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