Alberta Inquiry into Anti-Energy Campaigns

SUBMITTED BY MAC VAN WIELINGEN 

Public Inquiry

ANTI-ENERGY CAMPAIGNS

www.AlbertaInquiry.ca

March 31, 2021

Dear Sir/Madam:

RE: Public Inquiry into Anti-Alberta Energy Campaigns - Request for Commentary

Thank you for the opportunity to offer my perspectives and comments to the Commission of Inquiry into Anti- Alberta Energy Campaigns (the “Commission”).

I will firstly note that I have read or at least reviewed the Commission Reports, as well as the additional publications which were forwarded to my attention.

These reports and documents are summarized below:

1.       Cooper Report

2.       Nemeth Report

3.       Nemeth Report (Supplement)

4.       Energy in Depth Report

5.       Alberta Environmental Monitoring Panel Report

6.       Mines, Minerals, and Green Energy

In the letter of November 9, 2020, I was invited to address eight questions. I will speak to each briefly within this submission.

In a subsequent letter dated November 18, 2020, additional materials were provided, notably a November 11, 2020 New York Times article entitled “How one firm drove influence campaigns,” and responses published by Energy In Depth and FTI Communications. You asked certain questions relating to these materials which I will reference in my responses to the eight questions.

I wish to emphasize that most of my value add in this submission is probably in the realm of my experience in governance research and practice. As I explain below, I believe the issue of concern is policy-focused activism funded through private foundations (often foreign-controlled) subject to often limited public accountability.

Private funding of public activism is a governance issue

The essence of the issue is the potential misalignment of interests between the insiders of the activist agencies, large donors, and those with executive control, and the interests of those in the impacted communities. This problem is particularly serious if the donors and those with executive control are foreign, and thus may not be sensitive to the local, regional, and national interests within the countries where they are directing their actions. The worst circumstance is the foreign funding of activist agencies where there is limited or incomplete transparency and disclosure, and a lack of independent oversight to take into account the interests of stakeholders in the impacted communities. In my mind, this is the critical issue on the table for the Commission, for Albertans, and for all Canadians.

I want to be clear in saying that in my opinion, the problem is not activism. I see activism as an essential part of the functioning of an engaged citizenry. The problem is the possible misalignment of interests between the insiders of the activist agencies, large donors, and those with executive control, and impacted stakeholders. It is this possible misalignment of interests which turns the private funding of public activism into a governance issue. It is important to recognize that the governance issue can become particularly magnified and challenging if activism turns into extremism.

Activism that becomes extremism is a separate dynamic with unique characteristics that has the potential to seriously undermine good governance. Extremism represents a shutdown of open-mindedness and can limit and even prevent open inquiry into the conditions and impacts of desired change. Extremism thrives on narrow mindedness, divisiveness, the fracturing of interests, and often involves tactics to amplify polarization which can easily turn into aggressiveness, hostility, and dehumanizing behaviours of others who may have different views. This is a huge risk for governance integrity within a civil society, and it appears to me that Canada is increasingly moving in this direction.

A related perspective relevant to Alberta and Canada is the potential loss of full constructive partnering and collaboration. This is a perspective that is certainly relevant to me in offering this submission. I know from extensive experience in organizational leadership, both in practice and research, that the fundamentals of a strong culture – trust, accountability, commitment, and ethics – have a significant impact on the quality of decision making and the levels of collaboration essential for the success of any group of people seeking desired outcomes. Simply put, through working together versus tearing each other down, we can accomplish much more. This certainly includes the complex national and global initiative to decarbonize and reduce climate risk.

I am convinced that we need leaders within business, the not-for-profit sector, government and non-government agencies, and elected officials at all levels, who can hold the tensions of polarized positions and bring forth visions and strategies that are wholistic and unifying in ways that are ethical and respectful. This means resisting the temptations of political advantage seeking within polarization; resisting the pressures of aligning or opposing with “we/they” group identifications; and resisting the pressure to fall into attempts to diminish or delegitimize others who may have different views. We all have the opportunity to play a role in creating and maintaining a safe space for others to engage in civil discourse, including with those who have different or opposing views.

Question #1 - The Nemeth Report may be read as suggesting that environmental non-governmental organizations and activists are key players in a movement funded by well-endowed foundations and interested governments, which movement operates as a decentralized network that is aligned and ideologically motivated to act in concert to end the use of fossil fuels.

Do you agree or disagree with Dr. Nemeth’s conclusion? Why? From a policy perspective, what are your views on the role of foreign foundations and governments funding efforts in Alberta to reduce or end the use of fossil fuels?

I generally agree with Dr. Nemeth’s conclusion. Environmental NGOs and activists are definitely key players who have serious influence on public opinion and policy development, as well as regulatory and political decision making in Canada. I think it is reasonable to describe the aggregation of these players as a movement and it certainly appears well-funded, with substantial funding coming from US foundations. Further, in my opinion, it is accurate to say that it operates as a decentralized network. It is not centralized in the sense of a government or a corporation where authority rests with an ultimate body such as a cabinet or board of directors. Although the players involved do not act in unity as one entity, there is a considerable amount of influence, direction, and coordination that occurs within that network. This arises primarily through the grant giving or donation process; in other words, it is the power of the money being directed to these different activist groups that heavily influences the direction and activities of these groups.

Here is an example of this from my own experience: When the anti-oil sands movement was gaining profile, I had numerous discussions in my boardroom with environmental groups about the initiative.

I often asked, “Why are you so focused on Alberta’s oil sands? What about coal? We all know coal is a much more serious problem in terms of environmental impact.” (Alberta’s power sector at that time was heavily reliant on the use of coal).

Eventually the response came back to me as, “Attacking Alberta’s coal companies and coal industry is not what our donors want. Our donors want us to go after the oil sands.” It was also confirmed to me that the donors they referenced were largely US-based.

With respect to acting in concert to “end the use of fossil fuels,” this is a logical deduction, and I am quite sure it is true at least within the extreme elements of the movement.

Another general theme in this movement that needs to be noted is the left/right political oppositional dynamic. By extension, anti-oil and gas is anti-development as almost all modern development can ultimately be linked, in one way or another to the use of hydrocarbons. Further, anti-development is, by extension, anti- business, as almost all development involves private sector business interests. More broadly, this anti-oil and gas, anti-development, anti-business mindset, has morphed into anti-capitalism, which is logically biased against, if not outright opposed to, any political party that has a constructive and supportive view of the private “free-market” sector (i.e. the republican or conservative side of the spectrum). Thus, the anti- hydrocarbons/anti-oil and gas movement has taken on the appearance of being a highly politicized, left-wing movement.

The movement can easily appear as the product of an organized conspiracy, and it arguably has elements of that, but there is a linking of logic that explains how all these different perspectives fit together and present as an integrated political movement. This is highly unfortunate, as in a certain way, it reduces the legitimacy of the climate movement and leads to policy making that may be more political than fundamental, and which may be misaligned with societal interests, and, in Canada’s case, misaligned with national interests.

Question #2 - The Nemeth Report suggests that the North American Tar Sands Coalition Strategy of 2008 was an early campaign of a movement to create a new energy paradigm for the world, and such campaign was not concerned with making Alberta or Canada suffer in particular, but rather was concerned about transforming western industrial economies and societies to shift off fossil fuels. The Nemeth Report may further be read as suggesting that in this context Alberta’s oilsands reserves were an easy target that gained prominence when they were acknowledged as a proven reserve, increasing Canada’s reserves to among the largest in the world.

Do you agree or disagree with Dr. Nemeth’s conclusion? Why?

