Material Risks: How Public Accountability is Slowing Tar Sands Development

By Tom Sanzillo, Lorne Stockman, Deborah Rogers, Hannah McKinnon, Elizabeth Bast, and Steve Kretzmann - Oil Change International, October 29, 2014

The report, “Material Risks: How Public Accountability Is Slowing Tar Sands Development,” presents market analysis and industry data to support its estimates on lost sales revenue to the tar sands industry as public opposition creates delays and project cancellations. The report also describes other market forces that are putting tar sand developers at a growing disadvantage.

The report puts tar sands development lost revenue at $30.9 billion from 2010 through 2013, in part due to the changing North American oil market but largely because of a fierce grassroots movement against tar sands development. The report attributes 55% of the lost revenue, or $17 billion, to the diverse citizen protests against pipelines and the tar sands.

A significant segment of opposition, the report notes, is from First Nations in Canada who are raising sovereignty claims and other environmental challenges.

Among the report’s findings:

• Market forces and public opposition have played a significant role in the cancellation of three major tar sands projects in 2014 alone: Shell’s Pierre River, Total’s Joslyn North, and Statoil’s Corner Project. Combined, these projects would have produced 4.7 billion barrels of bitumen that would in turn have released 2.8 billion metric tonnes of carbon dioxide (CO₂) into the atmosphere. This is equivalent to the emissions of building 18 new coal plants that would last 40 years each.
• Tar sands producers lost $30.9 billion from 2010 through 2013 due to transportation bottlenecks and the flood of crude coming from shale-oil fields. Of that, $17.1 billion, or 55 percent, can be attributed to the impact of public- accountability campaigns.
• The combination of risks facing the industry has the potential for canceling most or even all of the planned expansion of the industry in Canada.
• Rather than seeing more than a doubling of output from 2 million barrels of oil per day to 4.8 million barrels per days — as the industry predicts — the report projects flat production levels.
• Tar sands producers have lagged, with 9 of 10 leading tar sands producers in Canada underperforming the broader stock market in the last five years.

Analysts have recently downgraded their outlook for tar sands production.

The report also explores how smaller tar sands producers are having trouble accessing capital markets, how the industry is increasing capital spending even as it faces declining cash flows, weak revenue expectations, rising production costs and tight margins.

Read the report (PDF).

Disclaimer: The views expressed here are not the official position of the IWW (or even the IWW’s EUC) and do not necessarily represent the views of anyone but the author.