Environmental watchdog says it found ‘strong’ evidence oilsands tailings ponds are tainting groundwater


A North American environmental watchdog says it has found “scientifically valid evidence” that oilsands tailings ponds are contaminating groundwater sources.

The report was released today by the Commission for Environmental Cooperation, an agency tasked with implementing an environmental side accord to the North American free trade pact.

“Based on the scientific tools used today, the current literature shows that there is strong scientifically valid evidence of oilsands processed water seepage into near-field groundwater around tailings ponds when compared with the first peer-reviewed evidence published in 2009,” says the report.

Tailings ponds, such as the ones used by oilsands mining operations north of Fort McMurray, Alberta, collect by-products from oilsands mining operations — a mixture of water, sand, residual bitumen and other hydrocarbons that the industry calls “processed” water.

Many of these byproducts are toxic and environmentalists have long warned of the risks of leaks from tailings ponds, while the residual oil that covers the ponds can trap migratory birds.

These massive ponds are bordered by outer walls of dirt built to hold back the tailings water — which, as the report notes, “is an acutely toxic substance containing, among other things, naphthenic acids and heavy metals.”

For years it’s been unclear whether pollutants detected in waterways near oilsands operations came directly from plant operations or from bitumen already in the soil.

Although tailings ponds may be leaking into groundwater, the commission found there is less evidence to suggest it’s seeping into surface water sources like the Athabasca River, which runs adjacent to one of the oldest oilsands tailings ponds.

“The literature shows that there is no evidence of dissolved bitumen-derived organics (natural or anthropogenic) being detectable in any water samples, although a major challenge to spotting any seepage is dilution in a very large river,” the report states.

The Commission for Environmental Cooperation launched its probe of tailings ponds after environmental groups, including Environmental Defence Canada, filled a submission in 2017 that accused the federal government of failing to enforce the federal Fisheries Act by not prosecuting oilsands producers over the “alleged leaking of deleterious substances.”

The Commission for Environmental Cooperation cannot issue binding rulings, but instead its reports the facts it finds.

“To me, the evidence is really clear,” said Dale Marshall, a program manager for Environment Defence. “It tells us that the federal government is not upholding its responsibility to protect human health and the environment.”

 



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Oilsands producers pile on debt to survive the crash but eye tentative recovery


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“We knew that the second quarter would be challenging. Certainly the most challenging in our modern history,” Suncor president and CEO Mark Little said on the company’s second quarter earnings call Thursday.

Little and other Suncor executives said the company is not expecting to take on more debt in the second half of the year but stopped short of detailing what the company would do with rising cashflows as oil prices improve. Little said it was too early to commit to a strategy amid volatility in crude markets and uncertainty about the coronavirus pandemic as economies re-open.

“Let’s see it before we decide what to do with that additional cash,” Little said.

We knew that the second quarter would be challenging. Certainly the most challenging in our modern history

Mark Little, Suncor president and CEO

Suncor reported a net loss of $614 million in the second quarter, compared with $2.7 billion in net earnings a year earlier.

During the pandemic, Suncor and its partners Teck Resources Ltd. and Total SA decided to shut down one of the two units at its 190,000-bpd Fort Hills oilsands mining project. Little said there is currently a debate among the partners about scaling production back up at the facility.

“There’s a substantial chance it’ll be back online by the end of the year,” Little said.

Phil Skolnick, analyst at Eight Capital, expects some producers“to ramp up production andfurther drive down the high fixed operating cost burden.

Overall, Suncor financial and operating results were better than expected, National Bank Financial analyst Travis Wood wrote in a research note, raising its target price for the stock to $28 per share from $27. The stock was trading at $23.1, down nearly 3.4 per cent for the day.

“Through the remainder of the year, Suncor will continue to focus on costs, with incremental help from what should be a fully operating (Fort Hills mine) by year-end,” Skolnick said, adding that a new pipeline connecting its Syncrude project and its main oilsands mind would soon be complete and further boost productivity.

Financial Post

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‘Hypocritical’: After divesting from oilsands companies, Norway expands to untouched Arctic


CALGARY — Norway’s move to stimulate its oil and gas industry with tax breaks and new exploration blocks in the Arctic after its sovereign wealth fund divested from Canadian companies has once again angered Alberta’s politicians.

“It’s hypocritical to try to drive investments away from a competitor here in Canada… and at the same time aggressively pursue increased production in Norway,” Alberta Energy Minister Sonya Savage said in an interview with the Financial Post on Thursday.

This week, Norway’s government cut taxes for the country’s oil and gas industry in a bid to reduce break-even costs there by 40 per cent and stimulate investment in the sector. It is seen as an incentive to attract oil majors to the Norwegian Continental Shelf.