There is no question in my mind that Alberta’s oil sands became a target because Canada is an open country and the oil sands are landlocked, which makes infrastructure decisions particularly vulnerable to regulatory and political process. Further, images of the oil sands offer the opportunity to create emotional impact and support often inflated, one-sided narratives. Also, the oil resource involved is one of the largest in the world. Attacking Canada’s oil sands could align with the self-interests of other oil suppliers who compete with Canada, notably those with a vested interest in the US oil sector.

I have had discussions with one of the original signatories to the Tar Sands Coalition strategy paper who confirmed much of this rationale.

There is another very important question about the motives and aspirations of the environmental groups involved. The idea of moving away from oil and gas to “save the planet” from emissions and climate change is a relatively new emphasis for the environmental movement. Although climate change was referenced a decade ago by some scientists and environmentalists, the main concern then was that oil and gas reserves were finite and depleting, and society would be left stranded (and would collapse) without a sustainable resource. This – not global warming – was the main argument for the push to renewables. As reality unfolded, the idea of consumers, households, and the industry being stranded because of a limited resource has been flipped, and now it is the resource which may be stranded because of reduced demand and substitutes.

An important question in the background is, what is it that really motivates and drives these environmental agencies? Is it purely to do good in the world? Is it ideology and value-based as some people argue? Or is it purely logic and functionality at a point in time, i.e., that oil and gas resources are finite and therefore we need to move off of them towards a renewable source of energy? That was certainly compelling logic at one point in time. Positive, if not admirable, intentions and compelling logic to solve societal problems are surely a large part of the reality, but there is another dynamic that is rarely addressed.

There is a strong argument that what motivates the individuals within these agencies is their jobs, income, and the survival of their entities in the turbulence of massive societal change. The risk and the limitation of these organizations is that they are generally single-purpose entities, for example environmental activism focused on blocking pipelines and opposing oil and gas. They are like small armies continually looking to mobilize themselves against a cause and they are prepared to adapt. These groups and organizations ideally need large, high-profile causes where they have a chance of proving that they can have impact and which provide a “use of funds” and justification for donor support, and indeed which justifies the existence of the agency. This is not a specific criticism of these entities; it is, in my opinion, a generalized truth that most of these organizations most of the time are striving to sustain themselves. As these environmental agencies adapt to the reality of external global circumstances, they are very willing to contort their stories to serve their own survival-based interests. As one environmental leader said to me, “We were being entrepreneurial; we went to foreign donors because they were prepared to fund us.”

This is not to say that ideology and values are not critical; but it is to say that organizational and professional self-interest is logically, and understandably, always present and colours the positions and actions of these agencies. Thus, the self-interest bias versus the interests of others is always present, within businesses, government, and non-government agencies pursuing a cause. This is one broad reason why good governance is so important to ensure the healthy and effective functioning of society.

Question #3 - The Nemeth Report may be read as suggesting that some advocacy programs are directed at children. Do you agree or disagree with Dr. Nemeth’s conclusion? Why? Do you believe that there are any compelling policy considerations that arise in regards to interactions between advocacy organizations and youth? If so, to what extent are these policy considerations different if foreign funding plays a role in such advocacy programs?

Advocacy programs directed at children are a problem particularly if they are narrowly focused and do not confer generalized benefit to all children and all people. If you look broadly at societal aspirations and values, we should also be educating children and all people about the importance of economics, the efficient allocation of resources in society, and the importance of savings and capital accumulation for our future. Young people coming out of school often do not understand this. There should also be a focus on social considerations relating to health, education, community well-being, and the link with economics to fund what can be thought of as “social prosperity.” Further, in my opinion, education must also include ethical concepts and principles that underlie societal governance relevant to all decision-making entities in society. This would include the importance of openness, transparency, honesty, and accountability. Education directed towards preserving the quality of our environment is clearly of vital importance, but it should be placed in the broader context of all essential societal needs and aspirations.

Specifically, there should be no role for foreign (or domestic) funding of narrowly prescribed advocacy programs directed at children. To me, it seems there is a horrible possibility that this is actually happening.

Question #4 - The Cooper Report refers to a “Design to Win” project advanced by certain foundations (see page 14), in which Dr. Cooper asserts that replacing existing electricity generation capacity with nuclear energy, and substituting natural gas for coal, appears to have been ignored. Instead, Dr. Cooper refers to a strategic objective of the project to mobilize public demand for legislative action, through what Dr. Cooper describes as alarmist rhetoric.

Do you believe that, as a general matter, issues related to the energy industry seem to be increasingly polarized and as a result, partisan debate is intensified? If so, do you consider this to be part of a deliberate strategy by any party or parties; and if so, on what basis do you draw this conclusion?

I have seen the same phenomenon that Dr. Cooper speaks to where substituting coal for natural gas, and using non-emission generating nuclear energy for base-load electricity is ignored or opposed. Similarly, technologies that remove carbon emissions from the atmosphere are often opposed by environmental activist groups. I have often wondered how those who embrace a short-term apocalyptic view of climate change reconcile their opposition to fast, relatively easy decarbonization by switching coal to natural gas, and the dramatic long-term emission-free solution of nuclear. If we are in a climate crisis and the “end is near” because of CO2 emissions in the atmosphere, why don’t we do everything possible as soon as we can?

On the same theme, environmental activist groups appear generally uninterested in the reality that Canada’s oil and gas sector has among the highest, if not the highest, Environmental, Social, and Governance (ESG) standards and performance among all significant energy suppliers in the world. Emissions from the oil sands have been high but are now clearly trending towards the average of all barrels refined in the US, and new oil developed in Canada is in fact now well-below the average. Further, our natural gas sector is arguably the greenest in the world. Broadly, we all know that the global transition to decarbonization will take multiple decades. Is it not in Canada’s national interest, and the interests of all our global customers, for Canada to stay in the energy market, albeit a market in transition and long-term decline, to provide the world with reliable, low carbon, high ESG energy products?

I will say directly that it appears to me that there is a narrowness of perspective in the views of most participants within the environmental community that do not align with sound strategy and policy that serves the long-term national interests of Canadians.

The concerns around polarization and political advantage-seeking within polarization are incredibly serious issues in Canada. Over my years of work in energy policy in Canada, it has become very clear to me that polarization persists because there are people and subgroups who perceive they benefit from polarization. In this connection, it is the national political parties that concern me the most who unquestionably design their electoral strategies around polarized elements within the electorate and are very prepared to amplify that polarization in order to serve their own electoral interests. The result may well be to weaken the integrity of democratic decision making in Canada. The second negative consequence is to undermine our national culture and the fabric of unity that is so critical to the healthy functioning of our country.

In my opinion, specific partisan interests are potentially being prioritized ahead of the integrity of our institutions and our national interests. Unique to Canada, this polarization and the reality of political expediency is intensely regionalized, certainly as it relates to energy policy, as our energy resource is based largely in Western Canada and national government control is based largely in Central Canada.

The temptation of the self-interest bias and advantage-seeking based on political regionalized polarization is a huge threat to the functioning of Canada. I believe the environmental anti-oil and gas movement is amplifying the divisions within Canada, profoundly influencing political activities and commitments, and making a difficult situation worse for all Canadians. The extent to which this influence is funded from foreign sources creates a highly sensitive and serious issue for all Canadians.

Question #5 - The Alberta Environmental Monitoring Panel Report proposes the need for a new approach to environmental monitoring, evaluation and reporting in Alberta and recommends the institution of a province wide system to achieve this (Recommendation 5).

Are you aware of whether any improvements to environmental monitoring, evaluation and reporting in Alberta have been instituted subsequent to the Report? Do you believe that Albertans have sufficient access to reliable information regarding environmental monitoring, evaluation and reporting in the province? If not, what can be done to improve Albertans’ access to such information?

