By Probe International

Investment criteria to assure sustainable development, part 1

Patricia Adams
Energy Probe Research Fund
November 22, 1994

Energy Probe Research Foundation’s submission to the Ontario Energy Board on E.B.R.L.G. 36


IN THE MATTER OF a direction
by the Lieutenant Governor in Council to the Ontario Energy Board
to hold a public hearing to examine and report on certain matters relating to
Ontario Hydro International Inc. by
Patricia Adams
President, Energy Probe Research Foundation Executive Director, Probe International November 22, 1994



IN THE MATTER OF: a direction by the Lieutenant Governor in
Council to the Ontario Energy Board to hold a public hearing to

examine and report on certain matters relating to Ontario Hydro International Inc.



Q. Please state your name, current affiliation and business address.

A. My name is Patricia Adams. I am currently the Executive
Director of Probe International and the President of the Energy
Probe Research Foundation, of which Probe International is a
project. EPRF’s address is 225 Brunswick Avenue, Toronto,
Ontario, M5S 2M6.

Q. Please state the purpose of your testimony.

A. I will explain the necessity of establishing minimum,
identifiable, precise, and enforceable standards by which OHI’s
investment decisions should be bound, and the environmental,
financial, and social consequences of not doing so for the people
in the host country and for the ratepayers of Ontario.

Q. Please summarize your educational background.

A. I have been awarded a bachelor of arts degree in economics and
political science by Carleton University (1975) and a Master of
Arts in development economics by the University of Sussex in the
U.K. (1979).

Q. Please summarize your professional work experience.

A. A detailed professional résumé is attached to this testimony.
In summary, I have worked for the International Development
Research Centre in Ottawa to establish its energy program, for
the engineering firm Acres International conducting economic
analysis for various Third World development projects, for the
Science Policy Research Unit in the U.K. on Third World energy
issues, for the World Bank, the Government of Kenya and the
National Council for Science and Technology in Kenya on a variety
of development projects and economic analysis contracts, and for
the Jamaican Ministry of Education teaching University of London,
Oxford and Cambridge “A” level economics.

In 1980 I became a founding member of the Energy Probe Research
Foundation where I have since worked as the Executive Director of
Probe International. In addition to regular public speaking
engagements, press interviews, representations to Parliamentary
and Congressional Committees, I have written articles for the
Wall Street Journal, Globe and Mail, The Guardian, and Technology
Review among others, and major papers for the Columbia Journal of
International Affairs and the Cato Institute. I have also
authored two books on the social, environmental and financial
problems with foreign aid, export credit, and private sector
investment in the Third World (one of which has been translated
into Spanish for the Latin American market), and edited a recent
book on the problems with the multipurpose Three Gorges dam
project on China’s Yangtze River. I have also been responsible
for developing Probe International’s data bank of hydro dams
around the world — the largest and most current list of dams
available — which includes the financiers, the designers and
builders, and the problems plaguing approximately 1000 dams.

For the past 15 years, as the Executive Director of Probe
International, I have followed the foreign activities of Ontario
Hydro, Ontario firms such as Acres International, and various
institutions such as the Export Development Corporation, the
Canadian International Development Agency, the World Bank, and
the Multilateral Investment Guarantee Agency.

My experience monitoring the environmental, social, and economic
problems created by the investments of these institutions leads
me to a concern about OHII’s proposed activities and an interest
in this hearing.

Q. Have you participated previously in proceedings concerning the
overseas activities of Canadian public and private sectors?

A. Yes. In particular, with the Grand Council of the Crees of
Québec and the Federation for a Democratic China, I worked on
behalf of Probe International to bring a joint case before the
International Water Tribunal in The Netherlands against the
Canadian, Québec, and Chinese governments, B.C. Hydro
International and Hydro-Québec International, SNC-Lavalin, and
Acres International, for their involvement in the James Bay and
Three Gorges dam complexes.


Q. Please summarize the conclusion of your testimony in this

A. Having reviewed OHII’s filings and interrogatories, and the
history of Ontario Hydro’s overseas activities, and being
familiar with the standards for investments and loans of the
international institutions with which OHII proposes to work, I
conclude that OHII has neither the identifiable standards nor the
enforcement mechanisms to ensure that its investments will
promote sustainable energy development in the host country or
generate profits for Ontario Hydro ratepayers.

I also conclude that, to protect ratepayers and to assure
sustainable development, OHII adopt a code of conduct that it
carry with it wherever it operates, and that it eschew
involvement with any development in which this code cannot be

Q. Ontario Hydro International plans to establish its leadership
and success in the global energy marketplace by “promot[ing] and
showcas[ing] SED principles and practices” in its proposed equity
investments. Do you have an opinion concerning the likelihood of
success for OHII’s plans?

