Canadian fossils are steadfastly refusing to invest significantly in new decarbonization projects despite lapping up record amounts of cash, the Pembina Institute reports in a damning analysis released last week.
“Free cash flow for Canadian oil and gas companies is estimated at $152 billion in 2022,” Pembina writes in a summary of the report. But “this boom will not be accompanied by new projects in Alberta’s oil sands sector or a significant increase in jobs. There is also no investment in decarbonization.”
Instead, the industry’s capital spending as a percentage of available cash has reached an all-time low, while companies pay dividends to their investors and buy back shares. That could be a fatal mistake, Pembina warns, as it could be the last chance for Canadian fossils to take serious steps to decarbonize their operations as global oil demand declines through 2030 and competition for low-emission energy increases.
“Companies that make deep and rapid emissions reductions now will be best positioned to thrive in the low-emission, competitive worlds of 2030, 2050 and beyond,” the executive summary said. “The ones that don’t [will] risk leaving behind significant underfunded financial and environmental liabilities – such as tailings cleaning.”
The Industry Pathways Alliance was formed with much fanfare over a year ago and now represents 95% of Canada’s tar sands/oil sands production. Its members include Canadian Natural Resources Ltd., Cenovus Energy, Imperial Oil, MEG Energy, Suncor Energy and ConocoPhillips Canada. The Pembina study “examined the decarbonization pledges made by each company in the Pathways Alliance and compared them to actions the companies are taking to reduce their carbon footprint,” notes the Globe and Mail.
“We need these two things to align,” said Pembina’s oil and gas director and study co-author Jan Gorski. “If they’re ready to make those commitments, we need to see the details and the actions to back up those commitments.”
But that hasn’t happened so far, conclude Gorski and co-author Eyab Al-Aini.
“While the Pathways Alliance’s pledges and promises may suggest that action on this front is imminent or underway,” they write, “our analysis here indicates that oil sands companies have yet to make the necessary investment decisions — or even disclosure is sufficient.” detailed project plans with information on the allocation of investments, timelines and individual company GHG reduction targets – to provide reasonable assurance on the likely pace of decarbonization in the industry.”
Five of the six current members of the alliance first launched their climate initiative last year as the Oil Sands Pathways to Net Zero Alliance. They immediately took criticism for a vague, ambitious plan that made no reference to phasing out or phasing out production, and expressed responsibility for the 80% of their emissions that occur after their product reaches its end user. Now, Pembina is urging companies to “avoid any further delay in making investment decisions and turning their climate promises into reality.”
The report urges industry to:
• “Respond constructively” to the federal government’s proposed cap on oil and gas emissions, advice the country’s largest fossils have so far failed to heed [public consultations on the emissions cap close this Friday, so get your comments in today!—Ed.];
• prepare some final investment plans for their touted carbon capture and storage projects;
• Learn more about the process improvements, energy efficiency measures and electrification options the Alliance has been discussing as ways to reduce its members’ manufacturing emissions.
But Pathways Alliance officials told the media it was too early to expect industry involvement with specific commitments.
“The Pembina Institute’s expectation that Pathways Alliance companies will make final investment decisions on these multi-billion dollar projects before governments have finalized the regulatory framework to support them is unrealistic,” Alliance President Kendall Dilling told CBC .
“There is a very active intent to move forward with these projects,” said Alliance Vice President External Relations Mark Cameron. “But that’s not the same as being able to make funding commitments today without knowing what the conditions will be like in three years’ time, when it’s actually time to start building.”
But “at the heart of the pathways plan to reach net zero are carbon capture, utilization and storage facilities, or CCUS, that push carbon emissions deep into the ground to keep them out of the atmosphere,” states The Globe . That’s one area where fossils are getting a lot of regulatory certainty — just not the answers they’re looking for.
Ahead of the generous CCUS tax credit in this year’s federal budget, Cenovus CEO Alex Pourbaix urged taxpayers to pay around $50 billion to help the industry adopt the technology. After months of controversy, in which a former federal environment minister opposed CCS subsidies, Treasury Secretary Chrystia Freeland finally announced $7.1 billion in subsidies by the end of this decade.
That wasn’t nearly enough for Pourbaix, who told analysts his company would need more generous government support to invest in CCS. “These are multi-billion dollar projects,” he said in late April, just minutes after announcing a sevenfold increase in his company’s first-quarter earnings. “And we need to have confidence that they’re investable and that we can manage those investments throughout the commodity price cycle.” Environment and Climate Secretary Steven Guilbeault responded a few weeks later that there would be no more federal funding for CCUS development .