I do not have the knowledge or the awareness to offer opinions of substance relating to the Alberta environmental monitoring panel report. I have certain impressions that we are doing an appropriate, if not exemplary job, in most monitoring respects, but I do not profess detailed knowledge on this matter.

Question #6 - The Cooper Report suggests that certain organizations are involved in strategically funding activist organizations in Canada or organizations that are in the US but are opposed to Canadian interests. The Cooper Report may be read as suggesting that funds flow from these organizations to smaller organizations that are ideologically aligned, thus giving the appearance of a grass roots movement.

Do you agree or disagree with Dr. Cooper’s conclusion? Why? From a policy perspective, if the Cooper Report is correct on the flow of funds from foreign entities, what are your views on this claimed means of funding advocacy? Does this create any concerns regarding transparency of funding? If so, should measures be taken to enhance transparency? Are there negative consequences that would arise from enhanced transparency?

I agree with Dr. Cooper’s conclusion that funding organizations in the US are strategically supporting activists in Canada and in the US who are opposed to Canadian interests. In my opinion, the related funding decisions, however noble they may be in a global context or in the minds of the donors, lack a concern for the national interests of Canadians. The lack of transparency in the flow of these funds is extremely concerning, and the distribution of funds to smaller organizations to create the appearance of a grassroots movement is similarly concerning. It takes on a look of pure political mobilization and creates a distorted understanding of reality in the minds of the public.

The above comment must be put into context. It is not just a “left wing” phenomenon, but if it is, it shouldn’t matter. I am sure that there are equivalent strategies within the “right wing” side of the spectrum. The problem is that public opinion and policy is being influenced and manipulated without full disclosure of often interconnected sources of funding.

Question #7 - The Energy In Depth Report (page 25) refers to the role of a law firm with registered charitable status in a letter writing campaign encouraging BC municipalities to sue a proponent of Canadian energy projects, including projects relating to the transportation of oil and gas, for climate-related damages.

What, in your view, are the advantages and disadvantages, or broader policy issues, with permitting law firms with focused objectives to have charitable status, such that their funding qualifies as charitable donations for the donors? To what extent are these advantages/disadvantages, or policy considerations, different where the funding comes from foreign sources?

Activism through law firms who might have charitable status is, in my opinion, incredibly manipulative of public opinion. It sends a message that those who oppose the views of the law firm may be legally offside or that the views of the law firm in its charitable activities are representative of what is in fact legal and real. The occurrence of this reinforces the perception that private funding of public environmental advocacy in Canada seems out of control.

Question #8 The Reports generally may be read as advancing the proposition that a small number of extremely well-endowed foundations advance the philosophy of their funders, management or boards of directors to influence public policy, and that they are less publicly accountable than politicians or industry.

Do you agree or disagree with this proposition? Why? If you agree with the proposition, do you consider it to be problematic from a policy perspective? Why? What, if any, solutions might offer a fair and proportionate mechanism to address the policy concerns you consider to exist?

There is no doubt in my mind that a small number of extremely well-endowed foundations exercise enormous influence on public policy in Canada, and that they are less publicly accountable than politicians or the corporate sector. I view this as an overarching governance problem that is so large, we almost can’t see it. The fact that this funding is foreign-based heightens the concern.

Governance-related processes can be understood as an effort to reduce or manage the misalignment of interests of insiders or powerful stakeholders with the interests of the public and other stakeholders. The expansion of activism within the philanthropic sector poses a serious governance challenge. The major donors of these entities may have interests that are totally misaligned with the public interest where they

operate. This is a particularly sensitive issue if the major donors are in fact foreign, but yet operating within Canada and exercising their influence.

This issue is occurring globally in different ways and to an extent, within numerous countries. At the highest level, this is akin to the extreme concern that exists within the US and Western Europe relating to foreign interference in shaping public opinion and intervening in electoral processes. It’s hard to imagine that the interests of Europeans and Americans are somehow aligned with the interests of these foreign perpetrators of change.

Canada is experiencing this conflict of foreign agency interests and the risk of misalignment with Canadian domestic interests. Even if there is no misalignment of interests, the lack of “good governance” relating to this influence in our domestic affairs is in itself a problem.

An example of foreign-funded activism is the Great Bear conservation initiative in British Columbia which had the look and feel of a pure conservation project. However, it became clear that it was the product of a significant, well-organized initiative where a high priority was to block oil resource development in Canada. It is hard for me to believe that the lost jobs and income for Canadians, including Indigenous groups who supported the Northern Gateway pipeline, were given serious consideration by the funders behind the scenes.

It is complicated because the Great Bear project has considerable merit. What is not complicated though is the disturbing lack of transparency and disclosure, and the difficulty of tracing the flow of money from foreign funders to domestic Canadian actors, including those who intervened in Canadian regulatory and political process absent, in my opinion, full, true, and plain disclosure.

I am personally an example of a Canadian who was, in a sense, taken advantage of in this process. I was asked, along with certain other Canadians, to make a donation to this project, which I did. Canadian donors were needed to create some legitimacy for the overall project which was predominantly funded by foreign foundations. If I had more knowledge of the Tar Sands Coalition and of the larger plans of a group of foreign foundations to block oil development in Canada, and that the Great Bear project was part of this grand strategy, I never would have made this donation.

In conclusion, the key issue that I wish to emphasize is the need for accurate and reliable disclosure of material and influential content from the philanthropic sector. The corporate sector has a form of independent governance oversight for the accuracy and reliability of disclosure materials upon which stakeholders may make decisions. As relating to corporate entities funding what can be seen as political activities, major investment firms are pushing for more transparency and disclosure. Here is a relevant quote from the Top 100 Funds organization: “For asset owners, keeping a wary eye on the money trail is not only the right thing to do but also the sensible thing to do. Asset managers should require the companies and asset managers they work with to disclose corporate political spending … and hold them accountable for donations to groups and individuals that undermine democratic institutions.”

This concept applied to the corporate sector should apply to all who have stewardship responsibility for society’s accumulated savings, the management and disbursement (or investment) of all of society’s capital, whether within corporations or foundations and the not-for-profit sector. I see no such oversight process within most philanthropic organizations, including those involved in public policy advocacy.

I believe that serious consideration must be given to requiring all foundations and not-for-profits active in influencing public opinion, public policy, and regulatory decisions to have both a code of ethics, a disclosure policy, and internal independent oversight of all reporting, policies, and disclosure materials in a manner similar to a public corporation.

At the very least, there is a profound need for more transparency, disclosure, and accountability of foreign- funded philanthropic activity directed towards public opinion and policy in Canada. I specifically believe that foreign-funded philanthropic activities engaged in public policy activities must conform with the highest possible standards of transparency and disclosure.

Thankyoufortheopportunitytooffermycommentsandreflectionsonthisimportantmatter. Sincerely,

Mac Van Wielingen

Founder and Partner, ARC Financial Corp.

Chair, Viewpoint Investment Partners

Mac Van Wielingen's Comments on Proposed Canadian Sustainability Disclosure Standards

Mac Van Wielingen submitted his viewpoints to the Canadian Sustainability Standards Board (CSSB) consultation on the two proposed Canadian Sustainability Disclosure Standards. General Requirements for Disclosure of Sustainability-related Financial Information and, Climate-related Disclosures.

I certainly appreciate the value of more consistency in sustainability standards. I’m also well aware that there is a lot of water under the bridge with respect to this process. Nevertheless, I will say openly and bluntly, Canada should not simply follow Europe’s lead in governance. More specifically, Canada should not follow Europe and the ISSB in E.S.G. and climate disclosure. Canada can show leadership in this process through more original thinking that would benefit the Canadian public, and also, quite frankly, all people impacted in all jurisdictions. My points below are in the direction of attempting to show how Canada can better serve its own interests and create more value for others in this process.

