Poor Imperial?

In the wake of an accident that saw 600,000 liters of gasoline leak from a storage tank in Imperial Oil’s North End Sydney tank farm, the oil giant has been rather stingy with its compensation to residents, tossing nickels around like the proverbial manhole covers.

It doesn’t require a very deep dive into Imperial’s finances to realize the company is not hurting for funds, but before we get to the details, a little history.

Imperial Oil Limited was founded in Canada in 1880 by 16 southwestern-Ontario refiners to “find, produce and distribute petroleum products in Canada.” In 1898, in return for expansion capital, a majority interest in the company was sold to John D. Rockefeller’s Standard Oil Group, which controlled almost all oil production, processing, marketing and transportation in the US at that time. Finding this arrangement to be somewhat oppressive, the US government brought suit against Standard Oil under the Sherman Antitrust Act of 1890 and in 1911 the company was ordered to divest itself of its major holdings—in all, 33 companies.

Standard Oil’s descendants include Exxon Corporation and Mobil Oil Corporation, which merged in 1999 to form ExxonMobil. The merged company controls 69.6% of Imperial Oil. (Esso, the name emblazoned on one of the North End tanks, is one of the company’s retail gasoline brands.)

Before we get to Imperial itself, let’s just take note that in 2022, ExxonMobil ranked sixth on the Fortune 500 with revenues of US$286 billion. As Fortune notes approvingly, after a  COVID-induced downturn in 2020, ExxonMobile “took to cost-cutting to perk up its balance sheet” and its efforts, which included laying off 9,000 workers, “helped position the company to achieve its biggest annual profit in seven years in 2021, as it earned more than $23 billion.”

That same year, Imperial oil reported net income of $2.5 billion, its highest since 2014.

 

No boon

In other words, Imperial Oil is not without resources, although its preferred use of these resources seems to be buying back its own shares and rewarding shareholders with generous dividends. It’s a phenomenon sweeping the entire oil sector, as the Canadian Centre for Policy Alternatives noted in February in a report entitled, “Latest oil boom no boon for workers nor the climate.”

The Canadian oil industry is jubilant. High prices means more profit, which, they claim, will lead to more investment. The oil and gas lobby expects a 33% increase in oil sands investment this year over last year. According to the industry, that investment will “support jobs across the country…for decades to come.”

The report’s author, the rather impressively named Hadrian Mertins-Kirkwood, says there was a time when:

…the industry’s promises of long-term job creation might have been true. From the early-2000s to the mid-2010s, high prices incentivized oil companies to start a lot of new “greenfield” projects. Building these new plants created a lot of work, especially in the in situ operations that are the mainstay of bitumen extraction in the oil sands.

BUT and this is a big but, which is why I’ve capitalized it:

…major oil projects become less dependent on labour and much more reliant on specialized equipment once they are up and running. Once construction is complete, there are simply fewer jobs involved in operating an oil plant or an oil pipeline.

Mertins-Kirkwood notes that when oil prices dropped in 2014, many new projects were halted, leading to a big drop in oil and gas employment, but “oil production continued to rise.”

Today, Canada is producing more oil and gas than ever before, even though oil and gas employment is back where it was in 2006, which is more than 20% below its 2014 peak.

 

Investors first

So, with oil prices high again (admittedly not as high as they were in February when the CCPA report came out, but they’re expected to rise again in 2023) will there be more investment and more new jobs?

Mertins-Kirkwood says no, because rather than investing in new oil extraction projects, companies are trying to squeeze more oil out of their existing projects and paying out more profits to shareholders.

Both are true of Imperial, which, in 2021, announced plans designed to increase production at its existing Kearl oil sands plant to 280,000 barrels per day (bpd) from 265,000 bpd and returned almost $3 billion to shareholders through dividend payments and share repurchasing.

Oil companies, in other words, see the writing on the wall, as “investors and governments around the world get serious about achieving net-zero emissions.”

So the notion that Imperial Oil will voluntarily spend money on anything at this stage of its corporate existence other than squeezing every last drop of profit from its existing projects and lining shareholders’ pockets seems unlikely—remember, their offer to residents to cover the “inconvenience” of being evacuated from their homes, breathing in gasoline fumes and worrying that the tank farm down the road might catch fire, was a princely $250.

That it will spend on improved safety equipment, dedicated trucking roads or tank farm relocation seems nigh on impossible.

 

Conspiracy?

During Monday night’s meeting of North End residents, CBRM emergency management manager Bruce MacDonald used the word “conspiracy” and it’s been bugging me ever since.

The context was the air quality monitoring that took place after the gas leak in the North End on July 8. MacDonald said the monitoring was done by a company hired by Imperial but he was “not going down a road of conspiracy” to say whether this might have compromised their work in any way:

I have to trust that the companies [Imperial] hired to do this job are doing the job appropriately.

I have no reason to question the work done by the air monitoring company, but it’s worth remembering that shortly after MacDonald made these remarks, it was revealed that the company Imperial had contracted to handle emergencies like a gasoline leak on its site didn’t have the necessary equipment to do so on July 8.

And I don’t think it’s conspiratorial to worry that Imperial is overseeing the air quality monitoring, Imperial is handling (often by ignoring) media inquiries about the spill and Imperial is investigating the spill, especially given that Imperial told residents for two months that all the gasoline from the spill had been contained before finally acknowledging that 3,100 liters had escaped.

We’re talking about an oil company here, so the idea that they can be “trusted” to do the right thing in any situation is open to debate. Imperial’s owner, ExxonMobil, was told by its own scientists in the 1970s that carbon dioxide emissions from the use of fossil fuels were causing global heating. Its response was to fund climate change denial groups and mount advertising campaigns designed to “shift responsibility for global warming away from the fossil fuel industry and onto consumers.”

The company will be tried in Massachusetts on charges it broke the state’s consumer protection laws by covering up what it knew about fossil fuels and climate change. According to the Guardian, the state also says “the company deceived investors about the risks to its business posed by global heating.”

Imperial itself is facing accusations in Saskatchewan that it “repeatedly failed” to notify the Saskatchewan government—or affected landowners—about contamination from some of its current or former fertilizer operations. As the Narwhal reported this very week, a November 2021 briefing note to then environment minister Warren Kaeding stated:

The  ministry has found evidence that Imperial has failed to properly report historical impacts at four separate sites. At each site, Imperial knew of off-site impacts for many years, but did not disclose this information.

It’s not dabbling in conspiracy theories to question oil companies; in fact, I’d argue it’s naïve not to.

 

Featured image: “Money to Burn,” 1893 by Victor Dubreuil, Public domain, via Wikimedia Commons