Greenwashing our hands of it — N.L.’s oil challenge

Posted on March 03, 2021 | Atlantic Business Magazine | 0 Comments

It was a Friday afternoon and if there wasn’t a pandemic, the place would’ve been packed to the gills. There was a limited number of appropriately spaced folding chairs instead. It didn’t take long for the guests—representatives of oil producers and supply companies, of political parties and particularly the governing provincial and federal Liberals—to take their places to hear about a new injection of public money, federal funds, into offshore oil and gas.

“Today, I am announcing $320 million to support jobs and to ensure a sustainable, long-term, lower-emitting future for our offshore,” said federal Natural Resources Minister Seamus O’Regan, from the podium.

The announcement was at the Johnson Geo Centre in St. John’s, N.L. The museum-like geological interpretation and education centre is cut into the rock of Signal Hill at the heart of the city. The main room is subterranean, offering a large, open space that’s rented out for special occasions. Models of the planets hang overhead.

On Sept. 25, 2020, the Earth looked on as O’Regan worked to explain to reporters how the funding—described by others in the room as “virtually no strings attached”—would be handled. The climate-conscious federal Liberals had made clear they wouldn’t be directly subsidizing the oil sector. At the same time, they never said never to funding clean-up efforts (think stranded, abandoned gas wells) or efforts to lower carbon emissions. O’Regan was walking the tightrope.

It’s easier in Newfoundland and Labrador than other parts of Canada, maybe even easier than in Alberta. The country’s most easterly province has many resources, but oil and gas is the industry that came with cash just as the cod moratorium slammed the economy with the largest mass layoff in Canadian history and shop windows were boarded and stories of the real “hard times” were back (what we’d hoped was left behind with Confederation). That’s the ‘everyday’ oil and gas entered into. It helped to flip the narrative, through investments not just directly in oil extraction but in related service companies and education spending.

Oil and gas was never perfect. It was built over bodies, including 84 people lost with the sinking of the drill rig Ocean Ranger in 1982, and 23 people killed in helicopter crashes in 1985 and 2009. But as the oil flowed, the province found its feet financially in years rather than centuries. Both directly and indirectly, the industry birthed a collection of skilled professionals and companies able to pivot into other oceans work, including roles with renewables.

It’s common for people on the outside looking in to say the people in a petrostate “love” oil. But if there’s any love here, it has been for the periodic financial relief, professional challenges and the sense of direction.

So, on this particular Friday, it was easier to welcome money for a “sustainable” offshore oil industry than reject it for an economic alternative never fully articulated.

Newfoundland and Labrador has not had the hard talk with itself on the energy transition and offshore oil. That discussion has been made more difficult with some newer political talking points, naming Newfoundland and Labrador as offering “one of the lowest per-barrel emissions in the world.”

It was the cry through 2020, as then-provincial Natural Resources Minister Siobhan Coady lobbied for federal support after the oil price crash and early challenges of COVID-19. “The importance of the offshore industry in Newfoundland and Labrador cannot be overrated. It represents one of the lowest carbon-per-barrel footprints in the world, contributes an estimated 30 per cent GDP, and directly employs 6,390 people with thousands more in supporting industries,” she said, in a quote also added to the “We Are N.L. Offshore” site, built to support the joint industry-provincial government push for cash.

The idea of “per-barrel emissions” was on repeat. It was there again after the federal government came to the table with $320 million and an industry-led task force was created to help direct the spending. “Newfoundland and Labrador’s offshore oil and gas industry represents one of the lowest carbon-per-barrel footprints in the world,” stated the related press release.
“Newfoundland and Labrador offshore oil is one of the least carbon intensive extractive crudes in the world and emits significantly less greenhouse gas emissions (GHGs) than other oil-producing jurisdictions,” the government stated.

At the federal level, O’Regan joined in, including when speaking to Atlantic Business Magazine in the fall. “Our light, sweet crude has one of the lowest per-barrel emissions in the world,” he said, “making it a perfect transition fuel.”

But if you’re talking about immediate action to push back against climate change, oil from any source is no “perfect transition fuel.”