A. I think OHII will fail in this endeavour because the three
broad operating principles that OHII proposes to guide its
promotion of SED (see Appendix I-3 of its Strategic Business Plan
(1995-1997), Exhibit 1.1.3 at this hearing) will relieve OHII of
the necessity to meet the most fundamental requirements of SED.

Operating Principle #1

OHII’s first operating principle — to respect the sovereign
right of each nation to develop its resources — will, I predict,
fundamentally undermine SED and negate all of OHII’s other
promises to accomplish SED. I am not alone. Many of my colleagues
in other countries reject the notion that it is the state’s right
to determine the use of resources in violation of the property
rights (customary land, air, and water rights for example) of its
citizens. In fact, the systematic and pervasive expropriation by
the state and international financiers of the resources on which
millions of Third World citizens have depended and managed
sustainably and accountably in decentralized ways for hundreds of
years is the fundamental cause of unsustainable development that
has undermined the Third World and its citizens in the past
century.[Endnote 1]

In practice, if OHII endorses the right of governments to develop
the nation’s resources against the will of its peoples, OHII will
reinforce the power of the wrong parties to make development
decisions, and in the process externalize the costs and risks of
its investment decisions onto those who have no recourse to due
process in the defence of their rights.

By proposing to accept, as its most fundamental operating
principle, the sovereign right of each nation to develop its
resources, OHII is saying it will adopt the standards of the host
governments, many of which either have low standards or no
regulatory and legal environment to enforce them. In effect, OHII
will have no standards to which it is committed, but will bend
its standards of practice to the whim of the host government.
Without this exemption from explicit and precise standards, many
of the projects OHII intends to invest in would fail OHII’s other
SED tests.

OHII is in effect saying that it will consider accepting the
human rights, environmental, and economic standards of
governments many of which are not elected, which do not respect
the rule of law, and which have records of expropriating the
environments of their citizens with impunity.

Operating Principle #2

OHII’s second operating principle — that it will use Ontario
Hydro’s standards (environmental, social/cultural/human rights,
energy efficiency, renewable energy, and health and safety) as a
“benchmark to determine involvement in projects,” in the absence
of a clear and enforceable obligation to eschew involvement or
withdraw from projects if those standards are not met, is
tantamount to a “trust us” policy. I would argue that Ontarians
do not give their governments and corporations such sweeping
powers on domestic matters. I would also argue that Ontarians do
not wish to give such sweeping powers to their governments and
corporations on international activities. As the executive
director of Probe International, I know that thousands of our
supporters regularly send letters to Canadian authorities urging
them to eliminate double standards and, at a minimum, to afford
the same rights to citizens of other countries as Canadians
insist on at home.

By trying to reassure us that it “will reserve the right to
decline participation in any project which offends federal or
provincial policy” OHII has only succeeded in confirming that it
will reserve the right to participate in projects which offend
federal, provincial or Ontario Hydro standards and policies.

Operating Principle #3

OHII’s third broad operating principle — that it “would not
commit to undertake the project if environmental impacts or human
rights do not meet acceptable levels” — leaves the definition of
“acceptable” standards to the discretion of proponents, leaving
them infinitely malleable and ever changing. Under the
circumstances, and based on the investment and lending practices
of other financiers, I predict that no “acceptable” environmental
or human rights standards will be reliably enforced. Nor will the
public have identifiable environmental or human rights standards,
that are consistent with Canadians’ values, against which to
judge OHII’s activities.

Q. In your professional opinion, why will SED be undermined if
OHII respects the sovereignty of the host nation, rather than the
rights of individuals and communities, to develop their

In my opinion, and based on the evidence I have gathered over the
past decade and a half, when project proponents need not account
to those they affect with their investments, and need not
internalize the costs they visit upon others, they finance
projects in which the costs to the country as a whole and to
identifiable and often large populations exceed the benefits.

Others have reached similar conclusions. The Economist magazine
investigated the legacy of large dams in 1992 and concluded that
“the draw-backs of dam-building have become more apparent, and
many of the purported benefits have turned out to be
exaggerated…. No solid retrospective studies exist of the costs
and benefits of large dams in developing countries.”[Endnote 2]

“Taxpayers who eventually foot the bill, should look on
dam-building with suspicion,” The Economist warned, adding “as
always, things look better when some costs are left out.”

