A recent study shows this problem might be a lot worse than the oil industry has let on. The study, which used aircraft to measure emissions from Alberta’s oil sands industry, found that pollution was actually 1,900% to 6,300% more than previous measurements that, the authors contend, were “severely” underestimated. The study measured chemicals known as volatile organic compounds (VOCs), as well as semi-volatile organic compounds, which are both generated through the extraction of bitumen.

“These findings validate what Indigenous communities have been saying for decades: the air is making them sick,” said Keith Stewart, a senior energy strategist with Greenpeace Canada. “Alongside the oil company’s own workers, who are bearing the initial brunt of these truly astonishing levels of toxic pollution, Indigenous communities are paying the price of turning large chunks of northern Alberta into a sacrifice zone. No one should accept this as inevitable, because it’s not.”

These findings validate what Indigenous communities have been saying for decades: the air is making them sick.

 

– Keith Stewart, Greenpeace Canada

The study, conducted by researchers at Environment and Climate Change Canada and Yale University, found that the methods used by the oil industry to record emission levels failed to account for certain organic compounds. Typically, the oil industry measures its emissions using ground-based methods, but researchers claim that their “top-down” approach is capturing a more holistic picture of what polluters are actually emitting.

“Work over the last 15 years or so has continually shown that there’s more going into the air from the oil sands than is being officially recorded,” Jeffrey Brook, an air quality expert and professor at the University of Toronto, told CBC News.

Researchers collected the data in 2018 from 17 different sites in Alberta’s Athabasca region. The study is the latest investigation to show that emissions are worse than what are being officially reported by Alberta’s oil industry. Last year, a similar study suggested that the oil sands could be spewing 31 million tonnes more of carbon dioxide into the atmosphere every year than what the industry is reporting.

“You can’t know what you’re missing and how important what you’re missing is until you go out and measure it, and that’s the point of this paper,” John Liggio, a co-author of the recent study, told CBC.

The Pathways Alliance – which includes Canadian Natural Resources Limited, Cenovus Energy, ConocoPhillips Canada, Imperial, MEG Energy and Suncor Energy – has questioned the validity of using aircraft to measure emissions in the past, arguing that its methods follow international standards. But Pathways spokesperson Mark Cameron said that the disparity between the oil industry’s numbers and those in the latest study that analyzed VOCs “warrant further review.”

Stewart said that if the oil industry’s reporting methods have followed the rules, then “the rules need to change.”

“This study has highlighted the urgent need to strictly enforce tough new air pollution regulations, as part of a just transition from an economy based on fossil fuels to one rooted in the wise use of renewable energy,” he said.

The post Is pollution from Alberta’s oil sands way worse than the industry has let on? appeared first on Corporate Knights.

“Your hot water, computer, washer and dryer, electric car, TV, lights, mobile phone, stove, your heat in minus 30. The things Canadians count on won’t work when needed,” warned the radio, television, web and social media ads, which targeted Alberta, Ontario, Nova Scotia and New Brunswick. “The cost of achieving a net-zero grid by 2035 will leave our power grid dependent on intermittent and unreliable sources like solar and wind.”

“No one wants to freeze in the dark,” read mobile-truck-borne billboards circling Parliament Hill in Ottawa in late September.

The Alberta government wants to push Ottawa’s net-zero target date for decarbonizing its grid from 2035 to 2050, arguing that Ottawa’s haste will triple or quadruple electricity rates. The five-week, $8-million “Tell the Feds” campaign urged Canadians to protest the federal proposals during a public comment period on net-zero rules.

Premier Danielle Smith’s Alberta government may be determined to drag out its hydrocarbon economy as long as it can, but sowing misinformation across Canada is a new kind of crude. The ads reflect the premier’s paranoia about decarbonizing – and ignore new technologies, such as more efficient power systems, heat pumps and energy-storage innovations (see Hero) that will significantly reduce electrical utilities’ dependence on oil and gas without intermittency issues.

Environmental researchers Sara Hastings-Simon and Jason Dion wrote a piece in the Edmonton Journal arguing that the campaign’s central claims don’t stand up to scrutiny: “The regulations would allow newer gas plants to continue serving the grid for a period well beyond 2035 without constraint.” University of Calgary law professor Martin Olszynski called the campaign “a thinly disguised attempt to enlist ordinary Canadians in Alberta’s unyielding service to the fossil fuel industry.”

The public also pushed back. So many complained about the ads that one Toronto radio station, JAZZ.FM91, pulled them off the air.

Alberta’s PR blitz may just have been setting the stage for Smith’s next act. In late November, she challenged the proposed federal standards by invoking the Alberta Sovereignty Act – the first piece of legislation her government passed, in December 2022. The move allows Alberta legislators to review the constitutionality of the federal rules, and then possibly set them aside. But experts say Alberta’s new law itself could be unconstitutional – news that no one needs to tell the feds.

The post Zero: Alberta’s fearmongering media blitz to try to delay federal climate action appeared first on Corporate Knights.

But the financing needs and expansion plans of oil and gas companies are incompatible with CPPIB’s mandate to ensure Canadians’ retirement security by investing “with a view to achieving a maximum rate of return without undue risk of loss.”

It should be obvious that achieving this mandate is dependent on stabilizing global temperatures at relatively safe levels. Canadians require a livable planet on which to retire, and climate scientists and energy modellers are clear that limiting global temperature increase to 1.5℃ and avoiding catastrophic impacts to our ecosystems, economy and financial system requires fossil fuels to be rapidly phased down.

