Oilsands Will Weather Norway Wealth Fund’s Divestment, Proponents Say

June 17, 2020 Updated: June 17, 2020

News Analysis

Despite the recent withdrawal of the world’s largest sovereign wealth fund from Alberta’s oilsands, proponents believe the industry still has a bright future.

Last month, Norges Bank Investment Management, which manages Norway’s $1 trillion government pension fund, announced it is stopping investment in Canadian Natural Resources, Cenovus Energy, Suncor Energy, and Imperial Oil.

“Water finds its level, so if some people are sellers, others are buyers,” former Alberta Petroleum Marketing Commission CEO Richard Masson told The Epoch Times. “Capital will find a way to go to a place that’s still going to get a good return, and … there are returns to be had to developing oil in Canada.”

The oilsands weren’t the only investments Norway pulled away from. It also divested from thermal coal companies and a few others for environmental or human rights issues. Norway objected to the carbon footprint of the oilsands, which they thought was higher than the industry claims.

Masson, who is now a first vice-chair of the World Petroleum Council-Canada and an executive fellow at the University of Calgary’s School of Public Policy, says Norway “didn’t have an up-to-date view about some of the companies they cut out of their portfolio.”

“Both Suncorp and Cenovus have committed—CNRL as well—significant goals for 2030 in their business plan and some of them have committed to net zero in 2050,” he said.

Critics maintain that the 2050 target is an “aspirational” goal and not a commitment. The Norwegian fund objected that the cap on oilsands emissions announced by former Alberta premier Rachel Notley was never formally implemented.

“It’s easy to make that commitment, but how are you going to get it done practically and regulate it?” Masson asks.

“Many people have bought oilsands leases under the understanding that they’d be able to develop them. It’s there, then, you’re imposing a regulation that may prevent some people from developing their property. That could be looked at pretty poorly, and so they were looking for a way to try and say ‘How do we do this fairly?’”

Masson says one reason Canada’s emissions numbers may seem high is that it accounts more fully for emissions other countries ignore. These include methane emissions from flaring gas—something Canada has minimized.

Mark Milke, executive director of research at the Canadian Energy Centre, co-authored a research paper that showed Canada’s energy sector paid $359 billion to governments from 2000 to 2018. This amount was $36 billion more than the federal government spent on programs in 2018-19.

Milke told The Epoch Times that Canada can be proud of the industry’s environmental record.

“Alberta and Canada already have multiple positive ESG (environmental, social and governance) indicators, and the industry has consistently made improvements year over year. Neither Alberta, nor Canada, should … apologize for its environmental leadership.”

Milke says carbon emissions are only one aspect that ethical investors should consider.

“There is going to be a global demand for years to come for oil and gas, and it is clear that Canadian oil and gas can meet that demand. If not us, then other regimes will, with less interest in civil rights, proper labour practices, and in meeting high environmental standards,” he says.

A report issued in 2019 by the Bank of Montreal found that independent evaluators gave Canada’s oil industry top marks for ESG indicators. Another BMO report in March of this year suggested Canada could fill a 400-billion-barrel shortfall in global oil production by 2040.

For the past decade, the Tar Sands Campaign against Canadian oil has tried to discourage foreign investment. Masson says while those investments are helpful, they’re less crucial than in times past.

“In the very beginning of the oilsands it certainly took a lot of foreign capital, a lot of risk capital, and much of it was American and some from Shell and others,” he says. “Then we had a big wave of investment that ran from a period of eight years up to 2014 when we were investing $30 billion a year.”

“[Now] we’re down to $12 billion a year … but it’s a much smaller amount than what we needed during the heyday.”

It seems the world still wants what Canada’s got. A 2019 Ipsos Global Pulse survey of 31 countries issued by the Canadian Association of Petroleum Producers found that Canada was the top choice as a source of oil and gas.

“We have a pretty bright future. We’ve got a great big resource,” Masson says. “It’s worth a lot of money, people are pretty good at producing it, and there’s a lot of good ideas on how to make it better.”