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Fuelling the oil sands

The oil sands industry's heavy environmental toll has prompted other investors to walk away. Why is our export credit agency bankrolling its rapid expansion?

Half a century of oil sands mining in northern Alberta has transformed vast tracts of boreal forest and wetlands into artificial lakes contaminated with toxic tailings waste.

These lakes, which industry calls “ponds,” now hold over a trillion litres of water so polluted that entire flocks of birds have died after landing on them. Scientific research has shown they’re leaking into the groundwater and the Athabasca River, with one lake estimated to be leaking 6.5 million litres every day. This raised sufficient alarm to lead NAFTA’s environmental monitoring commission to call for an investigation in 2018.

But the polluted lakes left in the wake of oil sands mining haven’t dissuaded Export Development Canada (EDC) from supporting companies heavily involved in the business. Despite these and other severe ecological impacts of the oil sands industry — from extensive deforestation to soaring greenhouse gas emissions — EDC continues to finance some of its major players.

Oil sands’ toll, at home and abroad

Beyond the threat of water pollution, the tailings lakes also emit air pollutants, some of them toxic. So do the upgrading facilities that convert the bitumen extracted from the oil sands into a synthetic crude oil. Scientific studies show trends of increasing — and vastly under-reported — pollution throughout the region that coincide with the upswing in oil sands extraction. Lakes as far as 90 kilometres away, for instance, have seen a “striking increase” in levels of carcinogenic chemicals released by the industry.

Communities downwind and downstream, which are home to several First Nations, have long raised concerns that pollution from oil sands operations may be harming their health and their way of life, which has already been severely impacted by the industry.

Oil sands mining and “in-situ” extraction1These are the two primary means of accessing the bitumen found in oil sands deposits. In-situ extraction, which is used for deposits too deep to be mined, involves forcing bitumen to the surface using steam. have extensively degraded Alberta’s boreal forest, harming threatened species such as the woodland caribou and eliminating swathes of forest cover that act as carbon sinks. Twenty percent of the surface-minable oil sands area was deforested from 2000 to 2012 alone.

EDC financing in support of major oil sands players, Jan. 2010 – Apr. 2020

  • Suncor: $425 million to $1.05 billion
  • Cenovus: $650 million to $1.45 billion
  • Husky: $950 million to $2.3 billion
  • TC Energy (TransCanada): $2.56–5.55 billion1
  • Enbridge $2.69–5.78 billion2

Total: $7.28–16.13 billion

These are just a few of EDC’s clients involved in the oil sands. Suncor, Cenovus and Husky are among the big five players that account for 80 percent of oil sands production in Canada, while Enbridge and TransCanada have major oil sands pipeline projects.

Both methods of extraction, but in-situ especially, are highly energy-intensive. So is the bitumen upgrading process. As a result, Alberta’s Athabasca oil sands are the most GHG-intensive source of crude of all oilfields examined by academic researchers for the Oil-Climate Index (OCI). The greenhouse gas emissions released by extracting and processing a barrel of oil from the sands are about 2.2 times higher than the average value for North American oilfields in the OCI database. Scientists have warned that even current levels of oil sands production are incompatible with international efforts to keep global warming well below the 2-degree mark.

“Fort McKay’s residential Reserves are surrounded by nine oil sands mines (…). The breach of a single tailings pond would have devastating health and environmental impacts. (…) Air emissions from these mines are known to frequently cause harmful air quality exceedances at Fort McKay’s Reserves.” (…)

“Studies have concluded that oil sands development is the leading cause for the rapidly declining population of traditional wildlife resources (…). The boreal forest, on which members rely to meaningfully transmit traditional knowledge to the next generation, is highly fragmented and inaccessible due to oil sands development; worse, there is no technology proven to reclaim boreal muskeg or peatlands.”

– Fort McKay First Nation, in a 2018 submission to a parliamentary committee

Accelerating harm

As oil sands companies push to rapidly expand production, the environmental toll of the industry’s first half-century of growth is set to be far surpassed in coming decades.

The industry’s total volume of greenhouse gas emissions nearly doubled from 2005 to 2016, and it’s projected to increase by another 47 percent between 2016 and 2030. Such rapid growth would put Canada’s emissions reductions targets — which it’s already on track to exceed — increasingly out of reach. Emissions from this one industry alone would account for more than a fifth of the country’s total permissible emissions by 2030, and about 80 percent by 2050, under Canada’s climate targets.

And those targets, UN scientists have warned, fall short of what’s needed to prevent catastrophic climate change.

