Why oil and gas needs to remember the golden rule
Plus a silly op-ed from (where else?) Postmedia, a terrible attempt to push back against divestment, and the great promise of green hydrogen in Quebec
I am fond — maybe excessively fond — of a line from an old Wizard of Id comic strip, which suggests that the real Golden Rule is that the people with the gold get to make the rules.
That’s certainly true when it comes to climate and energy, where global financial goliaths like BlackRock are pushing trillions of dollars towards low-carbon investments. The latest voice to join that choir? Canada’s BMO, which announced last week that it was all-in on the growing ESG (environment, sustainability, and governance) movement by creating the “BMO Climate Institute”.
"The Institute will convene intellectual and technology resources to equip us with the data and insights needed to be the leading advisor to clients and partners on climate-related risks and opportunities facing the financial sector and key client industries," said Simon Fish, Chair of the BMO Climate Institute and Special Advisor to the CEO on ESG.
And it’s not just talk. BMO is also doubling its commitment to sustainable financing through $300 billion in sustainable lending and underwriting that it intends to get out the door by 2025 and a further $700 billion that it intends to shepherd towards “responsible advisory and investment management services”.
The more things change….
In Alberta, though, people still seem fixated on yesterday’s issues: pipelines. In an op-ed for the Calgary Herald, former TC Energy executive Dennis McConaghy suggested that Canada should pick a fight with the United States — with whom it does more than $600 billion in trade every year — over the Keystone XL pipeline. “What [Trudeau] should have done was to have insisted that the Biden administration provide compensation to Canada for the value lost from the revocation of the KXL permit,” McConaghy writes. “A compensation, not only in respect of existing costs incurred to date but to also cover the lost value from volumes that would have been shipped by KXL, a figure that would ultimately approach $100 billion.”
This is ludicrous on any number of fronts, not least because said “lost volumes” are only “lost” to the company — McConaghy’s former employer — that would have shipped them. Instead, some of those barrels will get to market through existing pipelines (like the Line 3 expansion) while others will make it south via crude-by-rail tankers. And while that’s not optimal, for both environmental and economic reasons, there is no rational universe in which that will cost Canada $100 billion.
But here’s the thing: even if it did, bringing it up as an issue would still be a terrible idea. Lines 3 and 5, after all, are still well within the Biden administration’s reach, and while McConaghy may not care about their prospects (Enbridge, which owns them, is a competitor with his former employer) the Canadian government very much should. More to the point, picking a losing battle with the most powerful country in the world isn’t a particularly good way to win their favour on any number of other issues that affect Canada’s economic future, from the United States’s renewed push on clean tech to so-called “Buy American” provisions that can impair our exports.
I understand McConaghy’s frustration, given that he’s effectively been on the losing side of two major pipeline battles (first Keystone, then Energy East, and now Keystone again). But you’d hope, after so many defeats, that he might learn a thing or two. Pipelines are yesterday’s battle, and we risk losing the ones that matter in (and to) the future if we keep trying to fight that one.
Speaking of bad advice
A reader tipped me off to this story last week, which describes the efforts of some Texas legislators to push back against the growing divestment movement that has oil and gas squarely in its sights. Their strategy? By divesting from the companies doing the divesting, a list that could theoretically include most of America’s major financial institutions and tech giants like Amazon, Google, and Facebook. “If passed, the legislation filed by state Sen. Brian Birdwell, R-Granbury, along with four other Republican state senators, would require state entities — including state pension funds and Texas’ massive K-12 school endowment — to divest from companies that refuse to invest in or do business with fossil fuel-based energy.”
And if divesting the pension funds of Texas state employees from some of the best performing parts of the market wasn’t dumb enough, the bill also includes a provision that prevents said employees from seeking compensation for any damage done by this stupidity. “Senate Bill 13 — low numbered bills signal a high priority for lawmakers — would also prevent companies, retired beneficiaries and others from suing the state over the divestments.”
Jason Kenney has promised that a debate — and a referendum — on withdrawing Alberta from the Canada Pension Plan is coming. Don’t be surprised if something like this shows up along the way.
One cool thing: green hydrogen in Quebec
Green hydrogen — that is, hydrogen produced using renewable energy — is going to be a huge part of our energy future. And while Alberta intends to play a part in that through the production of so-called “blue” hydrogen (that is, hydrogen produced using natural gas-fired electricity and carbon capture technology), Quebec is quickly emerging as a player in its own right. According to the Berlin-based think tank Adelphi, “Eastern Canada has optimal conditions for a rapid market uptake of green hydrogen, possibly among the best in the world.” And last month, Enbridge and Brookfield Renewables signed a deal to build a 20 megawatt plant in the province, one that they say represents “the first phase in the creation of a regional green economy ecosystem centered around the production, distribution and use of green hydrogen.”
The second phase may already be upon us, too. On Tuesday, the federal government announced a deal with Germany that will see the countries partner on a push towards building out the global clean energy economy. That will include co-ordination around policies and regulations, as well as increasing the share of their electricity systems that are powered by renewables. For Germany, that means green hydrogen — much of which could eventually come from Canada’s east coast.
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