TAR SANDS

Alberta’s tar sands (also known as oil sands) are the world’s third-largest reserves of recoverable crude oil.60 Though it is expensive to extract, this oil fetches a much lower price than other heavy oils due to the difculty in getting the landlocked tar sands to the United States and other potential markets. Thus, tar sands companies are desperate to promote new and expanded pipelines. The need for new pipeline capacity is particularly acute as companies ramp up production at projects that were started several years ago, while still planning new projects, such as Teck Resources’ massive Frontier Mine.

            Moreover, tar sands projects differ from other oil projects in that they have massive upfront capital costs but relatively low operating costs, so that oil prices would have to drop to very low levels before companies cut back on production at most existing projects. Thus even in a low-oil-price scenario, with no investments in major new projects, tar sands output is projected to slowly grow through to 2030 due to projects started in the high-oil-price boom times gradually coming on-line, and expansion and increased efciencies at existing projects.

All this highlights the importance of stopping the construction of the three major proposed tar sands pipelines — Enbridge’sLine 3, Kinder Morgan’s Trans Mountain, and TransCanada’s Keystone XL (KXL) — in order to prevent future expansion of tar sands extraction, and all the damage to the climate, ecosystems, and local communities including Indigenous peoples that this entails.

Opposition Grows

At the time of last year’s report card publication, there were four of these proposed pipelines on the table. Now, there are three. The frst one to fall was TransCanada’s Energy East, which the company announced it would terminate in October 2017. This announcement came after Canada’s National Energy Board had instructed TransCanada to consider the broader climate costs of the pipeline, a challenge that piled onto changing market conditions and growing public opposition.

2017 saw a noticeable escalation of protest against these pipelines, as well as against tar sands at large, from Indigenous Peoples and their allies. In Minnesota, multiple Indigenousled camps have braved the winter’s freezing temperaturesto stop Enbridge from going through with its Line 3 pipeline that is opposed by a coalition including tribal governments, landowners, and the state’s Commerce Department. InBritish Columbia, the Secwepemc Nation is building solarpowered tiny houses directly in the path of Kinder Morgan’splanned Trans Mountain pipeline. And in a ceremony last May, Indigenous leaders from across the United States and Canada signed a formal declaration against the KXL pipeline and tar sands expansion in general.

More attention than ever is being paid not only to the banks that directly fund these projects — like TD, RBC, Bank of America, and the 20 other fnancial institutions that funded a C$5.5 billion loan package for Kinder Morgan’s Trans Mountain last June — but also to the banks providing corporate finance to the companies behind the pipelines. After all, projectspecifc financing is not always needed for a company to builda pipeline, as Enbridge’s construction on either end of the Line 3 project has demonstrated.70 In fact, US Bank has ended its credit relationship with Enbridge in what many presume is a move to avoid any connection to Line 3 (however, US Bank continues to provide corporate financing to other companies building pipelines). Meanwhile, public pressure continues, including an October 2017 three-day Indigenous-led “Divest the Globe” action that made up the largest-ever protest of banks’ fossil fuel financing.

Delay... Then More Delay

Delayed pipeline construction is one of the costliest factorsgetting in the way of tar sands expansion. The KXL, Trans Mountain, and Line 3 pipelines should all have been up and running by now, according to the companies’ original plans, but instead have faced major delays. In November 2017, TransCanada was denied permission to use its preferred route through Nebraska for KXL, which leaves it to contend with a new batch of landowners and environmental impacts. TransCanada then delayed its fnal investment decision on the project, which it has yet to announce at the time of this publication. Kinder Morgan’s most recent nine-month delay on Trans Mountain, after what one locality argued was an incompetent attempt at securing permits,76 cost the company C$270 million on top of C$810 million in lost revenue.

At the same time, Teck Resources’ proposed Frontier mine, opposed by the Athabasca Chipewyan First Nation on whose traditional territory the mine would sit, continues to be delayed so that regulators can review its full environmental impact.

Each month of delay moves the world farther away from the conditions that existed when these projects were conceived and closer to a vision of a climate-constrained world where oilis left in the ground.

In the Way of Coal

2017 closed with a reminder that tar sands oil is increasingly seen as just as untouchable as coal. In particular, the European financial sector has proven much more cognizant of the pitfalls of tar sands financing than North American institutions. In October, BNP Paribas’ policy announcement marked the shunning of tar sands companies by the world’s ninthlargest bank. French banks BPCE/Natixis, Crédit Agricole,and Société Générale followed with half steps on restricting project financing for tar sands at French President Macron’s climate summit in December.80 At the same time, AXA, theworld’s second-largest fnancial services company by revenue, announced it will stop providing insurance for tar sands projects.

The tide is turning, yet the $98 billion received by major tar sands companies over the past three years is staggering. It’s past time for other fnancial institutions to overhaul their tar sands financing policies and cut off capital to this dangerous fossil fuel.

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