Photo by GARTH LENZ - Stand.earth
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
photo by GARTH LENZ
EXECUTIVE
SUMMARY
Most (70%) oil sands The profit rate of the Big Despite record profits, Reclamation of the oil
production is owned by Five oil sands companies— hefty dividends to sands, conventional oil and
foreign companies and Suncor, CNRL, Cenovus, shareholders and gas wells, and pipelines
shareholders, who enjoy Imperial Oil and Husky skyrocketing pay raises in Alberta will cost an
the majority of record Energy— through the first for oil company CEOs, estimated $260 billion
profits, especially when three quarters of 2019 was subsidies for Canada’s and take as many as 3000
oil prices are low. Foreign 14.2%, almost double the already heavily subsidized years to complete. Past
controlled operational profit Canadian industry average. oil industry have increased experience and growing
doubled from 31.6 to 58.4% by billions of dollars over market risks make it
between 2012 and 2016, 3.5 the last five years. increasing likely that future
times the economy-wide taxpayers will have to foot
average. This allowed the Big Five the bill.
to transfer $8 billion
to their mostly foreign Despite increasing oil
shareholders in the production, technological
first three quarters of improvements, A recent poll indicates
2019, which almost puts modularization of that the vast majority of
them on pace to match construction and an Albertans agree that there
their 2018 total of $11.34 estimated 58% decrease in is a better way forward.
billion. In 2018, the Big capital spending from 2014 Almost 80% of Albertans
Five transferred $6.97 through 2019 led to the believe the province
billion to various levels of termination of 53,000 jobs should transition toward
government in the form of in the Canadian oil and renewable energy, and
taxes, fees, and royalties. gas industry, jobs that are more than 90% think the
never coming back. government needs to do
more to encourage the
technology sector. Perhaps
most surprising, a majority
wants to transition away
Methodology from oil and gas.
This report is based on data from Statistics Canada, oil
companies’ annual and quarterly reports and data obtained
from Bloomberg terminal.
2
1
Recommendations
While we need to Government policy, Canada cannot achieve
acknowledge and address including stimulus money net-zero by 2050 while
the tragic consequences of and industry bailouts, supporting increased
the COVID-19 pandemic, should invest in the future, production of oil and
it’s also clear that the not the past. This includes gas. Future stimulus
“
unprecedented public supporting unemployed oil must support industries
investment needed to and gas and other Canadian and projects that
workers and investing in a
rebuild the Canadian and
Alberta economies is a diversified, clean-energy
decrease greenhouse
gas emissions, increase
I keep trying to see who
once-in-a-generation economy that will provide economic diversification the beneficiaries are….
opportunity to position employment opportunities and provide workers with
Canada to compete and and public services in the retraining opportunities. It is not the people of the
prosper in the twenty-first
century economy.
long-term.
province, because they
are not getting the
royalty return that they
T
INTRODUCTION
he global COVID-19 Even before the world was other studies have revealed should be getting.
pandemic has devastated turned upside down by that the majority of
the global economy and the first global pandemic liabilities, now estimated Premier Peter Lougheed1
plunged the price of oil to in a century, the oil and at $260 billion and rising,
record lows. By April 19, the gas industry in Canada – are not only staying in the At a time when every corner
price of Western Canada despite rising production country but are falling to of the Canadian economy is
Select, Alberta’s benchmark levels – was cutting jobs the taxpayers as companies reeling from the disruption
crude, went negative for and paying less in royalties abandon wells and tailings caused by the COVID-19
the first time ever, and is at while demanding higher and ponds leak into our rivers pandemic and the country
the time of writing selling higher subsidies. For many and waterways. struggles to reign in rising
at $4.23/barrel on the years, industry lobbyists and greenhouse gas emissions
futures market. 2 As a result, spokespeople have argued Canada’s and Alberta’s from the oil and gas sector,
oil sands companies have that increased support and long-term interests are it’s important that we
begun cutting dividends greater subsidies were fair not being served by understand who benefits
and spending, and analysts because we all benefit from governments that prioritize from the expansion of the oil
expect production to be the oil and gas industry. the profits of foreign- and gas industry in Canada
curtailed by as much as While Canada has enjoyed owned corporations and and who is left footing the
25%, potentially causing many benefits of the oil the interests of their bill for clean up.
