Top Alberta Fossils Stayed ‘Incredibly Profitable’ Despite Oil Price Crash
Three of Canada’s top five tar sands/oil sands producers were “incredibly profitable” during the oil price crash and the continuing controversy over new export pipelines, according to a new report issued last week by the Alberta-based Parkland Institute and the Canadian Centre for Policy Alternatives.
The Big Five paid $31.76 billion in dividends to shareholders between 2009 and 2017, including $12.56 billion since the oil price crash in late 2014, the two organizations say.
Like this story? Subscribe to The Energy Mix and never miss an edition of our free e-digest.
“Despite the 2014 oil price crash and the ongoing hand-wringing over pipelines and the price differential, the reality is that the big five oilsands producers have remained incredibly profitable corporations,” said lead author and Parkland research manager Ian Hussey. “These companies have been able to continue to transfer sizeable amounts of money to their shareholders or to their bank accounts, while at the same time in 2015 cutting almost 20,000 jobs from the Alberta economy.”
Based on data from the decade-long oil boom between 2004 and 2014 and the price crash that ran from 2014 to 2016, the companies “have been able to continue to pay out high dividends to their shareholders when they’re crying poor to the public and in the media,” Hussey added.
In 2017, the Big Five sent C$4.16 billion to shareholders, bought back $2.04 billion worth of shares, put away $7.3 billion in savings, and remitted $4.72 billion to governments in taxes and royalties. Ben Brunnen of the Canadian Association of Petroleum Producers told CBC those numbers point to a system that works.
“Both companies and the governments are sharing in the benefits of the development, which is actually quite consistent with the nature of the royalty and resource development system that was built in Alberta,” he said, adding that investors would go elsewhere if Canadian fossils couldn’t reward them.
But Parkland points out that three of the Big Five—Suncor Energy, Cenovus Energy, and Canadian Natural Resources Ltd. (CNRL)—had profits above 13.5% in 2017, with Cenovus topping the list at 19.4%. That compared with average profits across all Canadian industries of 7.8% in 2016. Imperial Oil and Husky Energy came in at 1.7% and 4.0%, respectively.
Overall, “the Big Five were able to maintain their gross profits, out of which they pay for past investments, maintain overhead expenditures, and generate financial capital in the form of share buybacks and dividends,” Parkland concluded. “With the Big Five increasing production while squeezing costs and slowing down investment, a significant chunk of Alberta’s (and Canada’s) carbon budget is currently reserved for a slow-growing, cost-cutting sector with weak fiscal, investment, employment, and innovation benefits.”
And now, “if the Big Five are able to continue to steer provincial and federal fiscal, energy, and climate policies, Canada will not be able to live up to its Paris Agreement obligations for the year 2050,” Parkland adds. “There are no easy answers for how to limit global warming to 1.5°C,” but “what is clear is that Canada and other countries need to implement much higher carbon taxes, and fossil fuel-producing jurisdictions like Alberta need to develop and legislate plans for phasing out hydrocarbon production over the next number of years.
“In the case of the oil sands, this most certainly means phasing out production by 2050, and every year that timeline can be shortened gives humanity more of a chance to limit global warming to 1.5°C.”