This creates a difficult test for our national pension manager. CPPIB needs to tamp down the Alberta government’s efforts to upend Canada’s retirement fund and reassure Albertans that it provides value for money by delivering superior pension returns. At the same time, CPPIB must acknowledge the dire warnings of climate scientists and navigate the accelerating global market forces that are deterring institutional investors from investing in fossil fuels, of which Alberta is a major producer.

CPPIB appears to have flunked this test.

By caving to Premier Smith’s grievance politics and telling Calgary’s business community that CPPIB will continue to accept undue risk of loss in order to prop up an industry facing inevitable decline, Graham undermined the notion that CPPIB is a prudent arm’s-length pension manager that sits above politics.

He also signalled to Canadians that CPPIB is unwilling to make the difficult but necessary decisions to limit the exposure of the Canada Pension Plan (CPP) to increasingly high-risk fossil fuels.

Graham’s Calgary speech came just weeks after the International Energy Agency published its authoritative World Energy Outlook, which sees global demand for all fossil fuels peaking before 2030, under all scenarios, even if governments neglect to further strengthen and accelerate policies to reduce greenhouse gas emissions in line with climate goals.

By pledging to grow its portfolio of oil and gas assets, CPPIB is making an alarming bet on the world failing to limit global heating to safe levels, putting the CPP at risk from an accelerating energy transition and our retirement security at risk from catastrophic climate change. It’s almost as if CPPIB doesn’t understand that every 10th of a degree of temperature increase makes a livable planet less and less achievable.

Graham said in his Calgary speech that CPPIB holds $6 billion in assets in Alberta’s oil and gas industry, whose emissions continue to increase, putting Canada’s climate targets out of reach. He shared the stage with Teine Energy and Wolf Midstream, two Alberta-based fossil fuel companies owned by CPPIB – neither of which have committed to net-zero emissions.

CPPIB’s reluctance to acknowledge the need to phase out fossil fuels might also be influenced by the oil and gas interests prominently represented on its board. Four of the fund’s 12 directors are concurrently directors or executives of fossil fuel companies, including Kiwetinohk Energy, a Calgary-based natural gas producer and gas plant operator; Capital Power, an Edmonton-headquartered gas plant operator; Domo Gasoline, a western Canadian gasoline retailer; and Wajax Corp, an oil sands equipment and services provider. In case CPPIB needs a direct line to the oil and gas lobby, the president and CEO of the Canadian Association of Petroleum Producers is a former CPPIB executive based in Calgary.

Graham claimed that “some of the most responsibly produced conventional energy in the world is in Western Canada.” This is a fictitious line we expect to hear from oil lobbyists but shouldn’t hear from a prudent pension manager.

Greenhouse gas emissions from a barrel of Canadian oil are among the highest in the world compared with other producers. Studies estimate that methane emissions from Canada’s oil and gas sector are at least 1.5 times higher than reported, and in some cases 15 times higher. Recent research from the University of Calgary concludes that Alberta’s inactive and orphaned oil-and-gas-well problem is “an immense environmental and financial crisis” that could cost between $60 and $120 billion to address. Meanwhile, oil sands companies continue to leak toxic tailings into Alberta waterways with near impunity, contaminating ecosystems and exposing downstream Indigenous communities to harmful chemicals. The Alberta Energy Regulator is widely seen to be captured by the oil and gas industry it’s supposed to regulate.

Graham’s speech also included dubious statements about divestment and the pace of transition away from fossil fuels, claiming that the “global investment community has also changed its tune when it comes to fossil fuel divestment.” Similarly, CPPIB’s chief sustainability officer wrote in CPPIB’s 2023 Report on Sustainable Investing that “consensus has consolidated around the belief that the financial system should be empowered to finance the transition to a low-carbon future rather than mobilized to pursue a divestment agenda.”

This “consensus” is imaginary. The financial system must be aligned with a zero-carbon future, and many investors have stopped pretending that it’s possible to finance the decarbonization of fossil fuels. The only credible pathway to zero emissions for oil, gas and coal companies is to phase out production.

Already, investors with nearly US$41 trillion in assets have at least a partial investment exclusion on fossil fuels. In Canada, the Caisse de dépôt et placement du Québec (CDPQ) divested its oil and coal assets in 2022, while Ontario’s University Pension Plan,  OMERS (the Ontario Municipal Employees Retirement System), HOOPP (Healthcare of Ontario Pension Plan), and IMCO (Investment Management Corporation of Ontario) all announced partial exclusions on investments in fossil fuels in the last year. Globally, some of the biggest pension funds in the world exclude fossil fuels from their portfolios, including Europe’s largest pension fund, ABP, the U.K.’s largest workplace pension scheme, Nest, and the U.S.’s fourth-largest pension fund, the New York State Common Retirement Fund.

There are clear financial reasons that global capital continues to flee the oil and gas sector, particularly Alberta’s oil sands. The industry is facing terminal decline, with billions of dollars of oil and gas assets set to become stranded if Canada and the world are to achieve their climate targets. CPPIB is behaving irresponsibly by pretending that Alberta can extract, refine and burn these assets, when an honest conversation is needed about supporting Albertan communities and workers through the transition away from fossil fuels.

CPPIB CEO John Graham’s response to Premier Smith’s Alberta Pension Plan gambit is entirely predictable. But in telling the world that CPPIB will continue to prop up high-risk oil and gas companies whose business model is fundamentally incompatible with a livable future, Graham must ask himself: is CPPIB behaving like a prudent arm’s-length pension manager investing in the best interests of 21 million Canadians or a cheerleader for an oil and gas industry facing inevitable, structural decline?

It’s impossible for CPPIB to be both.

