February Will Be Remembered As the Month the Worm Turned On the Petro-State

What a month it has been for the Oil Patch and we're not even halfway through.

It began on the 2nd when CNBC's brash investment guru, Jim Cramer, pronounced the death knell for fossil fuels.

"You can tell that the world's turned on them, and it's actually kind of happening very quickly," said Cramer. "You're seeing divestiture by a lot of different funds. It's going to be a parade ... that says look, 'These are tobacco, and we're not going to own them.'"

That same day the CBC reported on an exodus of young people leaving Calgary.

One day earlier it was reported that Chevron was taking a 2 billion dollar (USD) write off on its investment in the Kitimat LNG venture the company was struggling to offload.

“Our assessment on the Kitimat project is, given all the other developments out there in the world, that one was going to be tough to compete versus our alternatives,” [CEO Michael] Wirth said during a conference call with industry analysts on Friday.

And, yes, in case you were wondering, this is the same project associated with the Coastal Gaslink pipeline. Chevron 's decision had nothing to do with the Wet'suwet'en protests. It's not the First Nations that are undermining the venture. We need $9/million BTU to break even. The Asian markets are now paying about $5.5/million BTU. It's a huge money loser and that's why Chevron has been so desperate to get out - if only it can find someone to buy their interest.  Good luck.

The next bombshell came on the 6th of February when BlackRock, the world's largest investment management company, notified the CEOs of the world's largest companies, that it was exiting high-carbon fossil fuels.

“Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance,” [BlackRock CEO Larry] Fink wrote in the letter, which was obtained by The New York Times. “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.”

That week closed out with a report that the Trudeau government had underestimated the cost of constructing the new Trans-Mountain pipeline, a.k.a. Trudeau's Folly, by a smidge - if you consider 70 per cent a smidge. The feds had tried in vain to unload the TMX on the private sector but no takers. What do you think their chances are now of getting this millstone off the necks of the Canadian public?  Oopsie, they f--ked up!

Then the New York Times dropped a bombshell yesterday, reporting that the financial and insurance giants had given a big thumbs down to Alberta, Athabasca and, specifically, bitumen. This time there was no grey area, no wiggle room. It was the Tar Sands, DOA - dead on arrival.

on Wednesday BlackRock, the worlds largest asset manager, said that one of its fast-growing green-oriented funds would stop investing in companies that get revenue from the Alberta oil sands.  

“If you look at how destructive oil sands can be, there’s a very strong rationale,” Armando Senra, head of BlackRock’s iShares Americas funds, said in an interview, saying that Alberta’s oil fields, along with coal, are “the worst offenders, if you want, from a climate perspective.”

And the giant insurance companies also want no part of Athabasca bitumen or the companies that operate there.

It wasn’t just financing that suddenly seemed at risk. Some of the world’s largest insurance companies, including AXA, Swiss RE and Zurich Insurance, announced they would stop providing coverage to projects in the oil sands, which are sometimes referred to as tar sands, as well as no longer investing money in those projects. 

In December, the American insurer The Hartford said it would no longer insure or invest in companies that get more than a quarter of their revenue from oil sands or thermal coal mining. “We selected coal and tar sands because they have been identified as leading contributors to carbon emissions,” said David Robinson, the company’s general counsel.

Jason Kenney wasn't going to take Wall Street's rejection lying down. If they boycott Alberta, he fumed, Alberta would boycott them. As if.

The Tories were always going to be on the wrong side of bitumen. Their base is Alberta. Bitumen is their manna from heaven. It is the heart and soul of everything from the Calgary Petroleum Club to the Stampede.

The Liberals, by contrast, chose to back bitumen. Ignatieff proclaimed Athabasca the "beating heart of the Canadian economy for the 21st century."  Then, three years ago next month, Trudeau flew to Houston to assure the oil barons that "no country would find 173-billion barrels of oil (sic) in the ground and just leave them there." He was onside. He was their boy.

Now that hazmat-laden, bituminous sludge is reviled in boardrooms and stock markets around the world. Who knew? Who could've known? Well, as it turns out, lots of people. People who our political caste, federal and provincial, have chosen to ignore.

People like Mark Carney and his predecessor at the Bank of England and their counterpart at the Bank of France, have been warning anyone who would listen that stock markets and bourses around the world are sitting on a lethal time bomb in the form of investments in fossil fuel reserves of some $27 trillion. And climate scientists have warned, repeatedly, that if the world is to avert utter climate catastrophe, that bitumen has to be left in the ground. There's no other choice.

What's next for the federal government? When Trudeau returns from his tour to persuade Africans to support our bid for a seat on the Security Council, he will have to deal with the proposed Teck mega-mine that promises to jack up Canadian bitumen production. The science types have already said it's a climate wrecker. Now Justin has to decide whether to greenlight it and he's got Jason breathing down his neck.

There are no easy answers for the Dauphin. There certainly are no good answers. He has a record of yielding to the expedient rather than doing what's right, at least when that might jeopardize his and his party's fortunes. It's been a busy month. He's got a lot to mull over.

My guess is that Trudeau will find some excuse to defer any decision on the Teck mine. If BlackRock is right, maybe they'll put the Tar Sands out of their misery. Then there's Trudeau's Folly. A skeptical mind could suspect that the feds went to keep that pipeline from being abandoned in order to keep the Teck mine venture from collapsing. Hard to say. As Nikiforuk showed a few months ago, there's ample capacity in the existing TMX to handle bitumen shipments to the coast. The huge expansion of TMX must have had some production venture in mind. But, if BlackRock has foreseen the end of Athabasca, then the federal government clearly zigged when it ought to have zagged on the bitumen pipeline.

We know what Jason has in mind. His war room. He'll be launching into a frenzy of rage (he's actually pretty good at it) over foreign meddling or eastern betrayal. He'll be setting up straw men as fast as he can. His quest to become the King of Canada hangs in the balance.