The most reliable way to ensure that costs are not left out is,
to use the words of a Chinese critic of that country’s dam
building record, to end the pattern where “those who have
suffered are not the beneficiaries while those who have benefited
are not the sufferers.”[Endnote 3] In other words, the best insurance
against careless decision-making is to empower those who have to
live with a decision’s consequences — whether environmental,
financial, or cultural — with the rights and tools to make a

Q. In order to further illustrate your point, can you cite

A. Evidence gathered from development projects financed since
the late 1950s shows that in the absence of precise and
enforceable standards, international financiers have applied low
standards that suit themselves and unaccountable borrowing
governments at the expense of the citizens of Third World
countries and at the expense of sustainable development.

For example, in the case of the Three Gorges dam being built on
the Yangtze River in China, the Canadian International
Development Agency financed a $14 million feasibility study that
was “to form the basis for securing assistance from international
financial institutions.”[Endnote 4] The World Bank oversaw the feasibility
study to ensure it conformed to World Bank standards. The
Canadian government described the feasibility study as world
class and argued that it would set the standard to which all
future feasibility studies would strive. Hydro-Québec
International, B.C. Hydro International, SNC-Lavalin and Acres
International carried out the study.

As the Executive Director of Probe International I secured the
document by using the Canadian Access to Information Act (despite
the efforts of the engineering consortium which tried to keep the
document secret) and asked nine international experts to review
the study and prepare a critique of it.[Endnote 5] These experts discovered
that the Canadian engineers had declared the project feasible
without reviewing the sedimentation data (for a river with the
fourth highest sediment load in the world), without adequate
hydrodynamic data or a thorough review of the backwater effects
of the dam, without demonstrating that it was feasible to
resettle the three-quarters of a million people who would be
displaced by the dam, by leaving 500,000 people living in the
active flood storage area around the reservoir, with imprudent
assumptions about reservoir induced seismicity and landslides,
without doing a proper environmental assessment, and by
exaggerating flood benefits.[Endnote 6]

Similar problems were found for the World Bank-financed Sardar
Sarovar dam on India’s Narmada river. An independent review team,
headed by Bradford Morse and Canada’s Thomas Berger, found that
as with the Three Gorges dam, proponents of the dam failed to
consider adequate hydrologic data; they failed to properly assess
the backwater effects of the dam, or the downstream impacts on
the people, the estuary and fish stocks; they exhibited “gross
delinquency” in the handling of environmental matters; and they
failed to prove that the dam would perform as planned.
“Assertions have been substituted for analysis,” the independent
reviewers stated in their 1992 book Sardar Sarovar: The Report of
the Independent Review.
[Endnote 7]

The importance of these two critiques — the only two ever done
for large publicly-funded development projects — cannot be

They exposed a disturbing pattern of omissions, errors, and
biases in the official justifications of the energy project
proponents — flaws that have thrived under the cloak of secrecy
that shielded them from the light of public scrutiny. Until these
two critiques were published, the international dam builders —
governments, corporations, and international aid agencies —
could justify their dams in the name of sustainable development
and with claims to the national interest, without fear of
challenge from a public kept ignorant of their calculations.
These two critiques have exposed that the dam builders could
justify their dams only by denigrating the cultural values of the
people affected, by discounting current economic activity in the
ecosystems they proposed to destroy, by treating the environment
as dispensable, by making scientifically imprudent and uneconomic
choices, and most important, by carelessly or over-confidently
assigning risks to others who would not assume those risks for

The relevance of these two critiques go far beyond the Three
Gorges and Sardar Sarovar dams: they make sense of the bad
technical and financial record of large dams around the world,
and they challenge the wisdom of other large dams, unbuilt but on
the drawing boards of institutions like OHII.

Q. What rights and tools should citizens be empowered with so
that proponents and the public can distinguish between
sustainable development projects and unsustainable ones?

A. The right to exercise your property or customary rights, the
right to know what designs another party has on your environment,
the right to review the reasons and justification for their
proposal, the right to a fair hearing to determine a project’s
value, and the right to fair compensation.

The Brundtland Commission on Sustainable Development singled out
public scrutiny of development projects as crucial and
recommended that “public scrutiny should be mandatory and
wherever feasible, the decision should be subject to prior public
approval, perhaps by referendum.” Norwegian Prime Minister
Brundtland, who headed that commission, also called on
governments to recognize the rights of citizens to know and have
access to information on the environment and to participate in
decision-making on activities likely to have a significant effect
on their environment. She also added that citizens must have the
right to legal remedies and redress when their health or
environment is seriously affected.[Endnote 8]

This is not a new principle in international affairs, but one
that is contained in the International Bill Of Human Rights which
states that “In no case may a people be deprived of its own means
of subsistence.”[Endnote 9]

Part 2


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