permanent damage to and gas industry, this shareholders ahead of
reservoirs and jeopardizing investigation reveals that the long-term interests
billions of dollars in assets.3 the majority of profits from of Canada’s workers,
the industry are leaving the environment and economy.
country. Simultaneously,
1
https://thetyee.ca/Opinion/2012/09/17/Radical-Peter-Lougheed/
2
https://oilprice.com/oil-price-charts/
3
“Canada cuts steam-driven oil projects, risking permanent damage.” Reuters, April 19, 2020.
https://www.reuters.com/article/global-oil-canada/canada-cuts-steam-driven-oil-projects
-risking-permanent-damage-idUSL1N2C4050 2
Majority of the Oil Sands
is Foreign Owned
Most oil sands production is not owned by Canadians.
Ten of the 14 publicly traded
companies invested in the oil sands Although several major international American interests own more than
are headquartered in Canada, but oil companies (IOCs) have pulled $30 52% of oil sands production, more
only two of those are majority billion out of the oil sands over the than twice Canadian shareholders and
owned by Canadians: Athabasca Oil last five years, foreign ownership of oil more than all other non-US investors
Corporation (89%) and Pengrowth sands production still tops 70%. This combined. If any one group is calling
Energy (91%). Together they account is because of increased investment the shots in Alberta and profiting
for just 1.5% (50,000 bpd) of oil by Chinese national oil companies, from the rapid liquidation of our
sands production. Average Canadian which now control 5.2% of oil sands bitumen, it’s American investors.
ownership of the other eight production, 3.5 times more than
“Canadian” companies is just 18.8%. 4 majority Canadian-owned companies.
barrels Per Day
% of Canadian Shares % of Non Canadian Shares (bpd)
PetroChina
BENEFITING?
2 98 35,000
Company Ltd
ConocoPhillips 3 97 150,000
Husky Energy 3 97 80,000
CNOOC 3 97 72,000
Sinopec 3 97 33862.5
Connacher 3 97 20,000
Oil & Gas
WHO IS
Imperial Oil 6 94 400,000
Cenovus Energy 28 72 390,000
MEG Energy 31 69 80,000
Suncor Energy 34 66 985,275
Canadian Natural 45 55 826,500
Resources Limited
Athabasca Oil Corp 89 11 32,000
Pengrowth Energy 91 9 18,000
Data from Statistics Canada, “Foreign-controlled enterprises in Canada”:
3
4
https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=3310003301
Foreign
Investers Enjoy
Record Profits
Foreign shareholders own almost
half (44%) of the $645 billion in
oil sands assets, 2.7 times the
economy-wide average. While
Canadian control of total operating
revenues has increased from
51.5% in 2012 to 59.9% in 2016, the
percentage of total operational profit
has decreased from 68.4% to 41.6%
over the same period. At the same
time, foreign controlled operational
profit has nearly doubled, from 31.6%
photo by GARTH LENZ
in 2012 to 58.4% in 2016—3.5 times
the economy-wide average. Which
means more and more of the profit is
being sent out of Canada.
BENEFITING?
Extraordinary
Profits for the
Big Foreign Five
A small number of large, integrated 2018 annual total of $140 billion by profit margin for all industries in
WHO IS
oil companies dominate oil sands the end of the year; their aggregate Canada in 2016 was 7.8%, which
production and upgrading. In early net earnings were $15 billion, more makes these firms extraordinarily
2019, the Big Five—Suncor, CNRL, than double their entire 2018 total, profitable.
