September 2013

Performance under pressure

The oil sands industry aims to win over public opinion in the hopes of de-risking future projects

By Antoine Dion-Ortega and Pierrick Blin

“I think I have a fantastic job,” declares Erika Uchmanowicz, community relations advisor at BP Canada, as she smiles at the camera. While the Sault Ste. Marie native describes her work – building relationships between BP and aboriginal communities – we read on the screen that Canada’s oil sands could create more than 800,000 jobs in the next 25 years. This televised message comes courtesy of the Canadian Association of Petroleum Producers (CAPP).

Any Canadian turning on his or her television nowadays is probably familiar with these ads. They are part of CAPP’s broader media campaign, Oil Sands Today, which was launched in May 2010 and has been mobilizing commercials for outdoor, print, radio and web media. For TV ads, the media buy varies from year to year but it is mostly focused on Canadian news, specialty and sports channels. Ads were designed by two Toronto-based advertising agencies: initially by Agency 59 and today by i2, whose existing client base includes the Canadian Energy Pipeline Association, Canadian Natural Gas, and the Mining Association of Canada.

The oil sands industry has arrived at an unfamiliar place. Producers spent decades advancing the technology and building the business case for the development of the vast bitumen deposits in northern Alberta, but outside of the province, a nearly perfect storm of other factors has come together to challenge industry plans. It is now public opinion that is putting new projects at risk and pushing the oil sands industry to respond.

Janet Annesley, vice-president of communications at CAPP, is reluctant to divulge the cost of the whole campaign but admits that “it is in the millions of dollars, all funded by the industry.” She says the ads will keep playing for a while. “We have a long list of oil sands technology, people and business stories we are working from, so we could be developing oil sands stories for TV for a very long time,” she points out. “Our research shows that the longer the ads are on, the more effective they become, as people see initiatives are not one-off efforts or exceptional examples, but part of everyday business. We have been asked [by our members] to speak out. This is an investment that we are going to have to continue in the longer term.”

It is by design that Erika Uchmanowicz speaks first about where she is from. “In our TV ads, you will never see an actor,” notes Annesley. Viewers learn that Ryan Cosgrove, a mining engineer at Suncor, hails from Chilliwack, B.C., and that Jacquelyn Kankam, environmental advisor at E&P Total Canada, comes from Winnipeg, Manitoba. Suppliers to the oil sands companies are also frequently featured, like Gaétan Bolduc, president and CEO at Prévost, a motor coach manufacturing company based in Ste-Claire, Quebec. “There are more than 2,000 companies across Canada supplying the industry and many thousands of others that supply these companies, and so forth,” says Annesley.

The main purpose of the campaign is to demonstrate that the oil sands are a benefit to Canadians from coast to coast, and not only production areas. “We do not concentrate our communication efforts in Saskatchewan and Alberta,” indicates Annesley. “We have been focusing on Ontario, Quebec, and B.C., where perceptions are different. We have the responsibility to deliver benefits nationally.”

Indeed, convincing Albertans that the industry is good for the economy has never been an issue. A 2011 study from the Mining Association of Canada revealed that since 2007, the oil sands have been generating an average of $1.8 billion in tax revenues for the province each year. “Most Albertans understand that our roads, our schools, our hospitals are funded by the industry through royalties and taxes,” says Annesley. An Environics Research poll last December showed that 85 per cent of Albertans had a positive opinion of the oil sands.

Rallying the other provinces has proven trickier though, with support falling to 57 per cent in neighbouring B.C., and as low as 40 per cent in Quebec. Though the industry benefits the rest of Canada economically, this does not always offset its perceived environmental costs, suggests Tony Coulson, vice-president of public affairs at Environics Research. Accidents like the recent leak at Canadian Natural Resources Ltd.’s Primrose operation can quickly neutralize the argument of economic benefits in the media as well as in the public eye. Canadians, says Coulson, “want to see economic development balanced with environmental protection. But if you force them to choose, they will choose the environment by about two thirds to one third.”

With 30 years of experience in the oil, gas and electricity fields, Peter Hunt is a first-hand witness of how the industry has been slow to break away from its Albertan cradle and tout the benefits of the oil sands to a wider audience. Hunt was promoted to national practice leader at Hill+Knowlton Strategies Canada in 2011 when the public relations consultancy was trying to strengthen its position in Alberta. According to him, the Albertan ivory tower, as comfortable as it might be, hindered the industry because it cut the province off from critical voices elsewhere.

“Most of the oil and gas industry is headquartered in Calgary,” Hunt says. “The people who lead the industry are not used to interfacing with people who do not share their industry experience. Senior people don’t get that first-hand exposure to the people who are being critical of the industry.” The failure to ­invest in what he calls the “political theater” was probably one of the greatest mistakes of the early industry because it let others impose their own narrative of the oil sands. “[Media] projects were put in play by other people who had other agendas, some of them supportive, some others not,” he says.

