Canadian fossils are steadfastly refusing to invest significantly in new decarbonization projects, even though they’re flush with record amounts of cash, the Pembina Institute reports in a scathing analysis released last week.
“Canadian oil and gas companies’ free cash flow is estimated to reach C$152 billion in 2022,” their highest profits ever, Pembina writes in a summary of the report. But “this boom is not being accompanied by new projects in Alberta’s oilsands sector, or a significant expansion of jobs. It is also not being invested in decarbonization.”
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Instead, the industry’s capital spending has hit an historical low as a percentage of available cash, while companies pay out dividends to their investors and buy back shares. That may be a fatal error, Pembina warns, since this may be Canadian fossils’ last chance to make serious moves to decarbonize their operations, as global oil demand declines through 2030 and competition for low-emission energy ramps up.
“Companies that make deep and rapid emissions reductions now will be best-placed to prosper in the low-emissions, high-competition worlds of 2030, 2050, and beyond,” the summary states. “Those that do not [will] risk leaving behind significant underfunded financial and environmental liabilities—such as cleanup of the tailings ponds.”
The industry’s Pathways Alliance formed more than a year ago amid great fanfare, and now represents 95% of Canada’s tar sands/oil sands production. Its members include Canadian Natural Resources Ltd., Cenovus Energy, Imperial Oil, MEG Energy, Suncor Energy, and ConocoPhillips Canada. The Pembina study “examined the decarbonization promises made by each company in the Pathways Alliance, and compared them with actions the companies are taking to reduce their carbon footprint,” the Globe and Mail notes.
“We need those two things to align,” said Pembina oil and gas director and study co-author Jan Gorski. “If they’re willing to make these commitments, then we need to see the details and the actions to back up those commitments.”
But that’s not what’s happened so far, Gorski and co-author Eyab Al-Aini conclude.
“While the pledges and promises of the Pathways Alliance may give the impression that action on this front is imminent or already under way,” they write, “our analysis here demonstrates that oil sands companies have yet to make the necessary investment decisions—or even release sufficiently detailed project plans, with information about allocation of capital expenditure, timelines, and individual company GHG reduction targets—to provide proper reassurance about the likely pace of decarbonization in the sector.”
Five of the alliance’s six current members first launched their climate initiative last year as the Oil Sands Pathways to Net Zero alliance. They immediately took criticism for a vague, aspirational plan that made no reference to phasing down or phasing out production and ducked responsibility for the 80% of their emissions that occur after their product reaches its end user. Now, Pembina is urging the companies to “avoid any further delay in making investment decisions and transforming their climate promises into reality.”
The report calls on the industry to:
• “Respond constructively” to the federal government’s proposed oil and gas emissions cap, a piece of advice that the country’s biggest fossils have not taken so far [public consultations on the emissions cap close this Friday, so get your comments in today!—Ed.];
• Make some final investment plans on the carbon capture and storage projects they’ve been touting;
• Get more specific on the process improvements, energy efficiency measures, and electrification options the alliance has been talking about as pathways to reduce its members’ production emissions.
But Pathways Alliance representatives told media it’s too soon to expect the industry to weigh in with specific commitments.
“The expectation by the Pembina Institute that Pathways Alliance companies make final investment decisions on these multi-billion-dollar projects before governments have finalized regulatory frameworks to support them is unrealistic,” Alliance President Kendall Dilling told CBC.
“There’s a very active intention to move forward with these projects,” said the Alliance’s VP of external relations, Mark Cameron. “But that is not the same thing as being able to make funding commitments today, not knowing what the conditions are going to be three years from now when it’s actually time to start building.”
But “the heart of the Pathways plan to get to net-zero is carbon capture, utilization, and storage facilities, or CCUS, which force carbon dioxide emissions deep into the ground to keep them out of the atmosphere,” the Globe says. That’s an area where fossils are getting plenty of regulatory certainty—just not the answers they’re looking for.
In the lead-up to the generous CCUS tax credit in this year’s federal budget, Cenovus CEO Alex Pourbaix demanded that taxpayers shell out about $50 billion to help the industry get the technology in place. After months of controversy that included a former federal environment minister speaking out against CCS subsidies, Finance Minister Chrystia Freeland ended up announcing $7.1 billion in subsidies through the end of this decade.
That wasn’t nearly enough for Pourbaix, who told analysts his company would need more lavish federal support to invest in CCS. “These are multi-billion-dollar projects,” he said in late April, just minutes after announcing a seven-fold increase in his company’s first-quarter profit. “And we have to have certainty that they are investable, and that we can manage those investments over the entire commodity price cycle.” Environment and Climate Minister Steven Guilbeault responded a couple of weeks later that there would be no more federal funding for CCUS development.
