FOR IMMEDIATE RELEASE
March 25, 2020
Contact: Bronwen Tucker, bronwen [at] priceofoil [dot] org
Oil Change International response to Export Development Canada changes in the Emergency Response Act
Today the federal government passed the COVID-19 Emergency Response Act, which included changes to the Export Development Act that would allow Export Development Canada (EDC) to provide potentially unlimited public finance to Canadian businesses, including oil and gas corporations. Last week The Globe and Mail reported that the Canadian federal government is preparing a bailout package for the oil and gas sector and it is likely further measures are still being considered in addition to those announced today.
As a follow-up to Oil Change International’s statement last week, Edmonton-based research analyst Bronwen Tucker released the following commentary:
“More oil and gas support measures may come, but today’s alone are already likely to amount to a substantial bailout for the sector — one with very little public oversight. The new measures allow for an unlimited amount of public finance to flow to the oil and gas sector at the sole discretion of the Minister of Finance, in a moment with very low interest rates. Though Morneau says these provisions will not privilege any sector, he has repeatedly named oil and gas as a key sector that needs support that his team has been in contact with ‘hourly’ during this crisis. Worse, if we look at Export Development Canada’s financing to date it is heavily biased towards oil and gas, making Canada second in the G20 for the most public finance for fossil fuels.”
“The federal and provincial governments have taken some important steps, but there are still massive gaps in Canada’s COVID-19 response packages that are putting millions at risk of losing their homes, jobs, and health that should be the priority right now. Once these critical basic needs are met, our governments should be working to fund a just and managed transition from oil and gas that protects workers, communities, and the climate instead of further tying our future to a sunsetting and volatile commodity.”
- For more background on Export Development Canada’s role and the make-or-break role public finance plays for oil and gas projects see this summary of a 2017 OCI report from Equiterre.
- EDC provided an average of USD $10.6 billion a year in financing for oil and gas 2016-2018, and 9.0 billion a year 2013-2015. This makes Canada the second largest provider of public finance for fossil fuels in the G20 after China. Between 2012 and 2017, EDC provided twelve times more support for oil and gas than for clean technologies. (OCI has a forthcoming report on this, but these specific figures are sourced from: EDC sub-sector reporting, OCI report Risking it All, and Canada Development Investment Corporation financial statements).
- Much of EDC’s oil and gas finance was already going to support domestic projects — including for the Trans Mountain expansion pipeline and the finance currently under consideration for the Coastal GasLink pipeline — rather than the international projects that export credit agencies are typically limited to because of changes to legislation in 2008 (See Figure 15 here). Today’s changes provide an even stronger mandate for EDC to focus domestically.
- On risk: EDC’s required reserve ratio has been lowered and their lending cap is now at the discretion of the Minister of Finance, leaving EDC more likely to default on its finance with the public bearing the risk. Canada’s oil and gas sector has negative profit margins in a sub-$30 oil world, and even if there is a recovery we have some of the most expensive reserves on the planet. Prior to this crisis we were seeing insurers, banks, and institutions investors drop Canadian oil and gas investments, and there is no indication that this is a safe long-term investment for the public.
- On transparency: There appears to be little recourse for trying to track what finance flows through these measures. By comparison, the stimulus deal introduced today in the U.S. actually has more oversight and transparency requirements and even those are being derided as weak.