Canada oil firms’ openness rates low
Canada’s biggest energy companies, including Suncor Energy Inc. and Imperial Oil Ltd., are trailing global peers in reporting environmental performance as scrutiny of the oil sands intensifies.
The 10 largest Canadian oil and natural-gas producers by market value scored an average 31.7 out of 100 on environmental-performance disclosures in 2011, the last year with information for all companies, according to data compiled by Bloomberg. The Environmental Disclosure Scores weigh information such as emissions, spills and water use.
The Canadian scores lag behind those of some of their largest U.S. and European competitors, including 54.6 for Irving, Texasbased Exxon Mobil Corp., the world’s biggest energy company, 48.8 for Europe’s No. 1 oil producer Royal Dutch Shell PLC, and 62 for London-based BP PLC which has taken a charge of $42.5 billion related to the 2010 Gulf of Mexico oil-spill disaster.
Canadian oil-sands producers are under pressure
from domestic regulators, environmentalists and the European Union, which is considering legislation that would penalize Albertan crude for being more carbon-intensive than conventionally produced oil. The scrutiny is slowing proposals for pipeline developments like TransCanada Corp.’s Keystone XL, which would connect Alberta to the U.S. Gulf coast, and Enbridge Inc.’s Northern Gateway, which would traverse the Rockies en route to British Columbia’s Pacific coast.
“Canada right now is facing potential limitations on market access, ongoing controversy around oil-sands production, and we’re also seeing opposition to pipelines,” said Bob Walker, a vice president at NEI Investments in Vancouver.
“It feels like the noose is tightening on this industry, and part of the problem is that it doesn’t have a strong narrative for what it’s doing for the environment,” Walker said in a telephone interview. “People want to see the proof.”
Bloomberg’s environmental risk scorecard, which is a component of environmental, social and governance disclosure data, measures companies’ management of nonfinancial environmental information with an effect on reputation and value. Bloomberg collects companysourced data from corporate social responsibility reports, annual reports and proprietary surveys and organizes the information according to metrics appropriate for each industry. Bloomberg’s ranking places different weights on different data provided by companies.
Suncor, the biggest Canadian energy producer, and Calgary-based Imperial Oil, which is a unit of Exxon, were among the four Canadian companies with disclosure scores higher than 35 in 2011. None of the 10 scored higher than 50.
According to the most recent filings, Canadian oil and gas producers with a market value of more than $2 billion had an average Environmental Disclosure Score of 13.6. That compares with 18 for U.S.based producers and 34.5 for their peers in Europe, according to the data. Spain’s Repsol SA and New York-based Hess Corp. were tied with the world’s top score of 78.5, according to the data.
“Our efforts on corporate sustainability reporting continue to evolve, and we strive to improve that reporting and make it better every year,” said Pius Rolheiser, an Imperial spokesman.
“With transparency comes accountability,” Arlene Strom, vice president of sustainability at Suncor, said in a Nov. 1 interview. “I think we are quite transparent on the environmental front and reporting GHGs. We look at stakeholder feedback every year to find out what it is they want us to be reporting.”
Environment-related issues are increasingly having an effect on share prices of oil companies. Shares of Canadian Natural Resources Ltd., which had a Environmental Disclosure Score of 40.5 in 2011, fell 4.5 percent after a July 26 announcement that the Alberta Energy Regulator told the company to restrict steam injections at its Primrose and Wolf Lake projects after a bitumen leak was reported at Primrose in June. The stock has risen 1.3 percent since the announcement, compared with a 2.9 percent increase in the Standard & Poor’s/TSX Energy Index.
Canadian Natural declined to comment on the company’s reporting score and said it plans to release a sustainability report for 2012 in the coming weeks.
The intensity of greenhouse gases in Canadian energy companies’ emissions rose 21 percent from 2008 to 2012, while use of fresh water also increased, the Canadian Association of Petroleum Producers said in a Nov. 5 report.
The deteriorating performance follows a report by Environment Canada last month that greenhouse-gas emissions will rise by 2020 in the country, missing a target to cut output 17 percent by that date, mainly because of oil and gas expansion.
“The oil-sands industry will be judged on the performance of the worst performer and cumulative impacts of all projects together, so while individual leadership reporting adds value and is welcome, mitigating actual environmental impact is more important,” said Jennifer Grant, director of oil-sands research at Calgarybased environmental consultants Pembina Institute.
Extracting crude from the oil sands involves scraping or steaming the pastelike bitumen and then softening it to make it flow though pipelines.
Studies show 8 percent to 37 percent more carbon is released to produce and bring a gallon of fuel from the oil sands to the market compared with conventionally produced fuel, according to a review by Pembina Institute. That’s because it takes more energy to extract and refine the oilsands bitumen than lighter crudes.
Compared with the U.S., oil-sands crude is on average 9 percent more carbon intensive than the U.S. average on a wells-to-wheels basis, which measures CO2 emissions from the start of oil production through to combustion, according to the Canadian Association of Petroleum Producers report.
The scrutiny on oil producers has put more pressure on pipeline companies planning to ship Alberta’s oil abroad.
U.S. President Barack Obama has said he won’t issue the permit TransCanada needs to build the $5.3 billion Keystone XL pipeline if it would significantly worsen global warming. In a July 28 interview with The New York Times, Obama said that Canada “could potentially be doing more to mitigate carbon release.”
The U.S. State Department is currently reviewing the pipeline project.