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Canadian oil sands compound their image problem

Emission pledges are being rolled back to counter adverse economic conditions, reinforcing a sense the sector is not serious about lowering its carbon footprint

The Canadian oil industry simply cannot shake the ‘dirty oil’ tag. The problem has contributed to an exodus of IOCs from Alberta’s oil sands, a growing financial boycott and opposition to new pipeline projects.

In May, US presidential challenger Joe Biden vowed to kill Canadian midstreamer TC Energy’s 830,000bl/d Keystone XL pipeline project if victorious in November. "I have been against Keystone from the beginning,” Biden told a TV news interview. “It is tar sands that we do not needthat in fact is very, very high pollutant.”

Critics point to rapidly rising greenhouse gas (GHG) emissions from the oil sands industry making it all but impossible for Canada to meet its Paris Agreement pledge to cut emissions by 30pc between 2005 and 2030 without massive offsetslet alone its impact on the federal government’s commitment to reach net-zero emissions by 2050. In contrast, supporters of Alberta’s oil sands industry point to its small share of total global emissions and substantial improvements in GHG emission intensity on a per barrel basis.

By all appearances, major Canadian oil sands producers, such as Suncor Energy, have recently made matters worse for the industry by making substantial cuts to capital spending for projects to mitigate GHG emissions, in response to the latest collapse in crude oil prices.

Emissions versus intensity

According to the Pembina Institute, a Calgary-based environmental group, GHG emissions from the oil sands industry almost quadrupled from 2005 levels to reach 77mn t in 2018 on the back of rapidly rising production. This, in turn, increased the sector’s share of Canadian oil and gas industry emissions by more than three times to 40pc. 

Based on data from government department Environment and Climate Change Canada, GHG emissions from the oil and gas industry increased from 158mn t in 2005 to 193mn t in 2018, a jump of 23pc, whereas total Canadian emissions declined from 730mn t to 729mn t (see Fig. 1). As a result, the oil and gas industry’s share of the Canadian total increased by 5 percentage points, to 27pc, over the period and is now the greatest emission-producing sector in the country, overtaking transport.

"Increases in emissions from the tar sands are undoing all the progress being made in other sectors," says Keith Stewart, senior energy strategist with Greenpeace Canada.

But supporters of the oil sands, such as the Canadian Association of Petroleum Producers, argue Canada’s share of the GHG emissions represents less than 1.5pc of the global total, and the oil sands’ share a mere 0.15pc. In addition, based on Natural Resources Canada data, the average GHG emission intensity of oil sands production declined to 83kg/bl in 2017, almost 15pc less than in 2005. Most major oil sands companies are targeting cutting emissions intensity by 30pc by 2030, with base years ranging between 2014 and 2019. 

Oil sands stumble

However, the recent collapse in oil revenue has caused three of the five largest oil sands producersSuncor, Canadian Natural Resources and Cenovus Energyto cut planned spending on projects to either directly or indirectly reduce GHG emissions by a total of C$1.8bn (US$1.34bn) .

"Increases in emissions from the tar sands are undoing all the progress being made in other sectors" Stewart, Greenpeace Canada

Suncor, the oil sands company with possibly the most enlightened views regarding climate change, surprisingly accounts for the bulk of the capital spending cuts on green projects. The company suspended a C$1.4bn investment on a cogeneration plant at its oil sands Base Plant which would ultimately replace coke-fired boilers with natural gas-powered units. 

This project is supposed to account for about a quarter of the company’s targeted 30pc reduction in GHG emissions intensity between 2014 and 2030, Suncor CEO Mark Little said when construction was given the green light in September 2019. In addition, the company shelved a C$300mn wind power project.

KLP, Norway’s largest pension fund, says these spending cuts by oil sands producers “strengthens[s] our view” that stopping investing in them is the “correct” decision. In October 2019, KLP sold all stocks and bonds in firms that generate at least 5pc of their revenue from oil sands, and in the process added the five largest producersthe three mentioned above plus Imperial Oil and Husky Energyto its investment blacklist.

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