In my experience, there is an understandable tendency to lose sight of the big picture of our economic and societal system, and the functioning of pieces within our total societal system. Specifically, most of us, including most business leaders, tend to lose sight of the fundamental role of business in society. This is to manage the allocation of a significant portion of society’s accumulated savings, revenues less costs of workers and businesses, that are intermediated within the financial services sector, and invested under the authority and responsibility of corporate boards (including asset managers). The business sector is responsible for managing society’s accumulated savings and redirecting these savings towards societal needs. The corporate board of directors are the standard bearers of preserving and responsibly growing society’s accumulated savings.

Within this responsibility, the board of directors must also ensure that the company is satisfying all laws and regulations appropriately. Specifically, for example the board of directors must approve all public disclosure materials. Generally, this falls within what most observers would call compliance based governance. It is an essential function, but totally incomplete with respect to the broader role of the board of directors and the corporation in society. There is a tendency, that seems to ebb and flow, to view the Board of Directors as an extension of the regulatory system. Even corporate directors seem to succumb to this mentality and think if they can satisfy these requirements, they have fulfilled their role and responsibilities.

These broad points enable me to say specifically that there is serious risk that the proposed sustainability standards are regressive to what could be considered good governance. The proposed standards are pushing corporate directors back into more of a regulatory and compliance based role, and away from “value beyond compliance”.

Governance is about “authorities, structures, and processes that direct and control the material fundamentals of a business, all within the context of uncertainty”. Directing and controlling material fundamentals requires foresight and holistic thinking. This is arguably the opposite, or at least a counterbalance, to compliance based process, which by definition is historical, focused on what has already happened. I see these new standards representing simply more compliance and more hindsight based reporting. Worse, they will serve to distract from what is most material to a business enterprise. Lastly, the information generated at best is “nice to have” but not material to the decisions made by boards of directors and most investors.

Risk associated with climate change needs to be considered as part of enterprise wide risk management. Most successful businesses are already immersed in this risk mindset. Climate is one risk. Covid and pandemics is another. Global financial market meltdowns are another risk ie the 2008-09 global financial crisis. Depending on your jurisdiction, war is another risk. Political volatility is another major risk. As the world attempts the journey to net zero 2050 it will have to go through 6 new presidential elections in the US which will create a great deal of uncertainty for the policy driven energy transition for Canada and all countries of the world. Policy risk has to be a concern for boards of directors. This list goes on and on, but my point is each risk needs to be considered in the context of enterprise wide risk. Climate risk, in the sense of adverse climate impacting a business, is very real and has to be considered. Disclosure and discussion on the management of this risk is appropriate.

Specific to the question of disclosure of emissions, it must be appreciated that requirements for emissions disclosure for most businesses, including scope 3, will not directly impact the level of climate risk a business may face. This should not be construed as an argument against decarbonization. It is an argument against excessive regulatory burden where there is no or very little materiality. The risk of climate can impact businesses locally, and this needs to be assessed as a risk, but individual businesses themselves do not create global climatic conditions. Maybe the proposed new standards need to have a materiality test on emissions that calculates a specific business’s share of total global emissions for which it was responsible. It could in a sense be set very low to be accommodating towards the broad concern of emissions, but if we went through the calculations, you would see there’s that there’s probably no single business in Canada that has a material impact on global climate, and in turn Canada’s climate.

In fact, the entirety of Canada, with about 1.5% of global emissions, is immaterial in the context of total global emissions. China, United States and India together represent over 50% of global emissions. Canada’s direct impact on the problem is one of “form or image, versus substance”. If climate leadership is defined on the basis of emissions alone, our contribution, arguably, is a moral responsibility as a cooperative partner, versus a climate leader.

This understanding of materiality is starting to work through the awareness and politics of climate policy globally. The idea of being a global climate leader, ie Germany or the United Kingdom, and Canada, as it often references itself, is going through a rethink. Without getting into this in depth, I will just say that the fundamental importance of policy proportionality is resurfacing. What are the gains and losses for any group of people in any jurisdiction relative to the problem of trying to reduce global emissions? This is not somehow an argument to go for a free ride. It is an argument for clarity as to how we can all contribute appropriately to reduce climate risk. It is also an argument to be very careful about what we might sacrifice to achieve something that may not be material to the problem we’re trying to solve.

The best example of this conundrum is Germany itself, which is arguably the worlds foremost, historic climate leader, although this is now changing as they backslide and regress in their commitments. Germany is now realizing that they have truly hurt themselves in pursuing their climate and green aspirations. I reference the recent comments in a speech by Theodore Weimer, CEO of the German Stock exchange where he refers to the German economic model as “sheer catastrophe”. “Our reputation in the world has never been as bad as it is now”. He speaks at length about how “institutional investors are asking where Germany’s economic sense has gone”. He reported that investors are now demanding a risk premium when they invest in Germany. This is a far cry from the view that climate leaders will be able to attract capital more easily.

The view that the proposed Canadian sustainability standards will help us attract more capital needs to be thought through very carefully. As an investor I can tell you that what does attract capital is first and foremost, a business and investment friendly environment. The new sustainability standards may actually discourage new investment or at least discourage new public company listings in Canada. Other fundamentals for attracting capital are low cost reliable and, yes, ideally clean energy (ie hydro in BC and Quebec), responsible development where social and governance factors are part of strategy, the availability of skilled labour, market access, relative ease in permitting, reasonable tax levels etc. Consistency in sustainability standards could be a positive but not if they are excessively burdensome or if based off a model drawn from other jurisdictions that are underperforming, if not actually failing.

My main point is that Canada must be very careful in following the German or the European model of governance. I’m emphasizing this because my fear is that Canada may get stuck with guidelines and compliance based process that have serious adverse impacts on our competitiveness, with minimal real world benefits. The issue of materiality and policy proportionality must be front and centre. My last point is that if Canada is going to follow or harmonize with any other international jurisdiction, it should be the United States. They are our major trading partner and our greatest competitor in many ways. Whatever we may do, we should not get ahead of the US in these standards and process.

Business Council of Alberta - Advocacy is Not a Job, it is a Responsibility

    “Advocacy is Not a Job, it is a Responsibility”

Mac Van Wielingen, Comments and Background Notes for Business   Council of Alberta Member’s Meeting June 20, 2024

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This is my last meeting as the chair of the Business Council of Alberta.

I depart this role with a very high level of confidence in our new chair, Scott Bolton, who will be more fully introduced to you later this meeting.

I am also very confident in our future given the leadership experience of our board of directors and our now proven, well established executive team.

In the simplest terms, the purpose of the Business Council of Alberta is to advocate for prosperity and to make life better for all Albertans.

The keyword here which underscores what we do is “advocate.”

The importance of advocacy has been one of my most powerful learnings. 

One line, a quote from Mahatma Gandhi, speaks to this understanding:

“Advocacy is not a job, it is a responsibility.”

Advocacy is a responsibility, in some way or form, and to some degree, for each of us, for all citizens, in order to be healthy as individuals and to create strong communities.

The resources and platforms we have as leaders in business offer the opportunity to amplify the influence of our advocacy and have greater impact.

This is highly relevant for all of us as leaders in Alberta and similarly for leaders in our neighboring provinces.

Given the structure of electoral politics in Canada, we in the west are under-represented in national policy decision-making. At every stage and level from the elected, to the bureaucracy, we are severely under-represented.

We are not at the table when national policy decisions are being made. These decisions often have a profound impact on our interests, our families, our communities, and all our stakeholders.

The problem of under-representation is not just regional or provincial, it is intra-provincial. We have communities within Alberta and the west that may be neglected, or worse, may be “grist for the political mill.”