Cenovus, Imperial Oil and Husky and their assets were worth more
Energy—were all majority owned than $286 billion, almost as much This allowed the Big Five to transfer
by foreign investors. Together, as Alberta’s average annual gross $8 billion to their mostly foreign
they control approximately 60% domestic product (about $300 shareholders in the first three
of bitumen production and 90% of billion). quarters of 2019, which almost puts
bitumen upgrading capacity.5 them on pace to match their 2018
The average profit rate for the Big total of $11.34 billion. By comparison,
Through the end of September 2019, Five through the first three quarters in 2018, the Big Five transferred
the Big Five’s aggregate revenue was of 2019 was 14.2 percent, with Suncor $6.97 billion to various levels of
$105 billion, on pace to match their and CNRL earning profits of 17.8%, government in the form of taxes,
and 26.7%, respectively. The average fees, and royalties.
4
5
Data on the Big Five was sourced from their 2018 annual reports, 2019 third quarter reports and each
firm’s annual Extractive Sector Transparency Measures Act (ESTMA) disclosures.
Increasing Subsidies
Fuel Record Profits
Despite record profits, increasing
dividends to shareholders, and
skyrocketing pay raises for oil
company CEOs,6 subsidies for
Canada’s oil industry have
continued to increase.
In 2014, the last time the Saudis
and their OPEC partners increased
production and brought the global
price of oil to below US$50/barrel,
Canadian and Alberta governments
responded by increasing subsidies,
tax breaks and handouts for the oil
BENEFITING?
sector. This is an industry that was
already subsidized to the total of $3.3
billion a year by Canadian taxpayers.
When oil prices fell again, in 2016
and 2018, the federal government
not only gave Alberta oil producers
a $1.6-billion bailout package, they
WHO IS
also spent $4.5 billion buying the
Trans Mountain pipeline, an expan-
sion project now estimated to cost
taxpayers over $16 billion.
photo by GARTH LENZ
In 2019, amid a budget crisis for
the ages, the Alberta government
reduced its corporate tax rate from 12
to 8%, a boon that will reward the Big
Five oil sands companies a $4.3 billion
through 2022.7
6
“Canada’s biggest energy companies raised executive pay and bonuses in 2019.” Globe and Mail, April 10, 2020.
https://www.theglobeandmail.com/business/article-canadas-biggest-energy-companies-raised-executive-pay-and-bonuses-in/
Data from companies’ second quarterly in 2019, as reported by Press Progress: https://pressprogress.ca/ucps-corporate-tax-cut-
5
7
likely-to-let-five-companies-alone-reduce-public-revenues-4-3-billion/
Future
Generations
of Taxpayers
The Alberta Numerous financial
experts have warned that
system for monitoring
liabilities,11 and Premier
Workforce international action on
climate change, ever-cheaper
Kenney just provided an
additional $100 million
clean-energy alternatives, loan to the Alberta Orphan
The economic downturn 53,000 jobs in the and increasing market risks Well Association, which
could see unemployment Canadian oil and gas for dirty hydrocarbons will now totals $335 million.
in Alberta reach as high industry. Because soon turn once profitable In a bid to employ laid-off
as 25%, but the crisis was overall productivity per energy projects into workers, clean up orphaned
WHO DOESN’T
well underway before the employee has increased stranded assets that could wells, and reduce methane
COVID-19 crisis began. dramatically, these lost leave behind billions of emissions, the federal
jobs are not coming dollars in environmental government recently
The oil and gas industry back.9 liabilities. announced what amounts
is one of the most capital to a further $2.4 billion
intensive sectors in the Even the Alberta Reclamation of the oil sands, subsidy to the oil and gas
world. While well-paid government tax cuts conventional oil and gas industry,12 more evidence
employment opportunities haven’t halted the wells and pipelines in Alberta that once foreign oil
BENEFIT?
skyrocketed during the shedding of oil industry companies walk
will cost an estimated $260
oil sands’ growth phase jobs. Soon after receiving away, future genera-
billion and take as many as
(2000-2018), there will be $233 million from the tax tions of taxpayers
3000 years to complete,
far fewer jobs available in breaks, Husky Energy laid $200 billion more than what will have to pay to
the future.8 off hundreds of workers; clean up the mess
has been publicly acknowl-
Encana, a Canadian fossil they left behind.