Rystad Energy, an Oslo-based energy research firm, said in a release the move would help 36 projects including some by Norway’s state-controlled oil producer Equinor ASA (formerly Statoil ASA) as well as majors such as Royal Dutch Shell Plc and ConocoPhillips. All three companies have divested all or parts of their oilsands assets in recent years.

In addition, Norway’s government also opened up new areas for offshore oil exploration this week, including 125 blocks in the Barents Sea — in a relatively untouched portion of the Arctic.

The Norwegian Petroleum Directorate aims to expand the country’s oil output by 43 per cent over the next five years to 2.02 million barrels per day by 2024, up from a 30-year low of 1.41 million last year.

The expansion comes after the country’s US$1-trillion sovereign wealth fund — the largest in the world — announced in May that it was selling stakes in Suncor Energy Inc., Canadian Natural Resources Ltd., Imperial Oil Ltd. and Cenovus Energy Inc., apart from a handful of international oil companies and coal-fired power companies, over concerns about emissions.

Savage said Norway’s sovereign wealth fund dumped its holdings in four of Alberta’s largest companies — exacerbating liquidity concerns here — over climate change concerns earlier this year. “It’s more than a disconnect. It’s hypocritical,” she said.

Public opinion in Norway is divided between those who want to see Western Europe’s largest oil-producing country diversify into other industries and those who are focused on stimulating the economy and supporting local jobs, said Marius Kluge Foss, principal with Rystad.

We are bragging about being a green country … but we are very reliant on the income from oil and gas

Marius Kluge Foss, Rystad Energy

“We are feeling the dilemma,” Foss said in an interview. “We are bragging about being a green country and bragging about producing all of our electricity from hydro-power and have the highest proportion of electric vehicles, but we are very reliant on the income from oil and gas.”

There is more agreement within the country over Norges Bank’s decision to divest its holdings in oil and gas producing companies.

Foss said Norwegians were supportive of divestments from the sovereign wealth fund primarily because the country’s economy is already focused heavily on oil exploration. “Being that dependent on fossil fuels in our own economy, it makes a lot of sense to diversify,” he said.

As Norway’s sovereign fund sold off shares in Canadian oilsands producers, another major oil producing country’s sovereign wealth fund used the coronavirus pandemic-induced downturn to buy up shares in those same companies.

Saudi Arabia’s US$320-billion Public Investment Fund bought shares in Suncor and Canadian Natural during the energy market collapse and now ranks as the eighth-largest Suncor shareholder and 14th-largest shareholder in CNRL, according to a Bloomberg news report.

Albertans frequently compare their own economy and public finances with Norway as the two places have a similar population base and a large endowment of natural resources.

The fascination with Norway has only increased as successive governments since the 1990s have reduced payments into the province’s Heritage Fund, while Norway’s sovereign wealth fund continued to grow.

Last week, the Alberta government tapped former Canada Pension Plan Investment Board CEO Mark Wiseman to chair the board of the Alberta Investment Management Corp., which manages the Heritage Fund.

AIMCo has come under fire in recent months for losing $2.1 billion in high-risk volatility trades linked to oil prices, which led analysts to question why the oil-and-gas-dependent province’s public pension assets weren’t invested in a more diverse range of assets.

As other oil producing countries develop incentives for their own sector, the federal and government is also looking to boost the industry.

Federal Natural Resources Minister Seamus O’Regan said Monday that financial help from the Business Development Bank of Canada and Export Development Canada, apart from programs to help bigger producers, are important to boost the sector.

Work is ongoing with the federal government on liquidity programs aimed at helping Canada’s domestic oil industry, Savage said. To date, only a few energy companies, including Athabasca Oil Corp., have announced their intention to use the loan programs, but none of the money has been allocated.

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Why Norway fund’s divestment from the oilsands could trigger a bigger fund exodus


CALGARY — The world’s largest sovereign wealth fund has divested from four Canadian oilsands companies over concerns about carbon emissions, adding to the woes of the already embattled domestic energy sector.

Shares in Suncor Energy Inc., Canadian Natural Resources Ltd., Imperial Oil Ltd. and Cenovus Energy Inc. all tumbled between 5 per cent and 7 per cent Wednesday after Norges Bank Investment Management, the country’s $1 trillion oil fund, said it would exclude those companies from its portfolio, citing their “unacceptable greenhouse gas emissions.”

The fund reportedly held stock worth $1.15 billion in the Canadian companies at the end of 2019.

The decision is ‘poorly informed and highly hypocritical’

Alberta Energy Minister Sonya Savage

NBIM, which is a unit of the central bank, said it had taken a long time to sell shares of several of the blacklisted companies in a reasonable manner due to the “market situation, including liquidity in individual shares.”

It always sells its holdings before any exclusions are announced, to avoid excessive market movements.