I’m thinking specifically about our rural communities, and our agricultural and food sector, whose interests may simply be an afterthought or expendable in national policy decision-making.

The Business Council of Alberta was created in response to the profound need for an additional credible voice to represent Alberta’s interests, across all sectors of our economy.

We are not the be-all-and-end-all solution to the problem of inadequate representation, but we can have influence as a credible and important voice.

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To describe advocacy as a responsibility is not to imply a burden. It is an opportunity to build deeper meaningful relationships with others within our community and to gain the positive satisfaction that comes from contribution.

Personally, I feel a great deal of satisfaction, and even gratitude, for having the privilege of advocating for Albertans, and to have been so involved in the development of the Business Council of Alberta.

It has been one of the most enriching and fulfilling experiences of my career.

We have created something that is very important for Alberta and quite frankly for Canada.

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Why do I say, “for Canada?”

One line from the Alberta Court of Appeal opinion on the Impact Assessment Act, formerly Bill C-69, explains this:

“Federalism is … the defining characteristic of Canada as a nation.”

To quote from the highest court of Alberta:

“Since neither level of government, (the provinces nor the federal government) has unlimited power, each serves as a check on the other.”

We do not have an elected Senate in Canada that might offer more fulsome representation and protection of the interests of the regions of Canada.

In Canada, it is the delineation of specific legal based authorities for our provinces and the national government that creates a counter balance or check on power.

All provinces (except Nova Scotia and PEI) were lined up with Alberta against the federal government in the Supreme Court challenge on the Impact Assessment Act. 

Alberta’s strong advocacy for its interests was advocacy for the interests of all provinces. In fact, it is advocacy for a stronger Canada based on nothing less than the “founding constitutional principle that defines us as a nation.”

The Supreme Court agreed with Alberta’s position that the Impact Assessment Act was unconstitutional. 

Unrestrained or unchecked centralized power is not good governance. In fact, as we have seen, it may well represent an affront to the established historic legal authorities that define Canada.

This affront was also evident in Ottawa’s listing of plastic as toxic and also the invoking of the Emergencies Act in response to the Freedom Convoy. Both were ruled “unreasonable and unconstitutional” by the Supreme Court.

These recent examples evidence a willingness in Ottawa to overreach and compromise the very authorities that define us as a nation. The Supreme Court decisions demonstrate though that the highest court in Canada will stand firm to protect these authorities.

When I advocate for a stronger Alberta, or for restraint on centralized power, I always believe I am advocating for a stronger Canada.

This has been a powerful motivator for me.

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My parents lost everything in the second world war, all their material possessions, the cohesion of their families, indeed many of their family members lost their lives.

They survived but lost their freedoms and dreams. 

They came to Alberta with a new dream. This was the opportunity to work hard and better their lives, and to live in fairness, free from persecution. 

When I entered Rideau Hall in Ottawa, and the room where I received the Order of Canada from the Governor General, all I could think about was my parents. 

This honour symbolically completed something that felt deeply personal.

My parents, if nothing else, were incredible survivors. They overcame some of the most extraordinary hardships imaginable.

The recognition I received left me feeling that their suffering and their commitment to Canada was not in vain.

There’s no question that the experience of my parents created in me a passion to do what I believe is right for all Albertans and, yes, for all Canadians.

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I reference constitutional authorities as I know how important governance structures are for containing and managing conflicts.

In this connection, the way we look at any particular conflict is often heavily influenced by our own biases, and where we stand politically with respect to those who are being advantaged or disadvantaged.

A quote from John Kenneth Galbraith, former advisor to President John F. Kennedy and former chair of Americans for Democratic Action, speaks to this point:

“In capitalism man exploits man, and in socialism it is just the opposite.”

Good governance always involves structures that encourage transparency, accountability, and the balancing of otherwise unrestrained power, whatever the political slant or worldview might be of those exercising power.

This is the deeper reason why corporations have boards of directors. This is to create accountability and to counterbalance the ever-present human tendency to push for more control and more power, which is invariably towards that which is self-serving.

This is the reason why I emphasize the importance of constitutionally established distinct authorities for our provinces versus the federal government. 

This is an example of a governance structure that creates a check on the risk of self-serving control and power. Without it I believe Canada would fail.

It is heartening that the Supreme Court of Canada has reinforced the importance of our governance authorities, and in turn the enduring strength of Canada as a federation.

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In my work in public policy over roughly the last 10 years, I confess I have had moments of real darkness and disillusionment.

We are in such a moment right now.

Over and over I have asked why does polarization persist and why does it seem to be getting worse? 

It eventually became painfully obvious.

Polarization persists because there are those who perceive they benefit from polarization. 

Worse, there are those who are motivated to amplify polarization to create opportunity for political advantage. 

We’ve all heard the perspective of Abraham Lincoln:

“A house divided against itself cannot stand."

But let me be clear, the house of Canada will not fall because of polarization. 

In fact, the open expression of different and opposing views should increase the probability of optimal solutions and strengthen us as a nation.

The problem is in the intentional amplification of polarization to create more opportunity for political advantage. But even this is manageable within a flexible and dynamic political system.  

Where it becomes toxic and seriously damaging is when advantage seeking becomes blind to the best interests of those being represented.

This is a classic governance problem where the interests of insiders are in direct conflict with those whom they represent or serve.

The result is to divide and create dysfunction within the house of Canada. 

I am convinced that much of what we see as hostile policy initiatives directed towards the energy region in the west is mainstream political strategy in Canada. It reflects a large degree of advantage seeking within polarization that tilts towards a blindness to the interests of western Canadians and all Canadians.

Our leading national governing parties are motivated to galvanize the hard-core part of their base; notably, interest groups focused on climate and environmental activism who are generally anti-business, anti-development, and anti-investment.

The environmental issues are incredibly important, but to the extent they are narrowly focused and rigid, they will lead to the subordination, neglect or mismanagement of other priorities that are also incredibly important. This is a notable part of the story of Canada over approximately the last 10 years.

The neglect of other essential priorities is part of the costs or damages of toxic polarization.

We have seen this in Canada with the neglect of economic fundamentals, notably those factors that drove inflation and created a cost-of-living nightmare for many families.  

Another area of cumulative damage has been the failure to create the confidence to encourage much needed investment. The result has been an erosion in the standard of living for Canadians.  The Bank of Canada is now referring to our “productivity” problem as a crisis.

Children and young people today are on track to be worse off overall than their parents, a situation we have never seen before in Canadian history.

Another disturbing high-level cost of politicized advantage seeking has been to breed distrust and discontent, particularly within western Canada. The result is nothing less than a loss in the functionality of our nation.

More specific to Alberta, there are many examples of hostile policy that have been directed towards the energy sector.

One is the freeze out or at least the chill on Liquified Natural Gas (LNG) development, while the United States leapt ahead and became the worlds largest exporter of LNG. Hundreds of billions in economic benefit has been lost or foregone.

There has been a further cost for our allies, and all energy consumers, as our natural gas is probably the greenest and most reliable in the world.

Another example is the emissions cap. The responsible Minister seems proud to point out that Canada would be the only country in the world doing this.

I would say we are the only country in the world doing this because of the great divide in electoral voting sentiments between the energy producing region in the west versus central Canada. If the emissions cap proceeds, we will likely see a loss of production, which would be the most expensive form of carbon reduction imaginable for Canada.

As our Council has said, this is not an “emissions cap,” as other less responsible global suppliers will fill the void and overall emissions will be unchanged or even higher. The “emissions cap” is better described as a “prosperity cap.”

I often ask what would energy policy in Canada look like if our energy resource, instead of being centred in the west, straddled Ontario and Quebec? Would energy policy in Canada be the same?