Patrick DeRochie is the senior manager for Shift Action for Pension Wealth and Planet Health, a charitable project that tracks the fossil fuel investments and climate policies of Canadian pension funds and that mobilizes beneficiaries to engage their pension managers on the climate crisis.

The post Canada’s pension plan shouldn’t be a cheerleader for Alberta’s oil and gas industry appeared first on Corporate Knights.

While this move will not be popular among environmentalists, I expect it will please some investors, who would like to wring as much money as possible from these fossil fuel assets before they become stranded. 

Kruger’s walk-back away from clean energy comes after the CEOs of Shell and BP made similar moves. The former Imperial Oil CEO came out of retirement in May only to steer the company “back to being a good old-fashioned oil company,” as Western Standard noted. Suncor had already divested from solar and wind assets last year, reportedly to focus on hydrogen and renewable fuels. Now Kruger has made it clear that the company is returning to its oil sands roots. 

Why the change in tune? The fickle price of oil.  

A few years ago, when Western Canadian Select was trading at US$12 per barrel, oil companies were professing their commitment to clean energy; now it’s at US$56, down from a high of more than US$100 last June.  

It’s hard to find anyone willing to bet serious money that high oil prices will persist as a decadal trend – there are too many forces of disruption dampening long-term structural demand for oil. Given the situation, an oil company has two choices: it can focus on fundamentals, juice profits to the max and give the money to shareholders as the company disappears into the sunset, or it can leverage its various forms of capital to plow these proceeds from old energy into the new energy that will dominate the near future, reinventing itself to own and thrive in the low– carbon future. 

Not that long ago, this is exactly what Mark Little (the CEO of Suncor at the time), was calling for, noting in an article he co-wrote for Corporate Knights that making advanced materials (including lightweight carbon fibres) from the rich feedstock that is bitumen could “quadruple the revenue from Alberta’s current bitumen output.” 

With Big Oil incumbents bailing on clean energy, it will be up to other sectors and entrepreneurs to accelerate the energy transition and reap the rewards of leading the low– carbon economy, one that’s already rivalling – and will soon dwarf – fossil fuels.  

Let’s cheer them on and let’s stop wasting time by giving Big Oil a seat at the tables where we make important decisions about our future, starting with the COP28 climate summit in Dubai in November. More than 600 oil and gas lobbyists registered for last fall’s summit. 

It’s bad enough that this year’s summit is being chaired by an oil company executive. Let’s at least keep the rest of the dinosaurs out.  

The post Suncor is turning its back on a clean energy future; let’s turn our backs on them appeared first on Corporate Knights.

“Public companies are selling off their most polluting assets in an effort to green their balance sheets,” says Paul Finch, treasurer of the British Columbia General Employees’ Union (BCGEU). “But little changes for the climate as these often older, dirtier and riskier investments have merely moved into the hands of private equity firms.”

Private equity investments in oil and gas have grown in the last decade. Between 2010 and 2021, private equity firms invested at least $1.1 trillion into global energy assets, with the vast majority in fossil fuels, according to data from PitchBook, an investment tracking service, and a report by the Private Equity Stakeholder Project (PESP), a private equity watchdog group.

What concerns the union and climate-oriented investors is the opaque nature of private equity. Private equity is exempt from most of the public disclosure rules for companies listed on public stock exchanges and funds offering investments to the public. This lack of transparency makes it difficult for stakeholders to hold these companies accountable for their environmental and social impacts.

“As oil and gas companies transition their strategies and portfolios and large banks reduce their fossil fuel investments, many private equity firms are standing by, ready to buy up bargain, heavy carbon-emitting assets and move them away from the scrutiny of courts, shareholders and environmental groups,” said Neil Segel, owner of Houston-based NES Consulting, in a report in January.

The 80,000-member BCGEU is hoping to bring attention to the issue by filing shareholder resolutions this spring with Brookfield Asset Management, one of the world’s largest investment management companies, and Royal Bank of Canada (RBC), the country’s largest bank. The two companies represent major BCGEU investments from the union’s strike fund.

Brookfield AGM

The BCGEU resolution, which will be heard at Brookfield’s annual meeting June 10, calls on the massive conglomerate to require two of its affiliated companies with large private equity holdings to set and disclose CO2-emission reduction targets for 2025. In a statement supporting the resolution, BCGEU recommends that the affiliated companies, Brookfield Business Partners and Brookfield Infrastructure Partners, reduce their portfolio emissions by 22% to 32% between 2020 and 2025, a target in keeping with the UN-backed Net-Zero Asset Owner Alliance.

The resolution received support from Glass Lewis, an influential shareholder advisory firm, which recommends that investors vote in favour. Glass Lewis argues that the recommended emission cuts are flexible and in line with the CO2 goals of the parent company, and there would be no undue burden on the affiliated companies to follow suit.

Interest in the resolution should  be strong since the company’s vice-chair and head of transition investing is Mark Carney, the former governor of the Bank of England (and Canada), who also sits as the United Nations special envoy for climate action and finance. In his UN role, Carney established the Glasgow Financial Alliance for Net Zero (GFANZ), which has attracted financial signatories controlling $130 trillion in assets. Brookfield, which holds nearly $700 billion in public and private assets, has joined the alliance through the Net Zero Asset Managers (NZAM) initiative, GFANZ’s asset manager subgroup.

While Brookfield’s renewable energy subsidiary is one of the world’s largest hydro, wind and solar companies (disclosure: I have a holding in this firm, Brookfield Renewable Partners), the company’s private equity affiliates hold significant fossil fuel assets. Last year, for example, Brookfield Infrastructure took over Inter Pipeline, Canada’s fourth-largest oil and gas pipeline operator, in an $8-billion privatization deal.