When did we start talking about “per-barrel emissions” anyway? The Newfoundland and Labrador government’s go-to man for oil and gas, Jim Keating, agrees he’s likely at the root of the comments. It dates back to 2016, soon after the Paris Agreement. Discussion of reducing GHGs and getting major emitters to pay on what they produced, “was coming front and centre, and we were not naïve or blissfully ignorant of that,” he recalled, in a January interview.

“We” includes the CEO’s team at provincially-owned energy corporation Nalcor Energy (since spun off as a group into the standalone company known as the Newfoundland and Labrador Oil and Gas Corporation, or OilCo). The team went deeper into offshore emissions, carbon pricing effects and investigated the potential for local emissions reductions.

Keating made note of changes underway within the industry. Just over five years ago, he said, a company would have been laser-focused on estimates of its “economically recoverable reserves.” Essentially, that’s all of the oil you can produce from a field before the oil coming out of the ground no longer pays for itself. In other words, when the value of the resource is outstripped by the cost of the production platform, crew, supplies and onshore support. “What we see now today and emerging—it will be more prominent in the years ahead—is not only is there going to be an economic cut-off, but there is likely to be an emissions cutoff,” he said.

Greenhouse Gas (GHG) emissions are publicly monitored. Companies from Equinor to BP have publicized emissions targets and they make emissions-related commitments to their investors. As Keating describes it, any producing wells in a portfolio with high levels of extraction emissions which could cause the company to miss its GHG targets, risks early shut-in. “They’re likely to be shut in even if they’re economic. That’s the reality going forward,” he said.

Jim Keating

He took note when a partnership of the Washington-based Carnegie Endowment for International Peace (think tank), California’s Stanford University and the University of Calgary in Alberta developed a first-of-its-kind “Oil-Climate Index” comparing carbon intensities of different crude oils at different stages, from production through refining to end use. The next year, incorporating some of the partnership’s work, the Calgary-based ARC Energy Research Institute offered the “ARC Method,” similarly allowing for the comparison of fossil fuel assets based on emissions (see: “Crude Oil Investing in a Carbon Constrained World”). They challenged the idea of a “standard barrel of oil” when it comes to emissions. The information was largely about weighing risk to existing oil and gas holdings and prospective developments. It was directed at investors, resource owners and developers.

References to Hibernia jumped out. Hibernia is a joint oil project of ExxonMobil (through ExxonMobil Canada at 33 per cent stake), Chevron (just under 27 per cent), Suncor (20 per cent), the government-owned Canada Hibernia Holding Corporation (8.5 per cent), Murphy Oil (6.5 per cent) and Equinor (five per cent). It is listed as less carbon intensive than many other oil projects internationally. It fares better in the measurement of “per-barrel emissions” than, for example, the Brazilian Lula oil field, Zubair oil out of Iraq or the Bonny crude from the Niger delta.

Keating had his team walk back through the models. They confirmed the basic differences affecting a given crude oil’s result, including environmental factors like reservoir pressure (crude under higher pressure is likely to take less energy to produce, and N.L.’s offshore does well on that), but also existing regulation around things like gas flaring.

A Princeton University research group made note of a Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB) regulation in 2018, when speaking to emissions in oil production: “For offshore fields where flaring is excessive, production rate restrictions are imposed until flaring reductions are made.”

Keating began weaving the idea of local per-barrel emissions into his public comments. He believes the first time may have been at a 2016 fall seminar event hosted by Noia, the province’s oil and gas industry association. “Back in those days I wouldn’t say it was fashionable. You certainly didn’t see it every day,” he said.

He aimed his comments at producers, weighing their options on where to invest to produce more oil, while meeting their own emissions targets. After all, Keating figured, companies would be looking at retrofitting existing facilities where possible, to get emissions down, or they could launch greenfield projects where emissions are a consideration from the start. “And that’s where I think Newfoundland and Labrador has the opportunity,” he said.

But per-barrel emissions can be oversimplified. When the discussion is about meaningful action on climate change, they can also mislead.

As Keating knows, emissions are project-specific and they are not static; they change over time. Crude oil from Hibernia, for example, is not the same as crude from other oil fields. And emissions from Hibernia won’t run at the same level forever.

