An oil worker holds raw sand bitumen near Fort McMurray, on July 9, 2008. Canada's $1.6 billion bailout package for Alberta's battered oil industry is well underway but with little transparency about who is getting the money and for what purposes.
Image Credit: THE CANADIAN PRESS/Jeff McIntosh
November 15, 2019 - 6:00 PM
OTTAWA - Canada's $1.6-billion bailout package for Alberta's battered oil industry is well underway, but with little transparency about who is getting the money and for what.
Almost $1 billion of the package of loans, guarantees and government grants announced last December is in the hands of companies, but details are available for a small fraction of the spending.
The package is rolling out as pressure mounts on Canada to fulfil its promise to end all subsidies to fossil fuel producers, and European banks flee the sector altogether.
Sweden's central bank, the Riksbank, said Wednesday it had sold its Alberta-government issued bonds because it will no longer invest in assets held by governments or companies with large climate footprints. A day later, the European Investment Bank, the non-profit lending institution of the European Union, announced it will no longer invest in any fossil fuel projects after 2021.
Both decisions followed a warning from Norway's central bank on Nov. 5 that climate risk must be considered in all risk assessments before investments are made.
Canada's energy industry is reeling from the departure of massive amounts of capital, with $30 billion divested in the last three years, even as global demand for oil is forecasted to grow at near-record levels. The International Energy Agency said this week that global demand will grow by about one million barrels a day over the next five years, but plateau by 2030 as the use of more efficient vehicles and electric cars begins to take hold.
A spokeswoman for the Canadian Association of Petroleum Producers said investors need to know that Canadian oil and gas is produced more sustainably and with tougher environmental standards than almost anywhere else in the world.
"We would encourage groups who are redefining their investment portfolios to consider that an investment in Canadian energy is a sustainable choice," said Tonya Zelinsky.
Zelinsky's comments echo those coming from the Alberta government. Premier Jason Kenney's United Conservative government was elected last spring with a promise to restore confidence in Alberta's energy sector.
What may be most concerning to Canada's energy workers and the economy as a whole is that natural gas is also on the European chopping block. Liquefied natural gas, which produces fewer emissions than coal when burned for electricity, has been held up as an alternative fuel and Canada is responsible for more than one-third of new global gas projects in development.
Nicholas Browne, a research director at Wood Mackenzie, a United Kingdom-based global energy consultancy group, said Friday the European bank's decision puts natural gas on the climate hot seat beside oil.
"The EIB's new financing criteria will make lending to gas projects very difficult," he said in a written statement.
Climate activists, however, want Canadian investors to use their money to promote clean growth at the expense of fossil fuels. James Rowe, a professor of political ecology at the University of Victoria, said Canada's lenders have been much slower to move against traditional petroleum companies than European ones.
He said while European investors see the writing on the wall for fossil fuels and are walking away before they are left holding stranded assets, Canadian lenders, investment firms and pension funds are taking a lot more risk.
It is not clear whether the $1.6 billion aid package announced by outgoing Natural Resources Minister Amarjeet Sohi has had a significant impact in the oil patch. Nor is it clear where most of the money is going.
Natural Resources Canada said this week that $37 million of the $50 million commitment under its Clean Growth Program has been pledged for nine projects that help oil and gas companies reduce their carbon footprint.
Innovation, Science and Economic Development Canada announced $49 million each to two projects to help Alberta companies building facilities to turn propane into polypropylene, a type of plastic not currently produced in Canada but used often in packaging and labelling.
A spokesperson for the Business Development Bank of Canada said 892 loans totalling $207.5 million have been approved out of its $500 commercial loan allotment in the aid package. There are no details provided about any of them.
Export Development Canada's $1 billion package has loaned or guaranteed $629 million to 37 companies, though the agency's website does not distinguish which loans came through this program. Some company websites do mention the transaction, including natural gas company Painted Pony Energy Ltd., which reported receiving a $25 million credit facility in May.
EDC last January announced it will no longer provide financing for projects involving coal, but will continue to aid oil and gas firms. Spokeswoman Amy Minsky said Friday that supporting customers to transition to a low-carbon economy is a priority for the agency, including helping them partner with clean-tech companies that provide solutions to lower emissions.
She also said EDC is collecting data about emissions and management of carbon footprints for its customers and to inform decisions going forward.
The Bank of Canada earlier this year included climate risk in its annual financial system review for the first time, with a promise to start a multi-year research program to better understand the risks climate change poses to the economy and banking system.
This report by The Canadian Press was first published Nov. 15, 2019.
News from © The Canadian Press, 2019