Although Alberta passed a law in 2016 to limit emissions from its oil sands industry to no more than 100 million tonnes of greenhouse gas per year, the province has already approved new projects that will bring the total to at least 131 million tonnes.

Even the oil sands emissions projections given above may in fact be gross underestimates. Environment Canada scientists recently found that the actual emissions measured in the air above several oil sands mines were much higher than the estimates calculated by industry and government, which have been used to forecast future emissions. Their study warns that emissions estimates across the entire oil and gas sector “may need to be revised upward by at least 30%.”

Oil sands divestment on the rise

These financial institutions won’t invest in or finance companies heavily involved in oil sands development:

  • Aegon
  • AP4
  • AXA
  • BNP Paribas
  • ING
  • Natixis
  • Rabobank
  • Société Générale

At least 13 other major banks, including Europe’s largest, either won’t finance any oil sands projects or won’t finance certain types of projects, such as new production projects or pipelines.

Tailings waste volumes, which Alberta only began to regulate in 2009, will also continue to grow. At first the province insistedthat companies de-water and prepare to bury a portion of the waste every year, and progressively reduce the volume stored in lakes. Those rules were scrapped after none of the companies met them.

Now nearly every miner plans to use a cheaper, experimental technique called “water capping”: pumping the waste into a pit and covering it with water. Despite acknowledging that it’s an unproven technique, the province has recently allowed companies to expand their mines and build new ones, giving them years to figure out how they’ll clean up the waste and decades to complete the process. The Pembina Institute notes that “[t]wo operators planning to shut down operations in the early 2030s have proposed reclamation timelines that extend beyond 2100 — 70 years after their mines close.”

One of them is EDC client Suncor.

Suncor has received up to $1 billion in loans from EDC since 2010 despite oil sands development being its core business. After five decades of mining, Suncor’s “ponds” have reportedly grown to hold about a quarter of the total oil sands tailings in Alberta. It’s currently “ramping up” production at its Fort Hills mine, and has two new oil sands projects in the works.

Pipelines: unlocking runaway growth

In the debate over oil sands pipelines, many have pointed to the risks posed in the event of a bitumen spill from a pipeline or, in the case of pipelines supplying marine ports, from an oil tanker. Scientists warn that spilled bitumen can be more difficult to clean up from water than conventional oil, and its effects on marine ecosystems are currently almost impossible to predict.

The much larger problem, however, is that boosting capacity to move oil sands crude quickly and cheaply to refineries and end markets will allow for the rapid expansion of the industry, compounding all of its ecological impacts.

And EDC has been a major supporter of companies pushing new oil sands pipelines.

The agency has issued over $2.56 billion in loans to TC Energy (formerly TransCanada) and its business partners since 2010. Some of the loans were earmarked for the firm’s Keystone pipeline and Keystone XL expansion project. With Keystone, TC Energy converted a natural gas pipeline to instead carry oil sands crude to U.S. refineries. With Keystone XL, it will expand and extend the pipeline. From 2013 to 2017, TC Energy was also pursuing a second oil sands pipeline project, Energy East.

The massive boost in oil sands production that Keystone XL will allow is expected to drive the industry’s greenhouse gas emissions up by a stunning 36 percent.

EDC reports that it closely monitors the environmental impacts of projects it supports, so it was presumably aware that by November 2017 the Keystone pipeline had racked up three major spills in the U.S. Before building it in 2010, TC Energy reportedly estimated that spills would occur “not more than once every seven to 11 years.”

“I was one of the few core TransCanada employees directly involved in the technical acceptance of work on pipeline projects with values from thousands of dollars to billions of dollars (…). I found that TransCanada had a culture of non-compliance, deeply entrenched business practices that ignored legally required regulations and codes.”

– Evan Vokes, former TC Energy (TransCanada) engineer, in testimony at a Senate committee in 2013

The pipeline’s subsequent poor performance evidently hasn’t affected TC Energy’s eligibility for future EDC support. The firm was granted new EDC loans in 2018 and 2019, and in April 2020 the agency decided to finance Coastal GasLink, a liquified natural gas pipeline that will be built and operated by TC Energy in Canada, after the project’s controversial impacts on indigenous people had spurred a UN human rights committee and B.C.’s human rights commissioner to call for a halt to its construction.

Enbridge, Canada’s leading oil sands pipeline operator, has benefited from even greater sums of EDC support: up to $5.78 billion in loans since 2010.2These were primarily loans to Enbridge Inc. or one of its wholly-owned subsidiaries. Some were to companies part-owned by Enbridge. The firm aims to increase volumes of oil sands crude piped to the U.S. through its Line 3 pipeline replacement project. It is also involved in the Dakota Access pipeline, along with another EDC client, Phillips 66. That project poses such serious risks to the Standing Rock Sioux tribe that the UN’s chief indigenous rights expert called for a halt to its construction. Many investors have pulled their support.