In addition to those four oilsands companies, the fund also dropped Swiss-based Glencore Plc., U.K.-based Anglo American Plc, Germany’s RWE AG, South African petrochemicals firm Sasol and Dutch company AGL Energy. Egypt’s ElSewedy Electric Co., and Brazilian companies Vale SA and Electrobras were also excluded for causing environmental damage.

However, the Canadian oil industry believes the exclusion did not account for the industry’s efforts to reduce emissions in recent years.

“Pulling investments from the oilsands and claiming it’s for climate change reasons is more about publicity than fact,” Cenovus president and CEO Alex Pourbaix said in an emailed statement, adding that the company has cut its emissions intensity by 30 per cent in the past 15 years and plans to cut it by another 30 per cent over the next 10 years.

“Our company is committed to finding solutions to the global challenge of climate change while continuing to be a significant contributor to the Canadian economy through taxes, employment and buying goods and services from businesses across this country,” Pourbaix said.

Oilsands companies have been under unrelenting pressure in recent years to reduce greenhouse gas emissions and improve their environmental performance after a string of European banks such as BNP Paribas, ING and HSBC Plc have also pared back on lending to the industry.

A number of European oil companies such as Royal Dutch Shell Plc have reduced their investments in the oilsands to cut their carbon footprint and pivot toward less intensive forms of energy such as natural gas.

Now, the exit from the sector by the world’s largest sovereign wealth fund with assets, built up through oil revenues from Norway’s offshore oil reserves, further exacerbates that pressure.

Canada’s federal government added to the industry’s woes Wednesday, noting that fossil fuel companies must be more transparent in their approach.

“We’ve seen investors around the world looking at the risks associated with climate change as an integral part of investment decisions they make,” Prime Minister Justin Trudeau said Wednesday, adding that many companies in the energy sector understood the investment climate is shifting.

“There is a need for clear leadership and clear targets to reach on fighting climate change to draw on global capital,” he said.

On Monday, Ottawa rolled out a bridge financing plan for companies with at least $300 million in revenues, which is expected to aid aviation and energy sector.

Companies that ask for the help will also have to show how they are contributing to reducing greenhouse gas emissions over the coming years, tying the cash to the Liberals’ promises on the environment. That will include oil and gas companies that are also facing a hit from a global drop in oil prices.

Suncor, Canadian and Imperial did not respond to a request for comment before deadline.

NBIM is now the highest profile fund to exit the oilsands after a number of university endowment funds divested over the past few years. Japan’s Mistubishi UFJ Financial Group joined a long list of European banks to signal they would reduce transactions in the industry on Wednesday.

Shares in all four companies fell sharply Wednesday morning, but analysts say their tumble was roughly on pace with the broader decline in oil and gas stocks.

“They’re underperforming the market but they’re not underperforming energy,” Eight Capital analyst Phil Skolnick said, adding that “energy is having a really bad day.”

Skolnick said most of the market expected the Norwegian fund to divest from Canadian Natural and Cenovus as it had already signalled it would move away from exploration and production companies in the oilsands, but he said there was a chance that Suncor and Imperial would be spared the exclusion because of their integration with refineries.

It’s becoming increasingly difficult for large fund managers to buy into the Canadian oil and gas industry because large funds try to buy large-cap indexed players and the market capitalization of the domestic oilpatch has shrunk, Brompton Funds senior vice-president and chief investments officer Laura Lau said.

“Part of the problem is there’s no market cap left to buy,” Toronto-based Lau said, noting that companies such as Husky Energy Inc. were now part of the small cap indices.

Lau said Canadian oil and gas companies need to do a better job communicating their efforts to reduce their emissions to prevent the continued exodus of large funds from the sector.

“I think they have to do a better job of communicating. I think they actually have done a good job of bringing (emissions) down but it’s the communication they need to improve,” Lau said.

Norway’s sovereign wealth fund was built up over decades using the proceeds of oil revenues and the country’s state-controlled oil producer, Equinor SA, is planning to ramp up its drilling program this year. As a result, the decision is “poorly informed and highly hypocritical,” Alberta Energy Minister Sonya Savage said in an emailed statement Wednesday.

“As Norway, the 15th largest oil producer in the world, is set to drill more oil wells than ever before, one could only imagine Norges Bank’s decision to be more focused on commercial competitiveness rather than environmental consideration as the world looks for reliable source of oil to fuel the coming decades,” Savage said.

The Norwegian government owns 67 per cent of the shares in Equinor, which is also a joint-venture partner with Suncor in drilling projects in the North Sea and offshore Newfoundland and Labrador.

Equinor spokesperson Erik Haaland said in an email there is “no connection between Norges Bank Investment Management and Equinor” and the two operate independently.

“The decision does not impact Equinor’s relationship with Suncor,” Haaland said.

Earlier this month, Equinor, suspended its forecast but maintained its long-term forecast for average output growth of 3 per cent per year from 2019-2026.

With files from The Canadian Press and Reuters

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