As a field matures, emissions will increase as more energy is expended to get the same amount of oil out of the ground. Older production infrastructure will be less efficient. A project’s oil type—“light” or “heavy” oil—will offer different challenges, affecting the effort required to produce it and by extension the emissions from production.

The Oil-Climate Index put Hibernia crude at 26 kilograms of carbon dioxide emissions (CO2) or CO2 equivalent (CO2e) per barrel at production. But Keating estimated the emissions from floating production, storage and offloading vessels (FPSOs) used for the Terra Nova and White Rose projects at between 30-50 kg of CO2/CO2e when in operation. Even the fields offshore Norway see dramatic differences between fields.

Most importantly, emissions at production are only a small part of the total GHG emissions from a barrel of oil. End use—like burning as gasoline in a car, or at a thermal power plant—is responsible for the bulk of harm. And that’s where the meaningful, public debate is being lost.

The exact percentages depend on where you draw your dividers but according to the way ARC breaks down the lifecycle of a barrel of oil, end use accounts for over 81 per cent of emissions from a barrel of oil. Production, before transportation to a refinery, accounts for just 11.6 per cent of the GHG emissions from any given barrel. Looking at the example of Hibernia again, the 26 kg of emissions per barrel “upstream” at production grows by another 25 kg in “midstream” processing, but then by a much larger 436 kg CO2/CO2e at end use, for estimated total emissions of 487 kg CO2/CO2e on a barrel of crude oil.

For effective public debate, the relevant comparisons on emissions are between different energy sources. Not oil compared to other oil, but oil versus coal, solar, wind and hydro.

Fact: our climate is changing and humans are the dominant cause. Dr. Robert Way is a physical geographer and assistant professor at Queen’s University. He’s also co-author on a paper published in 2013 that reviewed a large sample of scientific literature—almost 12,000 articles—spanning over a 21-year period. It showed overwhelming consensus on the topic of climate change (including a more than 97 per cent consensus in papers expressing a direct opinion).

Climate denial is more difficult now. More obvious changes are getting noticed. Way leads research at the Queen’s University Northern Environmental Geoscience Laboratory, with projects in Labrador and Northern Quebec, and has intensively studied climate change in the context of ice, glaciers and permafrost. It’s the cryosphere, a term incorporating all areas of frozen water. He also sees the evidence in ground that never thawed, now thawed. “You’re having areas that used to be tundra that suddenly have like three-metre-high alders and other shrubs,” he said. He explains how “warmer summers, less intense winters” can play out in real life in something as simple as a snowmobile encountering open water on a once, long-reliable winter route.

Of Inuit descent, born and raised in Happy Valley-Goose Bay, he has been working to empower people in Northern and remote communities through his research and new research tools. It’s about building our capacity to understand what is happening and at what rates. “In the North, we know that regardless of whatever global target we end up achieving, the North is going to experience significant amounts of warming regardless. Because whatever global temperature target they have, you would expect that the North is going to warm at two to three times that rate,” he said.

It’s not about a sense of futility, but urgency in response. As he continues his work, politicians in Newfoundland and Labrador talk about growing oil production.

Climate scientists say it’s time to table the talk of per-barrel emissions in Newfoundland and Labrador.“It falls into the category of false solutions,” says Dr. Michael Mann, professor of atmospheric science at Penn State and director of the university’s Earth Systems Science Centre.

In his latest book, The New Climate War, Mann calls out “climate inactivists” using “disinformation, deceit, divisiveness, deflection, delay, despair-mongering and doomism” to hold back the immediate action needed to slow climate change. In a chapter titled “The Non-Solution Solution,” he argues for strong pushback against language like “clean coal” and energy sector “adaptation,” and against going all-in on “bridge fuels.”

Speaking with Atlantic Business Magazine, he said comments being made about Canadian offshore oil are in the same category. “It’s similar for example (…) to the idea of natural gas as a bridge fuel. Here it’s more or less the same argument, that somehow fossil fuel, which is the source of the problem that we’re dealing with, can somehow be a solution to a problem created by fossil fuels. And that’s no more true with light crude petroleum oil than it is with natural gas,” he said.