Outside of Alberta, when many Canadians were hearing about the industry for the first time, environmental groups were able to tell the story of the oil sands on their own terms. “Too many companies do not think enough about what the Internet enables,” says Hunt. “Networks of likeminded persons were used by the industry’s opponents, but the industry has been slow to see that it needed to assemble its networks as well.” With increasingly apocalyptic rhetoric, the industry’s opponents have been relatively successful at suggesting that extracting the oil sands cannot be done while, at the same time, addressing climate change. In 2008, Maude Barlow, chairwoman of the Council of Canadians, compared the oil sands to Mordor, from the Lord of the Rings – it is an association that has been spreading over social media networks ever since. The following year in a speech in Toronto, former U.S. vice-president Al Gore called the oil sands a threat to “our survival as a species,” while more recently, former NASA researcher James Hansen said that Canada exploiting its oil sands reserves would mean “game over for the climate.”

In the public eye, oil sands mines rapidly became the poster children for environmental destruction, much more so than other non-conventional oil extraction methods like offshore drilling and hydraulic fracking, or other heavy greenhouse gas (GHG) emitters like coal-fired power generation. “[Mining] is a much more visual way of demonstrating disruption than showing a photograph of an offshore platform,” says Hunt, who recalls that the first oil sands projects were all mines. “If you carefully select your photo angles, you can truly make [oil sands mining] look shocking and dreadful.”

It was only in the last five years that oil sands companies started to realize they might lose the war of public opinion. “It became apparent in 2009 that a negotiated or constructive solution wasn’t the outcome that environmental groups wanted,” says Annesley. “They wanted to have a broad public campaign against the oil sands in an effort to shut them down. The industry was slow to understand what kind of scenario was playing out, and that in this particular drama, it was going to be cast as the villain.” In an effort to counter the impact of hostile campaigns from their opponents, companies told CAPP to look for ways to speak directly to Canadians about their environmental performance, as well as the economic benefits they provided for the country.

According to Kara Flynn, vice-president of government and public affairs at Syncrude, CAPP’s strategy “has resonated extraordinarily well with both our stakeholders and the public.” She might be right. Support for the oil sands has been increasing steadily over the last five years: In 2008, only 45 per cent of Canadians thought the oil sands were good for the economy, but that number jumped to 67 per cent by 2012. “The message is that the folks who work in the oil sands are your neighbours, your colleagues, the people your children play minor baseball with,” says Flynn. “They are just like you and I. They go to work every day as dedicated individual employees.”

Flynn’s vice-presidential role at Syncrude did not even exist before she took it on in January 2011. The decision to create the position reflects the intensifying public attention that the oil sands industry has been receiving lately, she says. “There is heightening dialogue across the spectrum of perspectives and opinions on our industry – heightening awareness.” Even though only 20 per cent of oil sands reserves are close enough to the surface to be mined, Flynn is well aware of the impact that visuals can have in the public eye: “The oil sands industry, particularly its mining aspect, is highly visible. It is one of the few resource developments in the world where you can literally drive right up to the door and witness it first-hand.” According to her, “transparency” and “accessibility” are the main reasons why the oil sands fell under such scrutiny.

A line in the sand

The disparity between provinces is not the only hurdle to overcome on the way to being viewed as a truly “national industry.” The oil sands also face the risk of being too tightly associated with party politics, with support varying among the federal parties, thus polarizing public opinion even further. “The Conservative voters, not surprisingly, are the most supportive of the oil sands,” says Environics’ Coulson. “So 88 per cent of Conservative supporters say they are good for Canada. Among Liberals, it is 68 per cent, undecided voters 60 per cent, NDP supporters 48 per cent, Green Party 40 per cent, Bloc Quebecois 20 per cent. There is a range of either support or opposition based on political affiliation.”

The Conservative government has given the industry its clear approval since its election win in 2006, abandoning the Kyoto accord in 2007, welcoming Chinese investment in the sector and touring the world to promote the industry. These actions have divided, rather than unify, Canadian politics, according to many environmentalists. Lately, the Conservative Party of Canada (CPC) has grown more combative, treating environmental groups as “radical” adversaries rather than partners in a constructive dialogue. The day before federal regulatory hearings began on Enbridge’s Northern Gateway pipeline in January 2012, Natural Resources Minister Joe Oliver wrote that environmental groups had a hidden “radical ideological agenda” and were “driven by an ideological imperative.” The Senate finance committee announced at the same time that it would review charitable funding for some groups, while Public Safety Canada listed environmentalists as “issue-based domestic extremists” that could pose a threat to Canadians.

John Bennett, executive director at the Sierra Club, has been advocating for strong environmental policies for 15 years. He has witnessed first-hand the change in tone in Ottawa, since the CPC came into power. “The acts of this government made the oil sands the key political issue of our time,” he says. Not too long ago, he remembers, “We used to have all sorts of consultations between the government and the industry on climate change. My work was to make sure that environmental groups were well represented at these meetings. And the guys from the industry were there, it was a multi-stakeholder thing. There were lots of discussions, lots of ideas.

“The Liberals were trying to find ways to reduce emissions and not shut down tar sands,” says Bennett, who also claims the CPC, not environmental groups, instigated the current PR war. “People like me are now treated like political enemies. So instead, we got back to a more traditional type of campaign, which is to attack the market. That wouldn’t have happened if they did not abandon the fight on climate change. If they had continued [with what the Liberals had done], campaigns on tar sands would not be what they are today.”

