Dirty Money: The Alberta Oil Sands and the Future of Green Investing
Canada’s Oil Sands are facing an increasingly uncertain future. On Sunday, 23 February 2020, a major attempt to expand the scale of oil extraction on the oil sands of Alberta, Canada collapsed just days ahead of a deadline for government approval, saving the Canadian government the hard choice between pleasing environmental or energy interests. Developer Teck Resources declared that ‘there is no constructive way forward’ for their plan to increase Canadian oil production by 5%, which has been nine years in the making. Environmental concerns and changes in investing practices were cited as major reasons for the developer’s withdrawal of the plan. Chief Executive of Teck Resources Don Lindsay said in an open letter to the federal government that ‘…global capital markets are changing rapidly and investors and customers are increasingly looking for jurisdictions to have a framework in place that reconciles resource development and climate change, in order to produce the cleanest possible products. This does not yet exist here today […] Questions about the societal implications of energy development, climate change and Indigenous rights are critically important ones for Canada , its provinces and Indigenous governments to work through.’
The project had been heavily protested by environmental advocates and Indigenous groups, and Canada’s national parks agency had also expressed concern about potential damage to nearby Jasper National Park, one of Alberta’s five UNESCO world heritage sites. But economic concerns were also paramount. A lack of investors, a drop in oil prices, availability of cheaper foreign oil, and reduced demand from the U.S. market coupled with the delay in building the promised Keystone XL pipeline were also cited as reasons for dropping the $15.5 billion project.
This announcement follows closely on recent moves by some of the world’s largest financial institutions to divest from investments in the Alberta Oil Sands. Sweden’s central bank announced this fall that it would stop holding Alberta’s bonds, while insurer The Hartford in December decided to stop investing in or insuring oil operations on the oil sands. And just a few weeks ago BlackRock, the world’s largest asset manager, announced it would stop investing in companies which receive revenue from the oil sands, as part of its larger pledge to focus on sustainable investing.
What are the Alberta Oil Sands?
The Alberta Oil Sands, known in environmental activism communities as the ‘tar sands,’ are responsible for 60% of Canada’s oil production. Canada is the world’s fourth largest oil producer and makes up the largest share of U.S. oil imports. Nationally, Canada supplies nearly 6 million barrels of oil a day to the market. The oil industry is a vital economic driver for the western part of the country, where it is the dominant industry and supports thousands of rural jobs. Yet extraction and refinement from oil sands is one of the most environmentally damaging forms of energy production.
Oil sands are a naturally occurring but unusual form of petroleum deposit, consisting of a water-saturated mixture of sand, clay and a viscous form of petroleum called bitumen. Extracting bitumen from the sand and clay is a difficult process, requiring far more energy expenditure than conventional petroleum refinement and producing about 70% more greenhouse gas per unit of energy than the global average for oil extraction. Large areas of Canada’s boreal forests must be cut down to access bitumen deposits, and chemicals have to be added to bitumen to make it transportable, as it is too thick to pipe. Toxic tailings waste ponds equivalent in size to 500,000 Olympic swimming pools cover the nearby landscape. These ponds are toxic for birds and other wildlife, and leak into the nearby Athabasca River. Acid rain created by emissions from the extraction process is also a problem in Alberta. According to environmentalist and former oil sands worker Paul Belanger, ‘for every barrel shipped out, six to 12 barrels of tailings waste is produced.’ The environmental destruction significantly impacts nearby Indigenous communities in its impact on local vegetation and wildlife. These groups have a cultural tradition of eating vegetation and game harvested from the nearby land, and the pollution caused by oil sands projects has been shown to be contaminating these food sources. Teck Resources’ proposed project would’ve cut down an estimated 24,000 acres of boreal forest and released millions of tonnes of CO2 into the atmosphere annually.
Financial Pressure
In the face of these pressing environmental concerns and an increased interest among energy consumers in renewable energy sources, many large financial institutions have recently pledged to stop investing in the Alberta Oil Sands. In addition to BlackRock, The Hartford, and Sweden’s central bank, HSBC (the largest bank in Europe), BNP Paribas Group, Société Générale and Norway’s sovereign wealth fund have also pledged to stop investing in the oil sands and pipelines. For economic reasons, namely, high production costs and widespread opposition to new pipelines, international oil companies including Royal Dutch Shell, ConocoPhillips and Equinor have also recently stopped investing in the oil sands projects. Several of these companies cited shareholder pressure to divest from environmentally damaging projects as a key reason for their decisions.
Government Response
In December, rating company Moody’s cited environmental costs and the province’s over-dependence on oil sands as reasons for downgrading Alberta’s debt to its lowest level in 20 years. Alberta’s government has only doubled-down its support of the oil sands in the face of these investor withdrawals, and has been criticised for its response. Alberta premier Jason Kennedy has promised to strip foreign investors like HSBC of government contracts and has accused them of hypocrisy for continuing to invest in oil in other countries, like Saudi Arabia. Alberta has been criticising for producing pro-oil online content intended to look like journalistic articles, one of which attacked a non-profit which teaches local schoolchildren about climate change.
Despite the withdrawal of international investors, the oil sands are still producing more oil than ever before, due to the continued investment of Canadian banks and pension funds. Only time will tell if the recent trend towards divesting from the oil sands will become a permanent blow. While the international tide appears to be turning on the oil sands, for now the tug-of-war between economic and environmental interests continues in Canada.