Most people, elected officials, senior bureaucrats, investors, and business leaders, just laugh when I ask this question and exclaim some version of “get serious, no way it would be the same.”

The fact is that energy policy in Canada is deeply politicized.

Now, as we head toward a federal election, the newest hostile policy initiative is a section in Bill C-59.

Under the banner of truth in advertising, the new law, introduced with virtually no consultation, creates so much uncertainty and potential liability that it will prevent business leaders from discussing environmental progress.

Critics are calling it a gag order which I have to agree with.

I believe it is another example of opportunistic positioning before the federal election. 

It is amplifying polarization, and creating confusion within the business sector, ironically including renewables and clean technology. It will work against the interests of Canadians; creating less disclosure on environmental performance at exactly the time when we need more.

So why do this on a rushed basis, with parts of the new legislation being half-baked, creating huge uncertainty in corporate and investor decision making?

Do political realities have anything to do with this?

Unfortunately, there are additional divisive and hostile policy initiatives underway.

One is Bill S-243, the Climate Aligned Finance Act, now before the Senate Banking Committee. This legislation applies to federally registered and federally reporting corporations, imposing costs, and restrictions that has the look of a forced prohibition against financial support for fossil fuel exploration, infrastructure, and potentially the agricultural sector.

Further, it is designed to prevent individuals from serving on federally registered boards if they have engaged in activities seen as “non-aligned” with defined climate commitments. These commitments include, of course, the Canadian Net-zero Emissions Accountability Act.

It can be deduced from this proposed legislation that a Canadian oil and gas company would not be climate aligned unless it is in wind-down mode. Therefore, any individual involved with a going concern exploration and development company would be restricted from serving on the board of federally registered corporations. It will create a sub-class of black-listed directors particularly in western Canada.

All of the Canadian banks are federally registered corporations. So is Suncor, Enbridge, TC Energy, TransAlta, and ATCO among many others. All these companies will have to assess the composition of their boards if this legislation gets passed, and basically push out those black-listed directors.

Bill C-59 has the effect of muzzling corporations who wish to disclose and discuss environmental progress and Bill S-243, if approved, represents a massive intrusion into the financial sector and corporate governance in Canada.

What is the logic for doing this?

Canada is among the most reliable, responsible, and innovative suppliers of hydrocarbons in the world.

The energy transition is going to be multi-decadal and probably multi-generational.

Our energy and resource sectors offer the highest value add opportunity for enhanced productivity across the economy.

We already have a massive complex array of taxes and regulations in place in the name of climate and environmental protection.

It is not beneficial for Canada to withdraw from hydrocarbon markets or to throttle back our resource sectors; it does not serve our interests, nor the interests of our global allies at a time of great geopolitical strife, nor the interests of global consumers especially those in developing countries.

The answer to the question “where is the logic” lies in a comment I’ve heard many times from trusted contacts in Ottawa.

“We understand your realities, they are based on fundamentals.”

“You don’t understand our realities, they are based on politics.”

“… and we have no electoral support in the west.”

The logic that explains Canada’s self sabotaging national policy initiatives is political logic.

The problem I’m pointing to is insider politicized advantage seeking that is in conflict with the best interests of those who are being represented.

The mindset behind these and similar initiatives is hostile to capital formation, reinforcing the impression that Canada is not business and investment friendly, and it is hostile to the fabric of national unity.

The cumulative damage is a continuing decline in the standard of living for Canadians, certainly compared to our largest trading partner, the United States.

The sacrifice these and similar policies impose on Canadians are grossly disproportional to the problem we are all trying to solve, to reduce global emissions. Canada is not a climate leader if we define leadership simply in terms of emissions.  

We are a climate leader only in form or image. We represent only 1.5% of global emissions. The climate leaders of substance are the largest emitters, China, the United States, and India which cumulatively represent about 50%.

There’s a lot we can do as responsible climate partners to reduce climate risk, but the direction is very different than what these policies imply.

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For Alberta, Saskatchewan, and all provinces of Canada, our constitutional powers are the best defence against self-serving narrow politicized ideals and the centralized push for electoral support and control.

At a deeper level, though, the foundational defence must be an alert and active citizenry committed to represent the interests of our families, communities, and the interests of all Canadians.

Advocacy is not a job. It is an essential aspect of civic engagement and responsible citizenship.

Energy Innovation: Oilsands Becoming Leaner and Greener

The author of a recent New York Times article is reveling in his scathing indictment of the Canadian oil sands – describing them as “the world’s […] dirtiest oil reserves,” and it isn’t hard to see why. As one of the largest oil reserves in the world, Canada’s oil sands have an image problem. Open pit mining, tailings ponds, and trucks the size of houses are not very appealing to look at, which makes the oil sands an easy target for the current wave of energy activism. Growing concerns relating to climate change, biodiversity, and marine health have spurred a ferocious appetite for more robust and stringent environment, social, & governance (ESG) standards – and rightly so. Climate change is a paramount concern that needs to be addressed with innovation and collaboration. These evolving standards are providing Canadian producers with the opportunity to adapt to a new world order and be leaders in an industry often criticized for being resistant to change.

Some of Canada’s largest energy producers have responded with extraordinary achievements in greenhouse gas (GHG) reductions. Canadian Natural Resources Limited (CNRL) has invested more than C$3.4 billion since 2009 in research and development to reduce its carbon footprint. Canadian Natural is a leader in carbon capture and sequestration (CCS), removing approximately 2.7 million metric tonnes per year through its Quest, Horizon, and NWR facilities. CNRL is continually making improvements to lower its carbon intensity, and has successfully reduced GHG emissions from its Horizon Oil Sands mine by 27 percent between 2012 – 2018. Furthermore, CNRL has committed to reduce its oil sands GHG emissions intensity by an additional 25 percent through 2025. To achieve these ambitious targets, CNRL is trialing new cutting-edge technologies such as molten carbonate fuel cells (MCFC), solvent enhanced oil recovery, and In-Pit Extraction Processes (IPEP) for tailings ponds.

In response to growing climate change concerns, Canadian producers have stepped up in a big way. The carbon intensity of upstream resource extraction in the oil sands is at an all-time low. GHG emissions for barrels sourced from the Canadian oil sands are increasingly comparable with major energy producers across the globe (See Figure 1.1). The magnitude of this accomplishment is even more impressive when viewed with the lens of a total energy mix. Many of the world’s largest energy companies produce large amounts of natural gas, and light oil which typically have lower emissions than heavy crude. However, despite the recent successes of Canadian producers, challenges remain. As the molecule moves down the supply chain from transportation to refining these processes can contribute significantly to a barrel’s total lifecycle GHG emissions. Unfortunately, this can largely be out of a producer’s control, and for many producers without integrated downstream facilities, the primary focus must be on reducing emissions during extraction.

Figure 1.1 – Source: Peters & Co (2019), Global Integrated E&P Carbon Emissions.

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The industry is rife with innovative collaboration and partnerships. Virtually all oil sands producers (90 percent) are contributing members to the Canadian Oil Sands Innovation Alliance (COSIA). COSIA functions as a research collective that brings companies together to share game changing technologies, intellectual property, and expertise. COSIA was formed to elevate the status quo and challenge its members to pursue operational excellence in the areas of GHG reduction, land reclamation, tailings ponds, and water management. Industry collectives are the new normal in Canadian energy and have extended beyond hydrocarbons to help facilitate the global energy transition. Nearly all of Canada’s top energy producers are among the 456 active members in the Clean Resource Innovation Network (CRIN) – which aims to share resource and expertise to accelerate and commercialize revolutionary energy technologies.