“Look, even if it were true that these fossil fuels were somehow less carbon intensive than other fossil fuels, they’re still fossil fuels. They’re still contributing to the problem. And to the extent that we’re providing infrastructure and incentives to these fossil fuels, we’re crowding out investment in what is a true solution which is renewable energy,” he said.

Michael Mann

Among his many credits, Mann was lead author of the chapter titled “Observed Climate Variability and Change” in the Intergovernmental Panel on Climate Change’s (IPCC’s) Third Scientific Assessment Report in 2001. He contributed, with other authors, to the award of the 2007 Nobel Peace Price, when the IPCC and U.S. vice-president Al Gore were jointly recognized for their efforts, “to build-up and disseminate greater knowledge of man-made climate change.”

Right now, he says there needs to be vigilance against comments favouring the major emitters. “They’ve developed this whole new rhetoric to try to make it sound like our doubling down on fossil fuels is somehow consistent with solving the climate problem. When it isn’t,” he said.

In 2018, the IPCC said global net human-caused emissions of CO2 would need to fall by about 45 per cent from 2010 levels to 2030, and reach “net zero” by 2050. “Limiting warming to 1.5 degrees Celsius is possible within the laws of chemistry and physics but doing so would require unprecedented changes,” said Jim Skea, co-chair of one of the IPCC working groups.

Also in 2018, the Government of Newfoundland and Labrador released Advance 2030, a plan for the oil and gas sector, stating the decision to rapidly expand oil and gas production.

The Government of Newfoundland and Labrador and Government of Canada have adopted the IPCC goal, but there has never been a squaring of how the province can reach the goal while also reaching its expressed goals on growing production of oil and gas.

“Offshore petroleum” as a sector leads the count on major human-source emitters in the province, at 2,049 kilotonnes (kt) CO2 equivalent in 2018, the last year of figures available. Onshore, the oil refinery at Come by Chance tops the list of single-site emitters when in regular operation, as it was when landing at 1,357 kt CO2 in 2018. Newfoundland and Labrador recorded GHG emissions 12.6 per cent higher in 2018 than in 1990. And the total was 5.3 per cent higher in 2018 than in 2005.

Over a decade ago, the Globe and Mail’s Jeffrey Simpson noted a wave of new attention to climate change but questioned how deep and durable it was in Canada. He had chronicled past failures to act on emissions and highlighted the divide between those provinces with fossil fuels and those without, saying from the presence of oil flowed different economies and different attitudes. “Broadly speaking, citizens in provinces with fossil fuels are hostile to serious action against greenhouse gas emissions, because they fear negative economic consequences, whereas citizens in provinces without fossil fuel industries are more eager for action, at least rhetorically,” he wrote, in his contribution to Carbon Shift.

Since then, Canada has imposed a carbon tax, but the Government of Newfoundland and Labrador has paid in tax dollars to offset its effect at the gas pump. For the offshore, the province worked with Ottawa to develop a “made-in-N.L. approach,” including a system under the provincial Greenhouse Gas Management Act of performance standards and carbon credits. The first related reporting is due sometime between deadline for this story and its publication. But as of December 2020, according to the department responsible, no credits had yet been purchased for a regulated industrial facility.

The first spending from the $320-million pot of federal oil sector funding was announced at Husky Energy (now Cenovus) headquarters in St. John’s, and the funding did not contribute to reducing GHG emissions or transitioning from oil production. The company had paused construction on its massive West White Rose concrete gravity production structure and the funding kept the project, with its many associated jobs, from being put on ice.

At that time, O’Regan was asked how he would respond to someone saying he was “greenwashing” Canadian offshore oil. In his response, he spoke about present-day financial health and competitiveness. He talked about economic survival. He mentioned hydrogen as a “bridge fuel,” that “hydrogen comes from natural gas,” and that Newfoundland and Labrador has plenty of natural gas offshore. He again mentioned the province has “some of the lowest emitting oil in the world.” And, he said, “the point is to not single out an industry. The point overall is to lower emissions.”