In response to BCGEU’s proposal, Brookfield argues it’s not necessary for the company to separately set emission targets for its infrastructure and business partner units since it is working on a 2030 emissions-reduction plan for all of its holdings under its NZAM commitment.

The company acknowledges, however, that it doesn’t have full operational control of all its assets. In some of its units, such as renewable power, Brookfield operates generating stations and has control over its emissions. But in other units, such as infrastructure and business partners, it operates as an investor through its private equity agreements, delegating control over emissions and operations to other companies. “We are initially focusing our net zero efforts on investments where we have control,” says Brookfield.

More RBC scrutiny

BCGEU filed a related resolution with RBC calling on the bank to stop any new lending, financing or advisory services to private equity firms purchasing coal, oil or gas assets. These services are critical in facilitating private equity buyouts since equity owners usually depend on large amounts of debt to reduce the equity they need to commit.

In its response, RBC argued that the proposed limitations “will not meaningfully contribute to achieving carbon reduction goals” and could potentially limit the path to net-zero by hampering useful transition projects. The resolution, heard at the April 7 RBC annual meeting, received 6.8% of the shareholder vote, low but not unusual for a first-time resolution at a major bank.

KKR’s case

In Canada, one of the most active fossil fuel private equity players has been KKR, also known as Kohlberg Kravis Roberts & Co., a significant investor in the expansion of Canada’s natural gas industry. KKR is perhaps best known for its $25-billion buyout of food and tobacco company RJR Nabisco in 1988, made famous by the book Barbarians at the Gate.

Among KKR’s Canadian investments is the controversial Coastal GasLink pipeline, taken over from publicly listed TC Energy in 2019 by KKR and Alberta Investment Management Corporation (AIMCO), the Alberta crown corporation that manages the province’s public pension funds. The 670-kilometre pipeline is slated to deliver natural gas for Asian markets from northern B.C. to the LNG (liquefied natural gas) Canada facility now being built in Kitimat, B.C. The pipeline is under construction through the unceded territories of the Wet’suwet’en First Nation and has been vigorously opposed by its hereditary chiefs.

KKR was also involved in a more recent deal with publicly owned Pembina Pipeline to form a new company to own and operate its gas-processing assets in northeastern B.C., a region with significant gas reserves. RBC was the leading banker in both deals.

With the recent launch of a $17-billion global infrastructure fund, KKR seems to be shifting its attention to the energy transition. Yet, like Brookfield and BlackRock, another major private equity manager, it’s not clear how KKR balances its emission reduction targets with its Canadian and global gas expansion.

“An investment in a gas pipeline should be explained,” Lisa Sachs, director of Columbia University’s Center on Sustainable Investment, told Bloomberg. “When you’re making a bid for a major gas pipeline, one should explain how that’s consistent with the commitments and consistent with a net-zero future.”

Canadian oil

While there is significant private equity interest in gas pipelines, private equity investors appear to be avoiding new oil company investments. This isn’t surprising given the huge run-up in oil share prices last year and especially in the last few months since Russia’s invasion of Ukraine. But this hasn’t stopped private equity altogether from investing in Canadian oil, as we saw from the recent shareholder campaign by activist investor Elliott Investment Management against Suncor, a major oil sands producer.

Elliott says it supports Suncor’s plans to reduce its carbon emissions, but the firm’s history shows it hasn’t backed major carbon-reduction plans at other companies. Like private equity firms in the gas industry, it’s difficult to know where Elliott stands on the carbon future of Suncor, one of Canada’s largest CO2 emitters.

Tzeporah Berman, chair of the Fossil Fuel Non-Proliferation Treaty, has argued that what’s needed are “just and equitable buyouts that permanently retire those assets without propping up fossil fuel companies or pushing the cost of environmental liabilities onto taxpayers.”

But this will take time. In the interim, Finch says he hopes the union’s shareholder proposals with Brookfield and RBC will shed light on private equity’s lack of transparency.

“We are in the age of stakeholder capitalism, but that concept is difficult to apply to private equity firms because of their lack of disclosure,” he says.

Eugene Ellmen writes on sustainable business and finance.

The post The murky world of private equity takeovers of Canadian oil and gas appeared first on Corporate Knights.

Canadian energy workers see the writing on the wall: they know that Canada’s economy is changing and that fossil-fuel-dependent jobs are vanishing. Iron & Earth was founded by and for fossil fuel workers. Last month, our organization released an Abacus Data poll showing that more than two-thirds of fossil fuel workers believe Canada needs to address climate change, and 61% believe Canada needs to pivot to a net-zero economy.

We were encouraged that the federal government launched an engagement process this summer asking Canadians “how the Government of Canada can ensure a just and equitable transition to a low-carbon future for workers and their communities.” That Just Transition program could offer an opportunity to build a better future for energy workers and all Canadians if the federal government follows through and implements what workers need to thrive in the net-zero economy.

We welcome the platform promise announced by the Trudeau government in late August of a $2-billion investment towards making the just transition a reality, and hope that all political parties vying for office will also commit funding to taking Canada forward into a net-zero economy. Iron & Earth is calling for a $61-billion federal investment in Canada’s just transition. It might seem like a big-ticket item, but that’s the scale needed for Canada’s energy future to be inclusive and viable – to help fossil fuel workers, their families and communities across Canada prosper in the transition to a net-zero economy, and to ensure that no one is left behind. 

Iron & Earth’s recently released Prosperous Transition Plan provides a blueprint for how to get there. We outline essential steps for the federal government to achieve net-zero by 2050 – steps that are backed by five years of consultations, interviews, surveys and Canada-wide polls with fossil fuel industry and Indigenous workers. 