Canadian energy companies are the most active clean tech investors in Canada. According to Natural Resources Canada, the industry accounts for two thirds of the C$2.4 billion spent annually to fund cleantech research and development. New partnerships between energy companies and clean tech investment funds are helping to fuel the growth of energy innovation in Canada. Suncor and Cenovus have partnered with the BC Cleantech CEO Alliance and committed C$100 million to form Evok Innovations – a clean tech fund created to develop technologies aimed at addressing the world’s most pressing environmental and economic challenges. Canadian energy producers have been carefully listening to the concerns of stakeholders calling for greater environmental stewardship. Through innovative partnerships, cutting edge technologies, and capital investment, the industry is setting the template for responsible resource development.    

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Author

Michael Hebert, Viewpoint Research Team

What on Earth is Happening? Energy Emissions are Falling in Advanced Economies

In 2019 something incredible happened – the International Energy Administration (IEA) reported that energy related CO2 emissions in advanced economies fell to 11.3 gigatonnes (See Figure 1.1). This is significant for a variety of reasons, but most notably because the countries with the capabilities to act on emissions reductions are doing so, and with encouraging results. Energy related CO2 emissions in advanced economies haven’t been this low since 1990. The gradual decline of CO2 emissions has largely been underpinned by efficiencies and fuel substitutions in the power sector, which contributed to 85% of the reduction in emissions in advanced economies from 2018 to 2019. While renewables continue to play an ever-expanding role in the global power mix, the most significant reductions in carbon emissions were achieved through the substitution of coal-fired power stations for natural gas and nuclear power options.Several countries including the United Kingdom – the birthplace of the industrial revolution – are set to completely phase out coal-fired power stations in favor of more environmentally-friendly options by mid 2020.

Figure 1.1 – Energy Related CO2 Emissions, 1990 – 2019(1)(2)

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Source: IEA Global CO2 Emissions in 2019, IEA CO2 Emissions from Fuel Combustion by Country.

1. Advanced economies: Australia, Chile, European Union, Iceland, Israel, Japan, Korea, Mexico, Norway, New Zealand, Switzerland, Turkey, and United States.

2. Canadian emission data 1990 – 2017

While emissions reductions in advanced economies are encouraging, it is hard to ignore the proverbial elephant in the room – the fact that global emissions have steadily crept up over the same period, largely due to rapid industrialization in developing economies. In 2015, Bill Gates aptly stated that we need an energy miracle in order to see global emissions fall; “[Most problems can be solved locally – but this one is a world problem. … [I]t doesn’t really matter whether it’s a coal plant in China or a coal plant in the U.S. – the heating effect for the entire globe is the same.”

Many advanced economies enjoy the luxury of choice while grappling with the pragmatism of climate change. It is undeniable that cheap and abundant energy played a major part in industrializing economies at the turn of the 19th century, and many developing countries desire the same access to low-cost energy that allowed advanced economies to flourish.

Natural gas can offer a viable bridge between heavy-emitting carbon pollution, and sustainable renewable resources. However, natural gas is often priced out of consideration for many developing countries without the domestic infrastructure necessary for extraction and transportation. Therefore, advanced, energy producing economies like Canada, have an opportunity to continue to provide clean and affordable sources of energy to developing economies so these countries can continue to advance, and we can all benefit from a more sustainable future.

Canada’s Contribution to Global Emissions

While emissions in advanced economies have fallen to a level not seen since the launch of the Hubble Space Telescope (1990), Canada has struggled to reduce emissions at the same pace. Canada agreed to cut its GHG emissions by 30 per cent under the Paris Agreement (from a 2005 baseline) but the Country faces a tough set of obstacles to achieve this end. While many advanced economies are reducing emissions by transitioning away from coal, Canada’s electricity mix was largely already free of heavy GHG emitting sources.  Approximately 82% of Canada’s electricity is supplied by non-GHG emitting sources such as hydroelectric and nuclear power, which leaves little room for reductions compared to the peer group of advanced economies. As Jackie Forrest notes, “If the U.S. could transform their power system to match Canada’s current electricity mix, this alone would achieve most of their Paris target.”  

Figure 1.2 – Change in Emissions from Fuel Combustion, Canada, 1990 – 2017.

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Source: IEA CO2 Emissions from Fuel Combustion by Country.

Despite Canada’s high baseline for non-GHG emitting power generation, the Country has made significant improvements elsewhere to reduce CO2 emissions from fuel combustion since 1990, particularly in the residential housing sector (-7.3%), and in industrial applications (-11.8%) (See Figure 1.2). Canada experienced an immigration boom between 1990 and 2018, which resulted in a net population increase of more than 33%. The increase in Canada’s population coincided with the rapid development of carbon intensive industries, which contributed to large gains in emissions from transportation (37.6%), commercial buildings (21.9%), agriculture (157.1%), and the energy industry (192.7%). Canada is a major exporter of both energy and agricultural products, which disproportionately elevates Canada’s overall carbon footprint. Between 1990 and 2017, Canada’s overall net carbon footprint increased by 31.0% (130 Mt CO2). It is important to recognize that without Canadian supply, countries with less stringent environmental standards would be required to produce these goods, and the impressive reduction in advanced economy emissions (Figure 1.1) would likely be diminished.

To augment the Country’s role as a resource supplier, Canada is implementing trailblazing technologies and processes to reduce its GHG emissions. The C$1.2 billion Alberta Carbon Trunk Line (ACTL) opened on June 3rd, 2020, and is the world’s newest integrated, large-scale carbon capture, utilization, and storage system. The ACTL will transport captured CO2 from the Agrium fertilizer plant and the NWR Sturgeon Refinery to be injected underground as part of an enhanced oil recovery process. The ACTL is capable of sequestering 14.6 Mt CO2 per year at full capacity, which represents a 20% reduction in all oil sands emissions, or the rough equivalent of taking 2.6 million cars off the road.

Canada set the standard for low-carbon electricity generation 20 years ago with a steadfast commitment to non-GHG emitting sources. This model is now being adopted across the globe, and Canada is again at the forefront of new carbon reduction technologies. With the appropriate support, investment climate, and global exposure, Canada’s practical applications of carbon technologies will hopefully again, provide a model for developing economies seeking to navigate towards a low-carbon future.

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Author

Michael Hebert, Viewpoint Research Team

Share Price Performance and Value Destruction in the Canadian Oil & Gas Sector

SUMMARY POINTS

- Of the 128 Canadian independent companies listed in 2014, almost half have gone through an insolvency event, been delisted or sold.

- Of the 66 remaining companies, 49 have lost 90% or more of their total equity value. It is extremely difficult to re-capitalize these businesses.

- Approximately 13% of the original 128 companies are alive, and the other 87% have been essentially wiped out.

Some will struggle through this and survive, and new businesses will ultimately surface, but the existing reality for Canadian independent producers and service companies is unspeakably grim.

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Author

Mac Van Wielingen

Canada Urgently Needs a Reset of National Priorities

Canada was in a slow-moving crisis of underperformance and dysfunction before the pandemic health crisis and consequent economic collapse. It is imperative that Canadians see this clearly. Only then will we have a better chance to reset our priorities and place our country on a different trajectory.

In recent years, we have been particularly focused on environmental priorities, most notably, our commitment to reduce emissions in accordance with the United Nations Paris Accord. It must be emphasized that this is not the problem. The problem has been the rigidity of focus on this priority at the expense of other essential priorities which has impaired the future for all Canadians.

There has been a relative neglect of critical economic, social, and governance priorities in Canada with cumulative negative impacts that are staggering We entered the pandemic and economic collapse in a position of serious vulnerability.

There is ample evidence that portrays a grim picture of Canada’s investment performance, competitiveness, and productivity in recent years.

• Since 2014, growth in GDP per capita was the worst of all G7 countries and less than half that of the US (4% versus 8.7%).  