Bennett is joined by other environmentalists in his view. With suspicion growing over the years, Greenpeace coordinator Keith Stewart has begun look­ing into the number of meetings between oil companies and government officials. “We are calling for a separation of oil and state in this country because it is very hard to see where government ends and where industry begins when it comes to oil policy,” he says. “We are seeing a weakening of Canadian democracy in favour of rapid industrial development.”

Syncrude’s Flynn will have to deal with the fallout from claims like this, regardless of their veracity. She says Syncrude has a long history of working cooperatively with governments, political stripes notwithstanding. “Government has an obligation to consult effectively with all stakeholders, which includes Syncrude,” she adds.

Hunt shares a similar opinion: “I think the government recognizes that the development of oil sands is important for the future of the country. I see common interests rather than close partnership.”

Annesley too is adamant that the government has been doing nothing more than its job in defending the industry. “Oil sands are the largest single export commodity in Canada,” she says. “It is our federal government’s role to advocate for the economic interests of Canadians abroad, regardless of what party is in power. How they go about it is completely up to them.”

Breaking out to global markets

With no direct access to the coasts, Alberta needs the other provinces to buy into the oil sands’ identity as a “national industry” and carry its oil through. As output from the oil sands is expected to increase from 1.7 to 6.7 million barrels a day by 2030, the industry needs to secure access to global oil markets in order to get the kind of prices that oil from other parts of the world can command. “Even though it has decreased significantly, the gap ­between West Texas Intermediate (WTI) and Brent is still there,” says Jean-Thomas Bernard, visiting economics professor at the University of Ottawa and a specialist in energy. “This tells us that there is not enough capacity to get Canadian crudes out, and the problem will be persistent as long as oil sands production increases.”

There is no magic formula to tackling bottleneck issues: The industry will need either more pipelines or more trains. “The best way to deliver crude oil is the pipeline, which is safer than train when looked after carefully,” adds Bernard. “The rail system was not designed to transport crude oil 150 years ago.”

Differences in capacity also make the case for pipelines. “To have a train fleet with the same capacity as Keystone XL [830,000 barrels a day] is unrealistic,” says Pierre-Olivier Pineau, professor at HEC Montreal and a specialist in energy policy. About 40 per cent of oil sands production leaving Alberta is heavy crude. This needs to reach the Gulf of Mexico, where most refineries were designed to process it. “Near 50 per cent of U.S. refinery capacity is located on the Gulf Coast, and most refineries have been transformed to process heavy crudes,” adds Bernard.

Selling the Keystone XL project to Americans has proven difficult, however. Hunt says it has become a “political icon,” though in truth it is a relatively simple industrial project.

“I don’t think there have been many elections in the U.S. over the last 50 years where a pipeline was discussed as part of a political platform for a party,” says Reynold Tetzlaff, national energy leader at PwC Canada. “There is some symbolism there.”

Symbolically or not, the oil sands are now inextricably tied up with the fight against climate change in U.S. energy policy, according to Michael Levi, a director at the New York-based Council on Foreign Relations and author of a new book, The Power Surge: Energy, Opportunity, and the Battle for America’s Future. “The U.S. position on climate has already affected the project,” he says.

Though President Barack Obama has stated that he would not approve a project that would result in a significant increase in greenhouse gas (GHG) emissions, his position’s implications for the Keystone project are hard to judge, says Bernard. “From well to wheel, oil sands production releases around 15 per cent more GHG than other oil sources,” he says, arguing that if Obama is looking to reduce global GHG emissions, he will not approve Keystone XL. But, he adds, another interpretation is that Obama does not want to weigh down the U.S. carbon footprint, preferring to shift emissions to Canada or other countries. If this second interpretation is chosen, it could be positive for Keystone, according to Bernard.

Refineries from the Gulf are, however, not the only ones designed for heavy crudes. Many others around the world would be pleased to get their share of the crude from Alberta’s oil sands. “The growing Asian markets could rapidly absorb the oil sands production,” says Levi. But the industry needs pipelines that cross through other provinces to reach the coast. With support varying among provinces as well as political parties, the future looks quite uncertain on that front too. “The Northern Gateway doesn’t seem to be accepted at all, [Kinder Morgan’s] Trans Mountain also faces many objections,” says Pineau. “Will the projects to the East Coast be realised? There are lots of question marks here, and in the short term, few positive answers.” Despite uncertainty in public support, TransCanada Corp announced on August 1 that it was moving forward with its Energy East pipeline project between Alberta and New Brunswick.

The industry is confident that the end result will be positive in terms of transport. Even if some pipeline projects are delayed or compromised, it can always rely on trains. “The companies will find a way to get their barrels to the market one way or another,” says Tetzlaff. “Even today, if you look at the differential [between] Brent and WTI, it has narrowed substantially from where it was a year ago.” It is a clear sign that some of the bottlenecks have loosened already.

The question is whether the advertising campaign from the oil sands industry will tip the balance in favour of building new pipeline infrastructure. But one thing is for sure: Canadians have been invited to a national conversation – and it is far from over.

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