Here’s how more than 80% of fossil fuel workers believe the federal government should invest $61 billion to build a just transition. All political parties vying for federal office need to embrace this platform: 

• Support upskilling of more than one million workers. Our recent poll shows that fossil fuel workers have the desire to work in the net-zero economy, and they have the core technical foundation. But they need training – and without a strong and capable workforce, it will be impossible for Canada to rise to the challenge of the economic transformation that must begin now. Federal investment: $10 billion over 10 years to support rapid upskilling of more than one million workers at a cost of $10,000 per trainee.
• Enable rapid refocusing and repositioning of 10,000 Canadian enterprises to meet the emerging demand in net-zero industries. Help pivot Canadian businesses to participate in a net-zero carbon economy while supporting supply-chain retooling of manufacturing, critical material extraction and materials-processing capabilities. Support the retool and upgrade of business facilities to extend production capability, and support contractors, consultants and service providers so they can position themselves competitively in the net-zero economy. Federal investment: $20 billion over 10 years to support the rapid repositioning of 10,000 Canadian enterprises.
• Promote retrofitting and repurposing initiatives to reduce the carbon intensity for long-term infrastructure. Oil and gas pipelines can be repurposed to extract resources like helium and lithium, and aging or decommissioned infrastructure, such as abandoned and orphaned drill-wells across Canada, for solar energy projects, enabling the use of otherwise fallow land and focusing on the remediation of inactive wells. Federal investment: $10-billion equivalent in the form of incentives and tax offsets, with green strings to carbon-intensive industries investing in net-zero technologies.
• Prioritize nature-based solutions. These projects – ranging from forest protection and restoration initiatives, to incorporating natural ecosystems into industrial operations – have the potential to simultaneously address social challenges while building resilience into the economy and revitalizing ecosystems. Federal investment: $22 billion over 10 years to prioritize developing green infrastructure, expanding carbon sinks and revitalizing ecosystems and biodiversity. 

Each of these are interconnected processes, and they must happen simultaneously if they are going to be successful. We can’t have a thriving net-zero economy without a workforce trained to work in net-zero jobs. But workers won’t be inspired to (re)train unless they know there are jobs available after their retraining is complete. 

Transforming our economy to one powered by low- or zero-emission energy sources will require significant investment. But it will be money well spent to ensure Canada remains a competitive energy economy while meeting our international obligations to mitigate climate change. As August’s landmark Intergovernmental Panel on Climate Change report on the impacts of carbon emissions shows, we can still limit warming to 1.5°C – but we need to act urgently. As economies around the world embrace emission-reduction technology, Canada risks being left behind unless we transition rapidly and at a massive scale.

The time for transition is now, and as our poll shows, fossil fuel workers are ready to mobilize – the majority believe Canada should pivot to a net-zero economy. 

As former fossil fuel workers ourselves, we know change can be challenging and nerve-wracking, but we have reasons for optimism. The transition to net-zero will deliver a new and exciting future with fulfilling jobs no longer tied to boom-bust cycles.

Canada has the technologies, the people and the skills to thrive in a net-zero world. Now we need bold, multi-party action from the government, not simply to weather the storm, but to get ahead of it by creating effective policies and delivering the investment funds needed to create hundreds of thousands of well-paid, stable and durable jobs. Canada’s energy workers have spoken. Let’s hope the next federal government listens. 

Luisa Da Silva is the executive director of Iron & Earth. Bruce Wilson is chair of the board of Iron & Earth.

The post Most oil patch workers believe Canada needs to pivot to a net-zero economy appeared first on Corporate Knights.

Alberta Innovates – a Crown agency – says the biggest opportunity lies in the production of carbon fibre, a high-strength material that can be used in wind turbines, automotive applications and the aerospace industry. The agency has launched a $15-million “Grand Challenge” in which 20 laboratories around the world are participating in research to commercialize the production of carbon fibre from the heavy asphaltenes contained in bitumen, in the so-called bottom of the barrel.

“We are finding new ways to use bitumen not as transportation fuel but as value-added non-combustion materials that are worth more than transportation fuel but with a low GHG emissions – products like carbon fibre,” said John Zhou, vice-president of clean resources at Alberta Innovates.

Zhou participated Wednesday in a virtual roundtable hosted by Corporate Knights and the German embassy in Canada, part of a series on rebuilding a cleaner, more sustainable economy as we recover from the COVID-19 pandemic.

He said that while technological challenges remain “very, very significant” to a commercializing bitumen-derived carbon fibre industry, progress is being made.

There are skeptics, however. Wolfgang Seeliger heads up Leichtbau BW, a German consortium of companies developing and deploying lightweight materials that reduce costs and greenhouse gas emissions in transportation and industrial processes. He said that carbon fibre production cannot compete with other lightweight materials on either cost or environmental footprint, noting that it takes more energy to produce auto parts from carbon fibre, for example, than is saved by the use of the lighter material.

Alberta Innovates estimates that diverting 30% of oil-sands production to industrial uses would reduce GHG emissions by 126 megatonnes (Mt) a year. That’s because the carbon from the thick, asphalt-like component of the bitumen would be locked in the industrial material, rather than combusted as transportation fuel or petroleum coke.

It also estimates the industry could earn $84 billion by 2030 from those industrial markets – including $44 billion from carbon fibres – while reaping $27 billion from the sale of the remaining crude.

However, the “bitumen beyond combustion” strategy would not lower emissions from oil-sands extraction and processing in Alberta. The sector currently produces more than three million barrels per day. It accounted for 77 Mt of GHG emissions in 2018, or 10.5% of the country’s total.

