Tuesday 18 August 2015

Canadian Oil Sands - lesser of several evils

Clumsy government support of Canadian Oil Sands industry is hindering the industry's development and risking its social license

The Canadian Oil Sands industry is under global pressures from social and environmental fronts.  And this is at a time of plunging global oil prices that are eroding the industry’s financial license.
Foreign governments, markets, NGOs, celebrities and others are actively protesting the operation and expansion of the industry, focused mainly on the carbon cost that is embedded in the energy from carbon-intensive production and processing methods.

It is interesting that these groups are targeting Canadian oil sands production when energy from other areas, like the Middle East, comes with unacceptable levels of human rights, conflict, military and other costs.

Few seem to be doing the calculus that would objectively compare the socio-environmental cost of Canadian oil sands and Middle Eastern energy production.  I strongly suspect that it is much easier to address the carbon and environmental impact of the oil sands than it is to address the human rights, conflict and military costs of Middle Eastern energy.

I also suspect that part of the reason that the carbon calculus versus the human rights and conflict calculus isn’t done is (at least partly) because Canadian government ‘support’ and Canada’s emergence as a climate change dawdler has helped to make the oil sands an easy international target.

The industry is in much difficulty, despite, or as a result of, a national government and regulator that has been a strong cheerleader for nearly 10 years.  It is facing global activism and opposition and has not been able to get its production to global markets.  Pipelines are stalled, and market access looks increasingly difficult.

These are directly related and have created an, at best, very tenuous social license for the industry.  The Canadian government, who is also the national regulator, has supported the industry in ways that have undermined its environmental credibility globally.

Recent revelations in the Guardian put more strain on the government’s role as an objective regulator and give fuel to opponent’s arguments.

A robust industry requires technical and economic viability as well as some level of societal acceptance.  An industry with international and global markets requires societal acceptance and an industry social license.
While individual projects and companies can, and do, develop their own project- or brand-level social license, many industries also need some level of industry social license.

In order to achieve societal acceptance (social license) industry must be seen to be making a net positive contribution to society and have an acceptable environmental risk and cost.  Notice I said ‘be seen to be making a net positive contribution.’  Perception is reality.

The oil sands is a carbon-intensive industry, and carbon and climate change are increasingly critical global issues.

In the case of the Canadian Oil Sands, there is a public perception (domestic and global) that the industry is a global environmental bad-boy.

The Canadian government’s support for the industry, including considerable tinkering with environmental regulation, coupled with the carbon-intensive nature of the industry, has given industry critics plenty of ammunition and credibility.

Canada’s increasing laggardness on the global climate change file has further eroded the perceived credibility of our environmental regulatory system, and, as a direct consequence, the trust that the Canadian and global public has in the environmental performance of key industries such as the oil sands.

If Canada wants to see the socio-economic benefits of a socially and environmentally responsible oil-sands industry, it needs to start by rethinking how it is supporting the industry and how it is engaging in the global climate change issue.

It may be counter-intuitive, but more stringent and credible environmental regulations will help the industry rather than hurt it — and, hopefully, force opponents to do the hard, but important, work of comparing the socio-environmental costs of energy from Canada’s oil sands with energy from the conflict-ridden Middle East.

Oil sands with an environmental impact that can be improved, or Middle Eastern energy with a conflict and human rights impact that is a lot more difficult to deal with?

I suspect that comparison would favor Canada’s oil sands and also push them to better address their carbon intensity — and at the same time take a small bit of fuel from the Middle East tinderbox.

Wayne Dunn is  President & Founder, CSR Training Institute and Professor of Practice in Corporate Social Responsibility, McGill University. You can sign up for the CSR Training Institute newsletter here and read more from him here.

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