Are Canadian oilsands companies working to save the planet or save face?

It’s a sunny day in Canada’s boreal forest. A man in a white hardhat and blue jumpsuit studies a tablet, evergreens to his left, pipelines to his right.

As he turns and starts walking, a woman’s voice intones, “It’s time to clear the air: oilsands contribute significant carbon emissions in Canada.”

The man is transported into a busy office. He shows the tablet to a worker, who nods approvingly. The woman’s voice reveals that six companies have “joined forces” on carbon capture technology to meet global energy and climate goals.

The logos of the companies then appear on screen: Canadian Natural Resources, Cenovus Energy, ConocoPhillips Canada, Imperial Oil, MEG Energy and Suncor Energy.

The ad is for the Pathways Alliance, a group of oilsands firms which together represent the major players. It ends with the voice inviting the viewer to “come see what we’re doing.”

So, just what are the Pathways companies doing?

The alliance has pledged to achieve “net-zero emissions from oilsands operations by 2050.” Achieving that goal would be a tremendous feat, roughly equivalent to cutting all the yearly emissions of the province of Quebec.

But critics say the pledge is just another greenwashing tactic designed to extend the life of fossil fuels.

These were the recent findings of a year-long U.S. Congressional probe that turned up stunning evidence of corporate deception.

The U.S. House of Representatives’ central investigative committee found that oil companies publicly touted carbon capture technology as key to climate mitigation, but internally viewed the technology as a means to secure a “social licence” to continue producing fossil fuels for decades.

Internal documents and emails from top U.S. oil companies and trade associations, obtained by the committee, showed how an industry proposal in 2021 to lower carbon pollution rested on a strategy to tackle emissions from a company’s operations — rather than its products — in order to “further secure the industry’s licence to operate.”

The Pathways plan relies heavily on carbon capture technology. The alliance has proposed a $16.5 billion megaproject that would collect carbon dioxide from almost two dozen facilities in the oilsands and transport it to the Cold Lake area, northeast of Edmonton, Alta. There, the alliance says, it will be injected into rock formations underground and sealed off.

The plan also involves targeting pollution from its members’ operations — drilling for petroleum deposits in the oilsands — rather than the emissions created from its products, like when people drive cars running on gas made from oilsands oil.

Activities like this are where the vast majority of pollution derived from oil comes from. That matters especially for Canada, because it exports most of the oil it produces; about four-fifths of domestic oil production was sent abroad in 2021.

The Pathways plan, as they’ve put it, is to “become the global supplier of choice for responsibly produced oil”—– a bid to use “next generation” technology to help slash operational emissions while they continue producing and selling petroleum products.

“I think those [Congressional] hearings were important because they showed that this has been going on for a very long time, that Exxon has known, oil and gas companies have known, for many, many decades, that the burning of fossil fuels is causing climate change,” said Catherine McKenna, the former Canadian minister of environment and climate change.

“They have pushed disinformation campaigns, they have organized against good policy, they’ve worked to discredit the science, and look at where we are.”

A pathway ‘from dirty to clean’

McKenna recently chaired an expert panel established by United Nations Secretary-General António Guterres, which made recommendations for net-zero pledges from large corporations. The 16-member panel came to a number of conclusions at odds with the Pathways plan.

For one, they concluded that net-zero pledges from corporations must come with a target aimed at ending the use of, or support for, fossil fuels. That’s what’s in line with scientific conclusions through the Intergovernmental Panel on Climate Change, and other modelled pathways that limit warming to 1.5 degrees Celsius, as well as the limits under the 2015 Paris Agreement on climate change.

For energy companies, that means ending oil and gas production, the panel said, as well as ending exploration for new oil and gas fields and ending expansion of oil and gas reserves.

Global oil and gas use will actually have to be phased out in developed countries even faster than planned to meet 1.5 C, because modelled pathways so far have relied too heavily on eliminating coal, according to a peer-reviewed study published in February in the scientific journal Nature Climate Change.

The expert panel found that corporate net-zero pledges should include plans to slash the carbon pollution from a company’s “full value chain and activities” — meaning when people use products that were derived from a company’s products.

And it’s not enough for companies to state climate ambitions and then go about business as usual. Firms must also overhaul their corporate strategy, including investment plans, said the panel, to ensure emissions targets are kept in mind during day-to-day operations.

“You need to show a pathway for your investments from dirty to clean. They aren’t doing that,” said McKenna.

The alliance’s website says the Pathways companies recognize climate change as “a critical challenge of our time” and that industry has an “essential role” to play in helping Canada meet its climate goals.

Pathways president Kendall Dilling, who was an executive at Cenovus before being appointed president of the alliance in 2022, has acknowledged emissions from the consumption of oil products are “part of what we have to get to, as well.”

The organization is “looking at ways we can partner with end-users of our product to also tackle the consumption issues,” he told BNN Bloomberg.