Canada has pledged to reduce GHGs by 30% from 2005 levels by 2030, and the federal Liberal government now says it will introduce an even-tougher 2030 goal along with its commitment to get to net-zero emissions by 2050.

Seeliger said carbon fibre will be relegated to a niche market for some time because carbon fibre is expensive and its introduction into markets like automotive, construction and aerospace will require complicated changes to certification standards. However, Zhou said the opportunities will expand dramatically if the province succeeds in driving down the cost and the environmental footprint of producing it. Alberta Innovates believes industry can reduce the cost of producing carbon fibre by more than 50% below that of current methods and reduce the carbon intensity of production by up to 90%. It estimates that a 50% cost reduction in carbon fibres would boost demand tenfold.

Suncor’s Carrie Fanai said Wednesday that Canada’s largest oil and gas producer is focused on the “need to transition to a greener economy.” Suncor has pledged to reduce the emissions intensity of its oil and petroleum products by 30% by 2030, while other companies, notably Cenovus Energy and Canadian Natural Resources Ltd., have set “aspirational” goals to have net-zero emissions at their oil-sands plants.

“For us at Suncor, that has meant not only focusing on improving the GHG intensity of our existing production but looking at new products, energy sources and related lines of business,” said Fanai, who is the company’s lead on bitumen value-chain optimization.

She noted that it is still early days in the journey to commercialization and that producers will have to work with chemical companies and manufacturers to ensure they maintain focus on potential customers.

Marcelo Lu, president of BASF Canada, said the opportunities for carbon fibre “are very large if we can crack the innovation to take the impurities out of the bitumen stream,” which is heavy in sulphur and metals. He said the massive bitumen resource represents a high concentration of low-cost feedstock for carbon fibre that could drive market developments in a way not seen before.

Alberta Innovates hopes to see a commercial-scale demonstration plant for producing carbon fibre from bitumen by the end of 2024.

If it succeeds in reducing the cost of production, the province could produce 326,000 tonnes per year of carbon fibres from the asphaltenes contained in one million barrels per day of bitumen, which would be worth an estimated $44 billion annually in today’s prices, the agency estimates. It says there is also potential to produce activated carbon and asphalt binder from the asphaltenes in another two million barrels per day of production.

The total value of the “non-combustion” products would be $84 billion. At the same time, industry would sell higher-quality crude, “de-asphalted” oil for $27 billion. Total value: $111 billion a year, compared to the $27 billion a year the sector expects to earn by selling three million barrels a day at $25 per barrel.

As part of its Build Back Better series last spring, Corporate Knights recommended that the federal government provide $1.4 billion in funding over five years to help the industry commercialize carbon-fibre production. Environmental groups have called for an end to subsidies for the fossil fuel industry, arguing that government efforts should be focused on the transition off oil.

Shawn McCarthy writes on sustainable finance and climate for Corporate Knights. He is also senior counsel for Sussex Strategy Group.

With the support of the Embassy of the Federal Republic of Germany in Canada.

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No one disputes that there will be vestigial demand for fossil fuels for decades to come. No one disputes that low oil prices would severely damage the oil sands. No one disputes that it will be decades before the transition to electrified transport is complete. But does the transition to EVs need to be complete before it contributes to chronically low oil prices? Importantly, what will the oil supply-demand balance look like later in this decade, and in future decades? Will prices be high enough to sustain one of the more expensive sources of oil? No one will dispute that someday EVs will threaten oil demand and thus prices.

Today, annual EV sales data are used to assess and dismiss the threat. Looking at annual sales data suggests the risk to the sector is years away – but that is looking at where the puck is, not where it will be.

Looking only at annual EV sales data means failing to recognize that once an EV enters service, it remains in use for a decade or more. Every fossil-fuelled vehicle displaced by an EV permanently removes oil demand for that vehicle. Cumulative EVs is the critical factor, not annual sales. Specifically, how many EVs are required to impact crude oil prices? And when might that occur? Is it decades into the future? Or is it imminent? How much does a small drop in oil demand affect price?

A 2% oil-supply surplus caused a 70% drop in oil prices between 2014 and 2015. That surplus was primarily due to Saudi Arabia flooding the market with crude oil. They are doing the same thing today, which, compounded by COVID-19, is causing acute problems. Electrification of transport is chronic, however, and its effect on oil prices will increase over time until a transition is virtually complete.

So how many EVs could cause a small oil-supply surplus? A report published by the Bowman Centre for Sustainable Energy suggests the answer: about 40 million EVs worldwide. And, disruptively, it could happen by mid-decade.

So, what to do?

First, we need to recognize the severity of problems facing the oil-producing provinces. Jobs are disappearing, and companies are under financial stress, leading to ripple effects across their economies and attendant social problems. These challenges are being imposed on Canada by global forces; our government leaders cannot change this global shift, regardless of political rhetoric.

Oil-producing provinces, the federal government and Canadians need to develop and implement a transition plan. An action plan designed for oil-sector workers and society at large. A plan that positions the oil sands as a resource that contributes to society and our economy as the 21^st century unfolds.

A detailed, equitable, data-driven and realistic transition plan will recognize the value of bitumen for non-fuel uses. In addition, such a plan will embrace electrification of transport as an opportunity. Visionary, courageous and cooperative leadership is required to drive technical and social solutions to ensure that the provinces, citizens and Canada build back better.

What happens if we are wrong? Nothing – there is no downside. Implementing a transition plan will create jobs and wealth in addition to those in a scenario where the oil sands prosper as in the past.

Ed Brost is a professional chemical engineer with over 35 years experience in the energy sector with Shell, Ontario Hydro and Atomic Energy of Canada. Ed is currently managing director of Innovation and Sustainable Development with Carbovate Development Corp. and volunteers his time as an associate with a non-profit, the Bowman Centre for Sustainable Energy.

