http://www.bloomberg.com/news/2013-11-08/canadian-oil-companies-trail-on-environmental-disclosure.html
By Jeremy van Loon - Nov 8, 2013 10:06 AM ET
Canada’s biggest energy companies including Suncor Energy Inc. (SU) and
Imperial Oil Ltd. (IMO) 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 (XOM) for Irving, Texas-based Exxon
Mobil Corp., the world’s biggest energy company, 48.8 (RDSA) for
Europe’s No. 1 oil producer Royal Dutch Shell Plc, and 62 (BP/) 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.
(TRP)’s Keystone XL, which would connect Alberta to the U.S. Gulf coast,
and Enbridge Inc. (ENB)’s Northern Gateway, which would traverse the
Rockies enroute to British Columbia’s Pacific coast.
‘Noose Is Tightening’
“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, which oversees C$5.5 billion ($5.2 billion) in
assets, including Suncor shares.
“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 non-financial environmental information with an
impact on reputation and value. Bloomberg collects company-sourced 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
weighting on different data provided by companies.
Greenhouse Gases
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, data compiled by Bloomberg showed. 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,”
Pius Rolheiser, an Imperial spokesman, said in a phone interview.
Stock Impact
“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 impact on share
prices of oil companies. Shares of Canadian Natural Resources Ltd.
(CNQ), which had a Environmental Disclosure Score of 40.5 in 2011, fell
4.5 percent following 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.
Scraping Bitumen
Canadian Natural rose 1.1 percent to C$32.97 at 10 a.m. in Toronto,
while Suncor gained 0.8 percent to C$36.41 and Imperial increased 0.6
percent to C$44.59.
The intensity of greenhouse gases in Canadian energy company’s 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 Calgary-based environmental
consultants Pembina Institute.
Keystone XL
Extracting crude from the oil sands involves scraping or steaming the
paste-like 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
oil-sands 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.
‘Doing More’
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.
TransCanada is revamping its own sustainability reporting with more
detailed environmental information by the end of the year, Kelly
Matthews, the company’s senior corporate sustainability adviser, said in
an interview. The pipeline operator, which scored 9.3 in 2011 on the
Bloomberg assessment, expects stiffer sustainability reporting from
regulators in the coming years.
“Our environmental performance is excellent, but we’re not great about
telling people about it,” Matthews said. “Stakeholders are looking for
transparency and how to assess risk. There’s a growing attitude that
this is part of business as usual.”
Fort Hills
Canadian companies are required to disclose environmental, social or
governance performance to shareholders under security regulations if it
is deemed to be “material information” that could affect the market
price of a company’s shares, according to TMX Group Inc., the operator
of the Toronto Stock Exchange.
On Oct. 30, Calgary-based Suncor said it will go ahead with the C$13.5
billion Fort Hills oil-sands project with partners Total SA (FP) and
Teck Resources Ltd. The oil producer has scored 38.8 on the Bloomberg
assessment for the past three years.
The Fort Hills mine will use so-called TRO (tailings reduction
operation) technology, which dries up toxic waste from processing
bitumen, in an effort to meet Alberta regulations on management of
mining waste, Chief Executive Officer Steve Williams said on an Oct. 31
conference call.
The Canadian oil producer aims to reduce fresh water consumption by 12
percent and boost energy efficiency by 10 percent by 2015 from 2007
levels. The company also is a founding member of the Canadian Oil Sands
Innovation Alliance, a group of oil-sands producers that share
technology related to environmental performance.
Presenting investors with information about performance allows them to
make more informed decisions, said NEI Investment’s Walker. Eventually,
companies will “deal with” emissions or other environmental issues after
they report performance, he said.
“We’re not seeing this as much in the oil and gas sector,” he said.
“This is an industry that is expanding and there is going to be an
increase in carbon emissions.”
To contact the reporter on this story: Jeremy van Loon in Calgary at
jvanl...@bloomberg.net
To contact the editors responsible for this story: Susan Warren at
susanwar...@bloomberg.net; David Scanlan at dscan...@bloomberg.net
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