But until then, Pathways is focusing on pollution from its activities, not its products, Dilling explained, because “we wanted to really start with our own business first, and take care of our own backyard.”

In the meantime, the oilsands companies are talking about going in the other direction: ramping up their production of fossil fuels.

Record profits to shareholders, cap-in-hand to governments

Imperial Oil, for example, said in December 2022 it was expecting “continued production growth” at its Kearl oilsands site. (Kearl, northeast of Fort McKay, Alta., has been leaking wastewater for close to nine months, leading to a recent environmental protection order issued against it by the province’s energy regulator. The company says it has been working with the regulator and will put in place new measures.)

In late January, Imperial Oil announced $7.3 billion in profits in 2022, the strongest financial results in the company’s entire 143-year existence. That success, it said, was due to the company benefiting from “a steady increase in oil and natural gas prices and refining margins.”

“We’re closing the books on what was the best year in the company’s history,” Imperial Oil president Brad Corson said during the firm’s January earnings call. The company is majority-owned by Texas-based ExxonMobil.

The Pathways plan is expensive, coming in at around $70 billion, according to Cenovus CEO Alex Pourbaix. But by the time Imperial Oil closed the books on 2022, it had “returned over $7 billion to its shareholders” that year, according to its fourth-quarter results.

The company does have various climate initiatives, including a $720 million “renewable diesel” project which it says could help cut three million tonnes of emissions per year, another technology it claims can cut emissions intensity by a quarter, and a new boiler configuration it says will cut 0.2 million tonnes of emissions per year.

But many of those projects, and others announced by Pathways members, are rolled out over many years and often involve studies or activities where the dollar figure is hard to pin down.

In a November 2022 statement from Pathways that outlined “decarbonization projects underway this year,” for example, the alliance pointed to a $1.4 billion boiler replacement project at Suncor first announced in 2019. Pathways says its members have “invested more than $10 billion” on research and development, but that figure stretches all the way back to 2012.

The story is similar at other Pathways companies. Canadian Natural Resources made $9.4 billion in profits during the first nine months of 2022, and then paid out $8.4 billion in combined share buybacks and dividends, and expects to grow oil production. The alliance said the company was working on technology that could cut emissions intensity 40 per cent — a pilot project that began in 2021. Cenovus, which has a half-dozen studies in play to implement carbon capture, made $5.6 billion and paid $2.5 billion to shareholders, and also expects to grow oil production. Suncor has budgeted for low-carbon investments through 2025.

Meanwhile, the companies have spent just $500 million as of late January on the first phase of the Pathways plan, according to Dilling. They are holding off on committing more funding until governments sink more public dollars into it first.

Pathways companies have engaged media many times over the past year, arguing that the federal government’s $2.6 billion tax break for investments in carbon capture projects is not enough. They would prefer governments fork over $10.9 billion, or two-thirds of the carbon capture project’s upfront cost.

Environment and Climate Change Minister Steven Guilbeault has repeatedly said it’s the companies’ turn to step up and make big climate investments using their profits.

“It is encouraging that oil and gas companies are committed to achieving net-zero. While oil and gas companies are making record profits that they are putting towards share buybacks and dividend payments, they should also be re-investing in the decarbonization and diversification needed to reach their goal of net-zero,” Environment and Climate Change Canada spokesperson Samantha Bayard told The Narwhal.

The industry has said it cannot invest more, even as the Alberta government has introduced new credits for carbon capture and storage in January as part of its industrial pollution program, which meets federal government benchmarks under Canada’s carbon pricing system.

Oil and gas companies have also so far avoided windfall taxes on their profits in Canada, taxes that have been enacted in the United Kingdom, the European Union and India. Prime Minister Justin Trudeau has dismissed the idea of a windfall tax, although his government has also proposed a share buyback tax that would come into force in 2024.

The energy companies argue Canada’s royalty system is already a form of windfall tax. And Pathways has defended its demands for more government money by arguing that oil companies are subject to volatile commodity markets, and can’t be expected to plan long-term investments based on the profitability of one year.

“It would be difficult to successfully plan a three-decade investment based on the price of oil today, and it would be impossible to remain globally competitive without government financial and policy support,” the alliance said in a statement.

McKenna, who is also the founder and principal of the Ottawa and New York-based advisory firm Climate and Nature Solutions, argued that the principles of net-zero pledges that her panel came up with are incompatible with “spending all your money to give dividends to shareholders and executive compensation, while you’re making money.”

Net-zero means “actually investing in the technology you say you need,” she said. Oil and gas companies “need to be reducing emissions now … if you’re very serious about it, you would actually be making the investments right now while you have a lot of money.”

Pathways Alliance says it’s working on ‘suite of technologies’

The Narwhal reached out to Pathways Alliance, and to each of the six individual member companies, to ask them about the expert panel’s conclusions and how the Pathways plan fits into them. A spokesperson from Pathways acknowledged the media inquiry but did not offer comment before publication.

None of the companies responded to requests for comment about the panel, their earnings and investments, or McKenna’s criticism.