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This story is more than 50 years old, a story of how the oil sands came to be an economically viable global scale resource development and Canadian success story. If we now focus on the low-carbon growth opportunities staring us in the eye, it could also be our future.

While Canadian oil and gas will remain a significant part of the global energy mix for some time, we have to take advantage of new opportunities that offer attractive growth prospects. The temporary economic lockdown triggered by the 2020 pandemic is giving us a glimpse into a not-too-distant future where the transformation of our energy system could disrupt demand on a similar scale. Disruption breeds opportunity and forward-looking companies and countries will need to step up and lead.

Now is the time to take a big step forward. As the history of the oil sands reveals, disruption and transformation are nothing new for Albertans and we’re optimistic that the Canadian energy industry is up to the challenge and best positioned to invest in and lead energy transformation.

Here’s why. The oil and gas industry is one of the largest markets for, and potentially investors in, clean technology in Canada.  The challenges faced by the sector, combined with an entrepreneurial culture and the motivation to thrive in tomorrow’s low-carbon economy provides a wealth of opportunity for clean technology investment by the sector. Canada needs to ensure these opportunities aren’t ignored.

Companies like Suncor not only conduct extensive internal technology development, they also monitor and invest in technologies developed by others. Consider Suncor’s partnership with Enerkem, which turns household garbage into biofuels. In addition to an equity investment, Suncor seconded a dozen operations experts. Working together, in the first month, Enerkem produced more cellulosic ethanol than it had in its history, demonstrating the potential for the energy industry to provide innovative technologies and processing expertise to help scale renewable production.  It’s partnerships like these that combine the expertise from different sectors that will lead to breakthroughs, significant growth opportunities and provide the greatest opportunity for Canada to succeed on the world stage.

Canada has an abundance of bio-based natural resources, the waste residues of which are ideal feedstock for biofuels. Beyond biofuels, there are other significant growth opportunities where we have all the ingredients needed to win on the world stage.

For example, the carbon density of Canada’s bitumen reserves make it uniquely suited for advanced manufacturing and materials processes that could create billions of dollars in additional value. Foremost among these Bitumen Beyond Combustion opportunities is carbon fibre, a strong, lightweight material increasingly important for producing lighter vehicles (including EVs) and building materials that store rather than emit carbon in their fabrication. Asphaltene makes up 15 to 20% of bitumen and is the feedstock for making carbon fibres. If we can figure out how to do this affordably at scale, it has the potential to quadruple the revenue from Alberta’s current bitumen output. Alberta Innovates estimates the added economic potential of carbon fibre, activated carbon and asphalt binder alone could be in the range of $84 billion annually.

The seeds for all of these ideas have already been planted in Alberta, nurtured by the Energy Futures Lab, Alberta Innovates, some leading energy companies and other collaborative efforts. It shows what’s possible when we seek common ground and use past and current strengths to build what the future requires of us. Those who can learn from the past are empowered to win the future.

Now is the time for the federal government to support disruptive innovation in the same spirit as the Alberta Oil Sands Technology and Research Authority (AOSTRA), which was launched in 1974 and made technological breakthroughs that unlocked hundreds of billions of dollars of value from the oil sands in subsequent decades benefitting all Canadians.

Three points to keep in mind:

1. Think big: Focus investments on disruptive technologies that can unlock value in global growth markets where Canada has a competitive advantage.
2. Empower a local public agency to get results: Fully fund an independent public agency to work with industry and academics to bring production of low-carbon options such as hydrogen, renewable jet fuel and carbon fibre to commercial scale.
3. Establish meaningful partnership with indigenous communities: This is the right thing to do, and the only way that large-scale projects will happen.

As we emerge from the COVID-19 crisis, the same approach that helped unlock the economic potential of the oil sands decades ago can now be reimagined to drive progress to the low-carbon growth markets of the future, leveraging the natural resources, highly skilled workforce and industrial infrastructure already found in regions that produce oil and gas.

We cannot predict the future, but we can shape it.

Mark Little is president and CEO of Suncor Energy Inc.

Laura Kilcrease is the CEO of Alberta Innovates.

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Carbon fibre is a material perfectly suited to electric vehicles. Manufactured from long strands of carbon blended with plastic resin (think fibreglass, with carbon replacing the glass), it’s far stronger than steel – up to 10 times as strong – and much lighter. Plus it doesn’t corrode. Owing to these advantages, carbon fibre has been coveted by car makers since it was first introduced in the early 1980s. Because of its steep price, though, it has until recently been used primarily in racing cars and next-generation prototypes. (Carbon fibre costs as much as US$7 per pound wholesale, compared to about 40 cents per pound for steel or 80 cents for aluminum.) The explosive growth in electric vehicle sales, however, creates a unique and potentially enormous market for carbon fibre – especially if the manufacturing costs of the stuff can be slashed somehow.

And this is where Alberta’s oil sands come in. Alberta produces nearly three million barrels of bitumen from the oil sands each day – heavy oil in need of expensive and energy-intensive processing to be turned into transportation fuel. The industry faces an uncertain and perilous future as the high cost and large carbon footprint of its product becomes harder and harder to sell as demand for oil begins to level off and eventually decline, in part due to the rise of emissions-free technologies such as electric cars. Might there be a place for bitumen instead in the carbon-fibre frames of those vehicles?