Enbridge’s proposed Northern Gateway pipeline would have piped large volumes of bitumen to the west coast. The project was rejected by the federal government in 2016 due to its unacceptable environmental risks.

During the debate over Northern Gateway, many expressed concern about Enbridge’s pipeline safety performance, pointing to a spill of more than 20,000 barrels of bitumen from an Enbridge pipeline into a river in Michigan in 2010. It was one of the largest freshwater oil spills in North American history. U.S. regulators found that the spill was due in part to a “culture of deviance” and “pervasive organization failures at Enbridge.” The firm had to pay a civil penalty of $61 million USD for various offences.

Enbridge pipelines have since continued to rack up serious accidents. In August 2019 an explosion on a pipeline in Kentucky killed one person, injured several more and caused a fire that damaged 30 acres. It was the third big blast on an Enbridge pipeline in less than a year.

EDC renews support to Teck despite string of infractions

Another EDC oil sands client whose environmental track record should raise concern is Teck Resources, which has a stake in the Fort Hills oil sands mine. From 2008 to 2020, Teck was also planning to build the largest oil sands mine to date in Alberta.3The Frontier mine and related infrastructure would occupy 29,217 hectares of land over the life of the project. This “project disturbance area” surpasses the approved footprint of other oil sands mine projects approved to date in Alberta.

Red Dog mine, owned by EDC client Teck
Teck's Red Dog mine. Photo by Robert Cummings, licensed CC BY-ND 2.0

Teck’s Frontier project would have brought an open-pit oil sands mine and tailings lakes within 30 kilometres of Canada’s largest national park. A government review found the mine would cause “significant adverse environmental effects” to wetlands, old-growth forests and at-risk species. Teck significantly underestimated the greenhouse gas emissions the mine would produce, according to industry watchdogs and federal officials involved in the review.

Critics also expressed concern about Teck’s environmental track record, pointing to systemic pollution problems at its facilities in B.C. These problems have led to record-breaking fines twice since 2014, when EDC gave Teck the first of its three recent loans.

In 2016 one of Teck’s subsidiaries, Teck Metals, received the largest environmental fine in B.C. history for spilling heavy metals and other pollutants into the Columbia River, in 13 separate spills between 2013 and 2015. The firm had previously faced significant fines for regulatory offences in 2011 and 2013.

Another of Teck’s subsidiaries, Teck Coal, has struggled for years to bring pollution problems under control at its coal mines in B.C.’s Elk Valley. U.S. officials at a transboundary commission report that selenium levels are 70 times higher in rivers affected by Teck’s coal mines than in other nearby rivers, putting aquatic life and human health at risk.

B.C.’s auditor general found in 2016 that selenium levels in the area have been on the rise for decades, and that Teck Coal’s planned discharges at one of its recently expanded mines exceed “water quality guidelines set by B.C. to protect aquatic life, (…) human health and safety.”

The U.S. officials note “numerous delays” in Teck’s plan to fix the problem with new treatment plants, and that in 2017 Teck had to shut down its only active treatment plant on one waterway.

That same year, weeks before EDC approved another loan to Teck Resources, Teck Coal pled guilty and paid a $1.4 million penalty for violations of the Fisheries Act at its operations in 2014.4This was reportedly the second largest fine ever laid in B.C. for Fisheries Act offences, and the largest ever for a single incident. The company reported in late 2018 that regulators have warned of further possible charges, and in February 2019 that it “cannot operate [its] Elk Valley coal mines in compliance with the Fisheries Act and its current associated regulations.” Those mines are still operating.

At least one of Teck’s coal mines has been repeatedly out of compliance with air quality regulations as well. In March 2019, Teck Coal was fined for failing to maintain its equipment and exceeding legal limits on the release of particulate matter — in one instance by more than 250 percent — over a period of several years.

A couple months later, Teck Resources benefited from an EDC loan of up to $1 billion to its Chilean subsidiary for the expansion of the Quebrada Blanca copper mine. In August, the company was fined $1.2 million for violating the terms of the mine’s environmental permit.

Why is our export credit agency supporting a company that expands its operations while pollution from those operations remains uncontrolled?

Why is it financing, furthermore, the rapid expansion of the oil sands industry, with all its attendant risks of environmental harm that companies may never find a way to remediate?

Published July 15, 2019; updated May 26, 2020

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