• Business investment is about 20% below peak levels in 2014.

• 2019 per-worker investment ranks Canada 15th among the 17 OECD countries. In Switzerland, businesses invest twice as much per worker as Canadian businesses. This is critical to competitiveness and higher productivity.

• Canada’s productivity has significantly lagged that of the United States, our main customer and competitor. In 2018, Canada generated US$55.00 GDP per hour of labour compared to US$76.50 in the United States.

• A 2017 survey of 60 of Canada’s largest businesses foreshadowed our declining performance; “a third said the investment climate had deteriorated over the past five years, [and] only 2 per cent said it had improved.”

We were in a slow-moving crisis of investment, competitiveness, and economic underperformance before the pandemic, and now we’ve gone right over the edge. There have been sharp regional disparities in economic conditions but ultimately, over time, there is no person and no sector that is unaffected by a country that underperforms.

Our national priorities also include the quality of life for all people in all regions of our country. The fact that social distress may be concentrated in one region, specifically in Alberta at this time, does not detract from the point that this is a national issue.

The distress in Alberta since 2014 is serious.

• The number of unemployed not covered by employment insurance has risen 53 per cent, from 75,000 to 115,000;

• Unemployment among young men is up 156%;

• Food bank usage is up 80 per cent;

• Suicide hotline calls have increased by 85 per cent;

• The number of individuals seeking counselling support in Calgary has increased 46 per cent;

• Incidents of domestic violence in Calgary have increased by 150 per cent;

• Non-violent crime is up 34 per cent;

• Business insolvencies have increased by 58 per cent; and

• Consumer bankruptcies are up 101 per cent.

This data is before the horrendous impact of the pandemic and oil price collapse. It is frightening to contemplate the hardship that is now occurring.

Underlying our economic underperformance and the social distress in Western Canada is cumulative regulatory and governance dysfunction.

According to the 2020 World Bank Ease of Doing Business Index, Canada ranks 30th out of 34 OECD countries in the time to get a permit for a construction project.

There has been over $200 billion worth of major energy and resource development projects cancelled or withdrawn since 2014. Some because of market conditions, but most because of regulatory delay, changing and inconsistent rules and guidelines, decision making arbitrariness, cumulative undue expense, and intensely politicized in-fighting. The Teck Frontier mine decision and Warren Buffett’s withdrawal from the Quebec-based Saguenay LNG project are the two latest examples of this.

Governance excellence is about effectiveness. During the recent rail blockades led by a small group of eco-activists, a DART & Maru/Blue poll found that two thirds of Canadians agreed with the statement, “Canada is broken.”

Governance integrity is about fairness and creating trust. This points to what is arguably the most serious red flag of governance failure in Canada. This is the emergence of extreme alienation in Western Canada. A large proportion of the 7.5 million people in the energy producing region of the West no longer trust that their interests are fully considered as part of the national interest of Canada.

Our longer-term national priorities need a reset, which arguably in the post-pandemic recovery, will be forced by a set of new realities. The direction is a renewed focus on economic priorities and on the social conditions for all Canadian citizens, and on rebuilding trust in the full functioning of our nation.

The most important renewed priority is governance excellence and integrity and the functioning of our nation. Otherwise the polarization and infighting will continue to message to investors that Canada is a poor destination for new capital, our economic performance will continue to erode, and social distress and alienation will become even more extreme and dysfunctional.

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Author

Mac Van Wielingen

What the Teck? Another Project Withdrawal for Canada’s Beleaguered Energy Industry

On February 24th, Vancouver-based Teck Resources Ltd. (“Teck”) delivered an all too familiar message to Canadians. The Company announced that it had withdrawn its application for the C$20.6 billion, 260,000 barrel-per-day Frontier mine. In a letter to the Minster, Environment and Climate Change, Teck cited a lack of investor confidence and a need for “jurisdictions to have a framework in place that reconciles resource development and climate change…This does not yet exist here (in Canada)…”

The Frontier project first applied for regulatory approval back in 2011, and now joins a long list of casualties in the Canadian energy graveyard that spans from project delays to outright cancellations, including MEG’s Christina Lake Expansion, Imperial’s Aspen Project, Petronas’ Pacific NorthWest LNG facility, TC Energy’s Energy East pipeline, and Enbridge’s Northern Gateway pipeline, among numerous others. It shouldn’t come as a surprise that ESG considerations are paramount in regulatory decisions. However, it is important to note that, while our National unity falls further into disarray over resource development, the ravenous thirst for energy globally will continue to be satisfied - with or without Canadian energy. The pendulum has swung too far in the opposing direction and created an opening where high-emission producers can capture increasing market share, while disregarding the environmental standards that Canadians are so proud of.

While Teck acknowledged a deep need to address climate change and, Canada’s role to play in their decision, skeptics of the project suggest that doubts about the Frontier project’s economic viability were the primary catalyst for the decision. In January 2020, the Institute for Energy Economics and Financial Analysis released a report questioning Teck’s financial assumptions for the project which were highly dependent on oil prices in excess of US$95/bbl Brent for prolonged periods of the project (2026-2066). While there are inherent uncertainties in forecasting oil prices, average estimates from the National Energy Board of Canada and the World Bank Commodity Outlook were more bearish on Brent prices through 2030, with an average Brent price of US$72.50/bbl. A more conservative oil price outlook was further compounded by the quality and distance differentials that heavy crude producers in Canada must endure to competitively price their barrels with counter-parties in the United States.

While Canada continues to flounder with project approvals, depressed prices, and fleeting investor confidence, capital is being mobilized. From LNG projects in Mozambique to deep sea pipelines in the North Sea capital is flowing to increase energy security and prosperity in oil producing regions around the globe. Nowhere is this more prevalent than in the prolific Permian basin in west Texas, which has spurred a flurry of new pipelines to bring crude to Houston and multiple locations along the Texas Gulf Coast (See Figure 1.1). According to Bloomberg News, more than ten pipelines are slated to start-up in 2020/21, providing additional takeaway capacity of ~5.6MM boe/d.

Figure 1.1 – Permian Basin Pipeline Projects.

Midstream investment isn’t the only thing booming in the U.S. energy sector. According to the Gulf Coast Energy Outlook, new capital investment in downstream facilities in Louisiana, Texas, Alabama, and Mississippi is anticipated to reach up to US$308 billion by 2030 (See Figure 1.2). The gargantuan capital program dwarfs any such development in Canada, and will be allocated towards new LNG export terminals, petrochemical facilities, and refineries.

Figure 1.2 – Gulf Coast Energy Infrastructure Investment 2011 – 2030.

While resource development is thriving in the U.S. Lower 48, Teck’s decision to withdraw its application for the Frontier mine continues to cast doubt and uncertainty over resource development in Canada. Not only is Teck burdened with a C$1.1 billion write-down on the project, but the opportunity for prosperity for all Canadians has been damaged. The project was expected to create approximately 7,000 construction jobs, 2,500 permanent operating jobs, and generate C$54.0 billion in royalties and taxes, C$11.8 billion in federal corporate taxes, and C$68.0 million in local property taxes over the life of the project. Additionally, the financial ramifications echo throughout the Indigenous communities in northern Alberta. Fourteen Indigenous communities bordering the project site had signed agreements with Teck to participate in the economic benefits of the project. Due to Teck’s decision to withdraw its applications, the Indigenous communities that are in favour of the project are losing out on prosperity that is desired by many, if not all, of the constituents in the community.

Ron Quintal, President of the Fort McKay Métis, accurately summarized the decision as a black eye for Canada, and rightly so, as this is yet another blow to an industry trying to shake off its multi-year hangover.

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Author

Michael Hebert, Viewpoint Research Team