Pathways has pointed to planned research on the use of hydrogen gas or nuclear reactors in the oilsands to generate non-emitting power. It says it is working on a “suite of technologies” to reduce the need for steam in oil production, electrify mining trucks, use geothermal energy to make hot water and other pursuits.

The alliance also says its engineers are working on “next generation technologies” for carbon capture, highlighting a joint Cenovus partnership with a Vancouver-based clean-tech startup, as well as a Canadian Natural Resources pilot project near Edmonton.

Jonathan Arnold, clean growth research lead at the Canadian Climate Institute, said the organization still considers carbon capture to be a “wild card.”

“It hasn’t been fully commercialized, such that it can be replicated and deployed at a scale required to bring down the sector’s emissions to net-zero,” he said.

While research continues over how to capture emissions, Arnold said the global energy market is tilting towards renewables and low-carbon technologies. Things like the U.S. Inflation Reduction Act, the prevalence of electric vehicles and batteries and an environmental shift in capital markets are going to put increased pressure on fossil fuels.

The U.S. Congressional investigation showed how the industry is thinking about ensuring its assets don’t become stranded in a low-carbon world. Investigators revealed how Shell executives understood that selling off assets essentially hands off the responsibility for cutting emissions. When one executive defended the practice, they said, “[w]hat exactly are we supposed to do instead of divesting … pour concrete over the oilsands, and burn the deed to the land so no one can buy them?”

Canadian oilsands companies need to be clearly laying out in their capital plans how they will be “transforming” so that they can “deal with the coming decline in oil and gas,” Arnold said.

“I don’t think that we see that currently,” he said. “It’s not just about decarbonizing operations, it’s also about just investing in new lines of business.”

Yet the world has still not given up on fossil fuels, Dilling has argued, and until that day comes, oilsands companies are still in the business.

“The world’s going to be using fossil fuels for some period of time, so we want Canada to produce the cleanest, lowest-carbon barrel of oil to the world for as long as that market exists,” he said during the BNN Bloomberg interview.

Nailing down the Pathways Alliance numbers

The alliance has declared one interim climate target of cutting emissions by 22 million tonnes by 2030, but beyond that, numbers seem to be in flux.

The “magnitude of (emissions) reductions in each decade can be adjusted,” Pathways acknowledged in October 2022. A graph on the alliance’s website, titled “our three-phased approach,” shows a timeline for reducing emissions, divided into three decades, but the graph had no numbers on it at the time The Narwhal viewed it.

The Narwhal asked Pathways if it had committed to any additional interim targets, or if it had any specific numbers for its emissions reduction graph, but did not hear back.

McKenna’s expert panel recommended that net-zero pledges contain short, medium and long-term emission reduction targets, with the first target set for no later than 2025, as the Paris Agreement requires that countries increase their national climate ambitions that year.

The magnitude of emissions reductions from Pathways matters, not just because of the climate impacts, but also because of how widespread the economic activity will be from its carbon capture project — and what kinds of jobs will be available for workers in an industry in transition.

Pourbaix, CEO of Cenovus, told The Canadian Press that Pathways’ plan would create 35,000 jobs. He was speaking after the federal government said it would introduce “just transition” legislation in 2023 to help retrain oil and gas workers for jobs in the low-carbon economy. Pathways says it welcomes efforts to transition the oilsands workforce.

But a presentation from the alliance also puts Pourbaix’s figure in context. The Pathways plan “protects 25,000 to 35,000 existing jobs,” it said, an umbrella figure which includes 1,000 “permanent, direct jobs” after construction. The rest are either temporary jobs created during construction or indirect or induced jobs created as a result of the business activity generated by the plan.

The Narwhal asked Cenovus if it could clarify the alliance’s jobs projections, but did not hear back.

Beyond how to organize their businesses and where to invest their money, the expert panel also had recommendations for how corporations with net-zero pledges should behave when it came to lobbying the government.

Corporations should lobby for “positive” climate action, and publicly disclose plans that show how their lobbying activities were consistent with their net-zero targets, the panel said.

Pathways has lobbied extensively for government funding for emissions reduction initiatives. But the alliance has also criticized the federal government’s Emissions Reduction Plan.

The government’s projections that the oil and gas sector would contribute an emissions reduction equivalent of 42 per cent from 2019 levels by 2030 is “simply not realistic given current technology, construction and regulatory requirements,” Dilling wrote in an op-ed.

Individual members of Pathways have also lobbied against climate action. Canadian Natural Resources lobbied to weaken regulations on methane, a potent greenhouse gas, while Suncor has lobbied against climate financial transparency.

Companies that care about being net-zero need to pay a “price of admission,” said McKenna. Net-zero pledges that don’t measure up are an example of the “new form of climate denial.”

“It’s actually saying you’re doing something, and doing the opposite — which in a way is worse, because it creates the impression that we’re actually making progress on climate change, that folks are showing climate leadership.”