However, technological edged.10 Cleaning up the
fuel giant, took a $55
improvements, modulari- mess left behind in the oil
million cut from Premier
zation of construction sands, including some of the
Kenney before relocating
and an estimated 58% largest tailings ponds in the
to the United States.
decrease in capital world, accounts for half this
spending from 2014 cost.
through 2019 led to
Alberta has collected only
the termination of
$1.6 billion in security funds
because of a deeply flawed
8
Based on data from Petroleum Labour Market Information: https://
careersinoilandgas.com/what-is-lmi/labour-outlook/
9
Hussey, Ian. “THe Future of Alberta’s OIl Sands Industry.” 2019. Parkland Institute.
https://www.parklandinstitute.ca/the_future_of_albertas_oil_sands_industry.
Rob Wadsworth, vice-president of closure and liability,
10
Alberta Energy Regulator, as reported widely in November 2019.
Ibid.
11
“Orphan wells cleanup funding 'a subsidy to industry,' says Alberta farmer.”
12
CBC. April 17, 2020. https://www.cbc.ca/radio/asithappens/as-it-happens-friday-
edition-1.5536035/orphan-wells-cleanup-funding-a-subsidy-to-industry-says-alberta-
farmer-1.5536478.
photo by MARC BRUXELLE via shutterstock
6
CONCLUSION:
The Oil Sands are no longer
in our National Interest.
Alberta’s oil and gas industry has Alberta’s and Canada’s workforce,
always been a roller coaster, but its environment and economy. While we
future is more uncertain than ever. need to acknowledge and address the
Even before the COVID-19 pandemic tragic consequences of the COVID-19
disrupted the global economy, pandemic, it’s also clear that the
twenty-first century market forces unprecedented public investment
were enticing an increasing number A recent poll indicates
needed to rebuild the Canadian and
that the vast majority of
of corporations, investment funds Alberta economies is a once-in-a-
Albertans agree there is a
and insurance companies to pull out generation opportunity to position better way.
of the oil sands, and the Big Five was Canada to compete and prosper in the
squeezing costs and slowing down twenty-first century economy. Almost 80% of Albertans
investment. A growing number of believe the province should
energy analysts agree that the current Government policy, including stimulus transition toward renewable
economic crisis will permanently money and industry bailouts, should energy, and more than 90%
reshape the Alberta economy. invest in the future, not the past. This think the government needs
includes supporting unemployed oil to do more to encourage
In response, the Alberta government and gas and other Canadian workers the technology sector.
continues to ignore the market realities and investing in a diversified, clean- Perhaps most
of a warming world by propping up the energy economy that will provide surprising, a
oil industry with policies that reward majority wants
employment opportunities and public
to transition
foreign-owned oil companies and services in the long-term. Canada away from
foreign investors and demonize citizens cannot achieve net-zero by 2050 while
oil and gas.
who advocate for a better long- supporting increased production of oil
term future based on clean energy, and gas. Future stimulus must continue
responsible climate policy, and greater to support industries and projects that
support for unemployed workers. decrease greenhouse gas emissions,
increase economic diversification
It’s time to stop prioritizing the and provide workers with retraining
profits of foreign-owned corporations opportunities.
and the interests of their shareholders
ahead of the long-term health of
“CBC News poll: Why the economic crisis could speed up transition to renewable energy.” CBC, April 16, 2020.
7
13
https://www.cbc.ca/news/canada/calgary/cbc-news-poll-energy-transition-support-1.5533036
photo by GARTH LENZdesigned and illustrated by JASMINE SALLAY-CARRINGTON
You can also read
