Proposed sale of MDA space assets highlights need for national space policy

Review extended 30 days

A former astronaut, a Nobel Prize recipient and a retiring Conservative backbencher have joined the growing chorus urging Industry minister Jim Prentice to block the sale of the space assets of Macdonald Dettwiler & Associates Ltd (MDA) to US military contractor Alliant Techsystems (ATK). Opposition to the sale of MDA's information systems and geospatial businesses has several critical components — the lack of a Canadian space policy, the loss of capacity to enforce national security and Arctic sovereignty and the folly of the former Liberal government in transferring world-leading technology to the private sector through a public-private partnership agreement.

Late last week, Prentice announced a 30-day extension to the review of the sale under the Investment Canada Act although a new legal opinion argues that permission under the Remote Sensing Space Systems Act (Bill C-25) is also required. That act falls under the authority of Foreign Affairs minister Maxime Bernier.

Radarsat II features dramatically improved capabilities over its Radarsat I predecessor, allowing for a wider array of products and services in application areas such as agriculture, forestry, geology, hydrology, ice, disaster management, marine surveillance and mapping. Featuring ultra-fine resolution and the ability to obtain imagery through cloud cover and darkness, it was launched December 14/07 from the Baikonur Cosmodrome in Kazakhstan just days before the MDA announcement of a deal to sell its space assets to ATK. The first images from Radarsat II were received January 21/08.

The significance of the Radarsat technology and MDA's leading role in the space industry were forcefully underlined last week by Dr John Polanyi. The Nobel Prize-winning chemist used his acceptance speech upon receiving the prestigious NSERC Gerhard Herzberg Gold Medal to make an impassioned plea to keep the technology under Canadian ownership.

heart of Canada's space program -—Polanyi

Tracking Canada's expertise in satellite technology back to 1940, Polanyi described MDA's space assets as Canada's eyes on the world and "the heart of the space program". "Canada has the power to prevent that sale and we should prevent it," said Polanyi, adding that the Industry minister's pending decision was historic. "It's an awkward jam we're in because if this deal passes, Radarsat will pass into other hands ... We are going to lose those eyes because the new owner will decide who uses them."

Polanyi's plea to keep MDA's space assets under Canadian ownership is just the latest call to block the sale to ATK, which is being made on economic, technological and ethical grounds. At a March 5th session of the House Standing Committee on Industry, Science and Technology, several witnesses argued against the sale to ATK on grounds ranging from economic to ethical to national security.

Dr Marc Garneau was one of four witnesses to appear before the committee. A former astronaut, former president of the Canadian Space Agency (2001-2005) and Liberal candidate for the riding of Westmount-Ville Marie, he argued that Canada urgently requires "a comprehensive Canadian space policy to guide the development of Canada's space science technology and industry". He added that the sale to ATK could undermine national security, the ability to monitor our coast lines and erode our industrial base and space industries.

"The Canadian taxpayer allowed MDA to secure a very lucrative deal for its shareholders and yet the Canadian public, which should be viewed as a shareholder, is giving up a great deal if this sale proceeds," said Garneau. "It is certain that other countries with strategically important space companies would not allow such foreign takeovers."

Garneau also stressed the need for Canada to support companies in the space sector like competing nations with space programs. The CSA has a budget of roughly $350 million annually and is unable to provide the levels of support enjoyed by firms in the US, France or Japan.

"If the government recognizes the importance of keeping MDA capability under Canadian ownership, it must also ensure that it provides the means to ensure the continued viability of such a company", he said.

Garneau's sentiments were reinforced by Steven Staples, founder and president of the Rideau Institute on International Affairs, a recently established research and advocacy group.

"This is a bad deal for Canadians. Taxpayers have invested closed to $500 million in the remote sensing satellite RADARSAT-2," said Staples. "In contrast, MDA, the private owner of RADARSAT-2, has reportedly invested a much smaller amount. Some estimates have been as low as $92 million, yet it's selling this technology and its other space systems for a cool $1.3 billion. There are also potentially grave, negative implications of the sale of RADARSAT-2 for Canada's continued regulation of the satellite's operation."

Prentice appeared before the same committee the following day but refrained from answering specific questions related to the pending sale as the issue is now being examined under the Investment Canada Act (ICA).

"The strict confidentiality provisions of the Investment Canada Act apply and do not allow me to make specific comments on specific cases," said Prentice. "Members can rest assured that I will not approve this investment unless it demonstrates a net benefit to Canada."