This was the question Alberta Innovates, the Alberta government’s research arm, aimed to answer with its Bitumen Beyond Combustion program, launched three years ago to begin exploring new commercial uses for bitumen. The program’s research identified a range of potential new markets, including asphalt for paving and the production of vanadium, a metal present in relatively abundant quantities in bitumen and in increasing demand as a component in new battery technology. But nothing else so far has shown the “major mid- to long-term potential” that carbon fibre has. What’s more, its greatest weakness as a transport fuel – its heaviness, owing to the very large carbon molecules that comprise it – becomes an asset.

“Bitumen is a bigger molecule, and you are competing with lighter oils as transportation fuel,” John Zhou, vice president of clean energy at Alberta Innovates, explains. “You are always at a disadvantage. But when you are making big molecules like carbon fibre, that high carbon in the bitumen compared with other oil becomes a competitive advantage.”

To transform bitumen into the lighter crude oils that are refined into gasoline and transportation fuels, oil sands operations either add a lighter petroleum product called diluent to their bitumen to make it flow down a pipeline to a distant heavy oil refinery or use costly, energy-intensive upgrading facilities that “crack” the bitumen into smaller molecules, turning it into synthetic crude. In recent years, oil sands companies have been developing “partial upgrading” technology, which cracks off a smaller piece of the bitumen molecule and allows it to be shipped without diluent. One of the heavy carbon molecules cracked off the raw bitumen is called asphaltene, and it shows enormous promise as a feedstock for producing the long carbon fibres that go into the lightweight, ultra-strong carbon-fibre panels used in cars like the Toyota Prius Prime.

Asphaltenes make up around 15 to 18% of a typical barrel of bitumen. Produce 100 barrels of bitumen and send them through a partial upgrader, in other words, and you have 15 to 18 barrels of asphaltene on your hands. The world’s current supply of carbon fibre is about 100,000 tonnes per year, a total that oil sands operators could easily exceed with the widespread use of partial upgrading.

“The supply is not the issue,” Zhou says. The big question is whether carbon fibre produced from bitumen could cut carbon fibre costs to the point where the material made sense not just for a flagship Prius but for Honda Civics and Ford Fusions. “If you can reduce the cost of carbon fibre by 50% or more, you will have a chance to get into medium-priced vehicles. So you will open up a much greater market.”

It’s an enticing possibility, especially for an oil sands industry battered by low prices, fleeing investment capital and a barrage of criticism over its expanding greenhouse gas emissions and other environmental impacts. “It’s early days in looking at the potential for carbon fibre production from bitumen; however, we think there’s value in looking at different ways of optimizing our barrels – value in the traditional sense and in potential environmental benefits,” says Carrie Fanai, who is leading Suncor’s participation in the carbon fibre project at Alberta Innovates. With partial upgrading technology perhaps only three years away from commercial-scale operation, oil sands companies will soon have stronger motivation to find uses for the by-products of bitumen processing.

“When you are making big molecules like carbon fibre, that high carbon in the bitumen becomes a competitive advantage.”

–John Zhou, Alberta Innovates

The carbon fibre market, though, remains a young and volatile one, and that means any plans regarding its future role come freighted with caveats. Cecilia Gee, an analyst with Lux Research who tracks the carbon fibre market, explains that carbon fibre is at present a niche product, and many factors beyond the price and availability of the raw material, in the automotive market and beyond, will determine future demand. At present, the use of carbon fibre in EVs, for example, is limited by a lack of standardized production and supply chain certainty, and as much as 70% of the cost associated with using carbon fibre comes from the high price of manufacturing and installing components made from carbon fibre – not from the cost of the raw material the oil sands might one day supply. Meanwhile, plummeting battery prices are taking some of the pressure off EV manufacturers to pay a premium to reduce the weight of their vehicles. BMW, for example, recently announced it will no longer be using carbon fibre in some of its electric cars as it expands production.

“Is there an opportunity for the oil sands? Yes,” Gee says. “Are there a lot of unknowns about that future? Also yes. But if they have the opportunity to make things more circular, more green, why not?”

In any case, Alberta’s carbon fibre industry is a long way from supplying frames for hundreds of thousands of Civics; at present, it’s not even an industry. In the wake of the Bitumen Beyond Combustion program’s final report in January 2018, Alberta Innovates freed up $2 million in seed money for a handful of initiatives, one of which is a laboratory at the University of Alberta now working on developing an industrial process for converting bitumen-derived asphaltenes into carbon fibre. The early results have been so promising that Alberta Innovates has already connected the lab with industry heavyweights like BASF and Mitsubishi Chemical. A representative from SGL, a market leader in carbon fibre manufacturing, has paid multiple visits to the lab and has made plans to connect the researchers with similar projects at the Oak Ridge National Laboratory, the U.S. Department of Energy’s top energy research lab.

These are, to be sure, very early days. There remain many hurdles yet to clear. But presuming that partial upgrading expands at the rate Zhou and his colleagues in the oil sands hope it does and that the lab research on bitumen-derived carbon fibre continues apace, there could be viable commercial-scale carbon fibre production in Alberta by around 2030 – which just so happens to be around the time experts predict electric vehicle sales will roar into overdrive worldwide.

Zhou concedes that from an investor’s point of view, the project is very much in the high-risk, high-reward category. At a recent funding meeting with federal officials in Ottawa, he compared it to the $50 million the government recently invested in General Fusion, a Vancouver start-up working on nuclear fusion reactors. Still, the long timeline and uncertain payoff don’t worry Zhou much. “If in 10 to 15 years we can create a multi-billion-dollar business in Alberta, I will be very happy,” he says. Significantly less time, come to think of it, than it took bitumen production to go from Karl Clark’s lab at the University of Alberta to the first mine site north of Fort McMurray.

Chris Turner’s most recent book is The Patch: The People, Pipelines, and Politics of the Oil Sands.

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