in what direction will they steer Canada’s New Democrats?

There is no doubt Layton will be missed. Across Canada, only one-in-five think the NDP will be able to find a new leader as strong as Layton, while two thirds (66%) of Canadians disagree.[4] As of now, long-time NDP strategist Brian Topp is the sole registered leadership candidate, which will be formally decided at the party’s convention in 2012.[5] He has a stance on every Canadian hot-button issue such as advocating Canada must formally recognize Palestinian statehood, to being vehemently opposed to the Keystone XL oil pipeline project linking Alberta to the Gulf Coast.[6] Other potential candidates exist, among them Quebec MP, Thomas Muclair who gains popularity day by day. According to a poll released last week 28 percent of Canadians would vote NDP if Muclair is chosen to be the party’s leader, while 25 percent who would vote NDP if Topp is chosen.[7]

There is an important side note for any American observing the NDP leadership race. Canada has extremely tight campaign finance laws. Under the new rules, the maximum contribution an individual supporting one of these candidates can contribute is $1,200, but the NDP has instituted an internal policy that reduces this to a mere $1,000.[8] Also under Canadian law, corporations and other businesses are completely prohibited from contributing altogether. Needless to say, this is a vastly different campaign finance regulatory structure than seen in the United States.

So how will this impact the party’s effectiveness as Official Opposition? For one, it is the first time in history the NDP has held this position. So, if you combine this with the fact that they entered this Parliamentary session without real leadership, at first glance things can look somewhat unpredictable for the party. However, the NDP is now the sole voice coming from the political left in Ottawa. Given the huge blow dealt to the more centrist Liberals, (the Official Opposition for the previous five years) we can be sure that Harper’s Conservative government is going to be contested with more passion than ever before. Yet one thing to keep in mind is that any effectiveness is going to be tempered, because at the end of the day, the Conservatives have a majority government. In Canada it is only in extreme cases that an MP votes against his party. That said, any Opposition party’s role in a majority government will be more-so to stimulate public debate while waiting for the next election rather than directly affecting policy outcomes.  

            What could the NDP being the Official Opposition mean for US-Canada relations? Let’s be honest, the party has never been particularly friendly with the US. Expect Parliamentary debate to be reflective of this. The NDP have historically been known as the “anti-American” party extremely skeptical of American power. At one point they even called for Canada to pull out of NATO, because of their suspicion of American intentions.[9] And just this week NDP Immigration Critic (the formal Opposition “shadow” position to the Immigration Minister) MP Don Davies, called for Canada to ban former Vice President Dick Cheney from entering Canada for a scheduled speaking engagement, because of his role in the Bush administration.[10] While the Opposition’s current Foreign Affairs Critic, NDP MP Paul Dewar (another possible leadership candidate) has made clear that his party will closely examine any perimeter security cooperation between Canada and the US. [11] Alexander Moens, writing in the Fraser Institute’s most recent report on Canada-US relations, blames Canadian nationalist sentiment and specifically the NDP for creating what he terms the “political albatross” preventing progress on the Prosperity and Security agreement.[12] During Layton’s campaigning in 2011 he reiterated the NDP stance on Canada’s involvement in Afghanistan. He spoke on numerous occasions about how the party has been strongly in favor of bringing Canadian troops home since 2006 and immediately ending the military mission altogether.[13] The Conservatives on the other hand, are more in line with Obama’s plans of scaled down perseverance in Afghanistan. On every occasion the NDP has almost automatically opposed Canadian cooperation with the United States. We can anticipate that the NDP will be quick to challenge the Prime Minister on everything he decides to do regarding relations with the US. This is not only because it is the role of any Opposition to be the proverbial thorn in the governing party’s side, but also because there could not be more diametrically opposite sets of beliefs regarding Canada-US relations in Parliament.

Yet there is hope that things could gradually warm up between the Opposition Party and their stance towards the Americans. With the NDP’s new foothold in Quebec, they will now have to appeal to that province’s voters, who have historically been somewhat more supportive of Canada-US cooperation. Actually, amongst English-speaking Canadians, it is a well-known joke that when in Quebec, you will be treated more warmly if you tell them you are American rather than from another province. And from a policy standpoint they have always been Canada’s exception. One pertinent example is with regard to trade. In 1993, the NDP (and frankly most Canadians) had been staunchly against Canada’s commitment to NAFTA, but the opposition to the free-trade agreement was remarkable lower in Quebec where almost half of the population actually supported it.[14] This illustration is particularly germane to today, because the NDP under Layton’s leadership had advocated completely renegotiating the trade agreement. So might there be a chance the newly the acquired Quebecers lessen the party’s disdain towards the free trade pact? It is on key Canada-US issues like these, in which the new leader will have to balance traditional party positions with the interest of maintaining support in their newly conquered province.

Ultimately, Jack Layton’s legacy will be reflected by the strong position in which he left his party. As Official Opposition the NDP are going to be effective as determined critics of any move Harper’s Conservatives make, and at least for the meantime this critical voice should be at its loudest when it comes to Canada-US relations.

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[1] Text of Stephen Harper's speech to the Council for National Policy, June 1997 http://www.cbc.ca/canadavotes2006/leadersparties/harper_speech.html

[2] Ian Austen, New York Times http://www.nytimes.com/2011/08/23/world/americas/23canada.html

[3] 2011 Federal Election Results http://www.sfu.ca/~aheard/elections/results.html

[4] Angus-Reid Poll http://www.angus-reid.com/polls/43998/canadians-remember-layton-fondly-support-state-funeral-to-honour-him/

[5] NDP Party Website http://www.ndp.ca/leadership-2012

[6] Brian Topp, Globe and Mail http://www.theglobeandmail.com/news/politics/second-reading/brian-topp/

[7] Joanna Smith, Toronto Star http://www.thestar.com/news/canada/politics/article/1058971--ndp-would-do-best-under-mulcair-poll-finds?bn=1

[8] Elections Canada http://www.elections.ca/content.aspx?section=pol&document=index&dir=lim&lang=e

[9] John Ibittson, Globe and Mail http://m.theglobeandmail.com/news/politics/ndp-foreign-defence-policy-differs-from-tories-in-style-more-than-substance/article2036769/?service=mobile

[10] Canadian Press Release, http://www.huffingtonpost.ca/2011/09/26/dick-cheney-canada-visit-ndp-ban-bar-don-davies_n_980609.html

[11] John Ibittson, http://m.theglobeandmail.com/news/politics/ndp-foreign-defence-policy-differs-from-tories-in-style-more-than-substance/article2036769/?service=mobile

[12] Alexander Moans, “Skating on Thin Ice: Canadian-American Relations in 2010 and 2011” p. 26 [Google Books] http://books.google.com/books?hl=en&lr=&id=mBLlGi0kAakC

[13] NDP Party Website http://www.ndp.ca/press/canadian-leadership-in-afghanistan

[14]Guy Lapachelle, “Quebec under free trade: making public policy in North America” p. 255 [Google Books]

http://books.google.com/books?id=E40tHMkPlUkC