At the University of Waterloo, associate professor of political science Angela Carter said the entire $320 million could have been put into pushing the province’s energy transition. The author of “Fossilized: Environmental Policy in Canada’s Petro-Provinces,” Carter has spoken publicly about the potential role for governments in putting public funds squarely into the transition, including support for the workers adversely affected in the interim. “We put in a lot of work, over four decades, to spark an oil economy. It wasn’t for oil per se, it was for economic security,” she told the CBC’s Peter Cowan earlier this year. She argued the same focus is needed again, “to align our society with a low-carbon future.”

It’s not been shown possible, in the timelines we face, to lower emissions at the rate needed and increase fossil fuel production.

The Canadian Association of Petroleum Producers (CAPP) has argued against reducing oil and gas production offshore Eastern Canada just for the sake of reducing provincial emissions. The argument is: if oil and gas is produced anywhere, it should be here. It feels a lot like per-barrel emissions talk. But CAPP’s Atlantic Canada and Arctic director Paul Barnes said oil producers, who are often also refiners and gas station owners, are not keen on using public comments with per-barrel emissions numbers.

They’ve used quotes from government, but shy away from repeating something like the provincial government’s claim Newfoundland and Labrador has, “30 per cent less GHG emissions per barrel than the global average.”

“It’s largely because (…) while we may be kind of at that 30 per cent mark now that the government keeps using, it may not be that way tomorrow, or it could even be less, depending on advances in new technology when it comes to emissions. But as these fields age, you’re going to require more intensity to get the oil out and that will result in potentially more GHG emissions,” he said.

Oil and gas companies operating here do expect to be producing less oil in the future, “at some point,” Barnes said. “We know a transition is underway and we feel we can be part of it in a productive way,” he said.

So why not stop exploration investment today? Well, we’re in an energy transition, Barnes said, speaking to efforts by oil companies to reduce their own emissions. “But as we get there, the world needs that energy. So we’re in the business of providing it.”

There is recognition petro states will need financial help through the global energy transition and it’s something political leaders are talking about at the highest levels. On Jan. 26, for example, the International Energy Agency (IEA) launched a new “Global Commission of People-Centred Clean Energy Transitions,” including Canada’s O’Regan, exploring the means for a just transition.

Chair Dan Jørgensen, Denmark’s Climate and Energy Minister, explained the work by using the example of his country’s decision to phase out offshore oil and gas production while offering specific support to industry-dependent communities. Denmark is “taking care of the impacted workers,” he said, while investing to speed the establishment and growth of emerging industries, including tech, in those same geographic areas.

The new international committee will be developing recommendations for others to take the path of reduced fossil fuel production. “Governments will need to properly prepare for change and to protect those adversely affected,” said IEA executive director Faith Birol. He said the plan is for the commission to release the recommendations on just transitions before the next United Nations Climate Change Conference, COP 26, scheduled for Glasgow, Scotland in November 2021.

Canada’s Environment Minister Jonathan Wilkinson has also said Canada “needs to extract value for the resources that it has” in order to fund the transition. It’s an active choice to weigh more rapid action against immediate financial harm, dealing with the longer-term harm from climate change as it comes.

In Newfoundland and Labrador, on the day of the provincial election call, on the day of the provincial election call in January, the Liberal government announced $16.6 million in public funding for North Atlantic Refining Limited, to ensure the refinery remained in warm idle and at least 200 jobs were retained at site. Because those jobs were needed now.

The Government of Newfoundland and Labrador has made decisions and spent public money on oil and gas out of concern for public finances and private job losses. It’s also true the province has had no honest debate on how it’s going to really respond to the crunch on emissions.

The earth looked on when federal Natural Resources Minister Seamus O’Regan made his announcement of $320 million and said it would support a “lower-emitting future for our offshore.” Just weeks later, it was announced that part of the funding could go to sustain the Terra Nova oil project. The provincial and federal government’s press release on the Terra Nova funding plainly stated political support for the sector and—in the same breath—tied the new public funding to GHG emissions targets. “The agreement between the Government of Canada and the Government of Newfoundland and Labrador will work to re-affirm Newfoundland and Labrador’s commitment to achieve net zero carbon emissions,” it stated.

The hard truth is that N.L.’s oil is a significant source of greenhouse gas—full stop. Accepting that, it’s time to talk about where the province’s economy goes from here. •

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