The ICA examines the sale of Canadian assets to foreign entities according to the following criteria:

* the effect on the level of economic activity in Canada;

* the degree and significance of participation by Canadians in the Canadian business;

* the effect of the investment on productivity, industrial efficiency, technological development, product innovation and product variety;

* the effect of the investment on competition;

* the compatibility of the investment with national, industrial, economic and cultural policies; and,

* the contribution of the investment to Canada's ability to compete in world markets.

external legal opinion

The Rideau Institute and the Canadian Auto Workers Union have banded together to commission a legal opinion on the proposed sale. It contends that the proposed sale is "entirely contrary to Canada's interests and cannot be reasonably approved under either the Investment Canada Act or the Remote Sensing Space Systems Act". It also notes that US security will trump Canadian security concerns making it impossible to use Radarsat II imagery in its own national interests.

"The serious consequences of authorizing the transfer of Radarsat-2 to a US-based company is underscored by the risk this poses to Canada's ability to ensure access to vital and strategically important information gathered by this satellite, particularly where US and Canadian interests collide," it states. "The sale of MDA assets would represent a substantial loss, not gain, of the benefits that Canada will realize from maintaining Canadian ownership of the unique and world-class technologies that MDA has developed with enormous help from Canadian taxpayers."

urgent need for national space policy

In an interview with RE$EARCH MONEY, Garneau said that, of the host of reasons why the sale of MDA's space assets are ill advised, the need for a Canadian space policy rises above all others.

"It's the number one lesson to be learned. An inter-party committee needs to look at this," says Garneau. "Right now we are pushing up at the bottom and coming forward to government. It would be much better if we had a top-down process from government including input from government departments and the scientific community ... When I was at the Canadian Space Agency, we did get the government to approve a Canadian strategy – a framework for what we do in space and priorities. But that's not the same as a policy document."

Garneau says the potential loss of key assets held by Canada's premier space company comes at a time when many nations not typically associated with space are investing aggressively. These include emerging economies such as Brazil, India and China.

"Canada has to have a presence in space. The government must formulate policy by means of organizations like the CSA to coordinate the building of these satellites in Canada," says Garneau. "A space policy must recognize that if you are going to have this set of policies it makes sense to nurture Canadian industrial capacity and invest more in companies like MDA. We've spent a huge amount of resources and time building up Canadian space resources so we could turn to a Canadian company when the time came."

Radarsat Constellation

Canada has an opportunity to retain its lead in space if key project proposals are green lighted. In 2005, Garneau proposed Radarsat Constellation to succeed Radarsat II. To date, $200 million has been approved to move the project forward, including a $7-million contract awarded in 2006 to MDA for conceptual design and mission definition.

Then Industry minister Maxime Bernier said the new program would "enhance Canada's ability to ensure its sovereignty and security through space-borne coastal surveillance ... It will also ensure continuity of data services for government departments and a growing number of commercial clients."

Since then, however, the Constellation program appears to have slipped into limbo and without MDA as a key player, it's uncertain whether it can proceed.

"This project would continue to consolidate Canadian dominance and fulfill major policy needs (but) it's still in limbo," says Garneau. "There's no free trade when you talk about space with the US. They have very stringent requirements ... I'm not a protectionist but in this case you have to weigh more than the economic benefit to Canada. This is a company that has been heavily invested in by the government of Canada and the Canadian taxpayer. We have a stake in the company."

Another key concern facing Canada is the issue of shutter control, or who will control the use of imagery generated by Radarsat II if it becomes part of a US company. It was precisely this issue that led to the passage of Bill C-25: An Act Governing the Operations of Remote Sensing Space Systems.

"If Radarsat II and operations are transferred to ATK, what is the outcome of shutter policy. This question has not been resolved and it's essential we retain shutter control. When the public-private partnership was developed in the late 1990s, no one anticipated a Bill C-25 would have to be implemented. Related to that is the licensing (of imagery). The government of Canada is the licensing authority and can use and distribute the imagery."

Art Hanger weighs in

Perhaps the single most important individual in prompting the government to delay its decision on the sale is Art Hanger, a Conservative Calgary MP who gained a fierce reputation as a political warrior during his time with the Reform and Canadian Alliance parties.

Hanger — who last fall announced his intention to retire from politics — joined critics from the Liberal, New Democratic and Bloc parties in expressing his opposition to the sale of publicly supported technology. Describing it as a waste of money and betrayal of the public interest, Hanger has written to his fellow Conservative MPs to solicit their opposition. He also outlined his opinion in a column in a weekly Calgary-area paper:

"It's about time Canada stop playing the nice guy at the expense of our own security and sovereignty — not to mention our own research and development capacity."

MDA's space assets facilities are located in Richmond BC, Montreal and Brampton

R$