inly to local office worker venings. You are proud CHAPTER 3 Evaluating Business Ethics 129 ith you since you opened d high turnover. You con Now, your head chef hat CASE 3 Canada's oil sands: "most destructive project on Earth' or 'ethical oil"? very distressed and you work in the kitchens and even on your customers main ethical considera 3 as arisen in an organiza- ager. e main business ethics ave been considered in was the best option, Updated by Simon Oldham This case outlines the ethical controversies surrounding the development of the Canadian oil s teaching. Journal of sands. It sets out the pros and cons of the oil sands and examines the role that these factors play in broader political decisions in the US and Europe about supporting imports from the derplayed in business Canadian oil industry. there has been a kind Despite the oil industry being no stranger to controversy, Canada's oil sands have become probably bountiful resource to the most hotly contested development in decades. Extracting oil from the heavy, extremely viscous ependent judgements mixture of sand, clay, water, and bitumen has become economically viable within recent years. How- ever, critics argue that the social and environmental costs are excessively high. Tar sands extraction requires much greater quantities of water than for conventional oil, it imposes a far higher burden s Ethics Quarterly, 20 of carbon emissions, and it has been associated with a range of other pollutants, including mercury contamination. According to the Sierra Club, the largest environmental NGO in the US, the oil sands als provides a useful produce 'the most toxic fossil fuel on the planet'. ss we can show how Nevertheless, oil sands development also has its legions of supporters, especially in Canada, r this, he argues, we where most commercial extraction takes place. As exemplified by the publication of 'Ethical Oil: The Case for Canada's Oil Sands' by Canadian lawyer and lobbyist Ezra Levant, the Canadian oil sands e social and political have been argued by proponents to be a source of 'ethical oil'. This is justified by Levant and other supporters by the enormous economic benefits of the oil sands; for instance, they have been proven to be the third largest oil reserves in the world, with an almost doubling of production forecasted between 2017 and 2038 to 5.5 million barrels by 2038. Moreover, this argument has been com- pounded by the fact that Canada, when compared to many of the other largest oil-producing coun- tries, has a strong track record of upholding democracy, human rights, and environmental protection.130 PART A Understanding Business Ethics Canada's oil sands industry Oil sand is a naturally occurring substance that can be found in several locations around the globe, including Kazakhstan, Russia, and Venezuela. However, the deposits in the western Canadian prog nice of Alberta are, so far, the largest and most commercially developed source in the world. Alber td's oil sands are located in an area of around 140,000 square kilometres in the north of the province with Fort Mcmurray being the main urban hub for the industry and supporting services. The Albertan oil sands have long been known to the local First Nations who used the bitumen to seal seams on their canoes. European explorers provided the first written accounts of the oil sands in the 18th century and the first patent for commercial separation processes to extract crude oil was awarded as early as the 1920s. Commercial operations only began seriously in al sands en producers on an adscrude the late 1960s with the establishment of the first oil sands mine. Development initially occurred elatively slowly, with the second and third mines only opening in the late 1970s and early 2000s Panned expansion of ol' espectively. between 50 and 150 m The initially slow pace of development was mainly due to the high cost involved in extracting crude ability to meet emissions oil from the oil sands; this, coupled with low oil prices and relatively abundant supply from other sources, made the oil sands economically unattractive. With the spike in oil prices that began around 2012 ponds of to the turn of the century, the rush to secure greater energy independence in the face of an unsettled square kilometres, con Middle East, and dwindling supplies elsewhere, investment flowed into the Albertan oil sands in the found to leak into the early 2000s. A swathe of foreign energy companies, including Shell, Chevron, Total, Statoil, Exxon, and ConocoPhillips, as well as the Korean National Oil Company, and CNOOC, China's largest pro- As of 2017 an area of ducer of offshore crude oil, joined Canadian companies Suncro Energy and Syncrude to boost annual investment in oil sands extraction to just over $30 billion by 2012. From just over half a million barrels stroyed. of bitumen a day in 1997, the oil sands industry in 2017 produced almost 2.77 million. Studies suggest tha However, despite production increasing year on year, the oil market downturn in 2014 saw invest- cinogens. Furtherm ment in new oil sands projects decline by up to 2/3, falling to around $10 billion dollars a year in 2018. which are carcinog Difficulties in bringing new pipelines online, escalating carbon taxes, and a cap on greenhouse emis- lems, such as ele sions from the oil sands have dampened many investors' interest in the Canadian oil sands. . In 2011, the oil The pros and cons of the oil sands dential water u The rapid expansion of the oil sands has brought a host of economic benefits to the local Albertan 170% economy and to Canada as a whole. According to the Canadian Energy Research Institute (CERI), Since commer almost every community in Canada has been touched by oil sands development through the stimu lating impact it has had on job creation and economic growth. Some of the headline impacts pro- seen or is in moted by oil sands supporters include: have been Employment in Canada's oil sands industry as a result of its expansion is expected to grow from These and mar 206,000 jobs in 2017 to 461,000 jobs in 2027. despite some Between 2014 and 2015, 3,400 Canadian companies outside of Alberta supplied the oil sands various kinds, industry with goods and services con capture Between 2014 and 2015, 371 companies in Quebec earned CAD$1.2 billion in business contracts released into related to the oil sands industry. Most em The oil sands industry is expected to contribute CAD$1.6 trillion to the Canadian economy be- de differen to 2035. tween 2017 and 2027 and CAS$521 billion to the US economy over the 25-year period from 2010 strong pos Defence The oil sands industry will pay an estimated CAD$139 billion in federal taxes and CAD$98 billion on oil co in provincial taxes between 2017 and 2027. Such As In the US, the oil sands industry is expected to contribute $16 billion to gross state product and create or sustain 145,000 jobs between 2017 and 2027.CHAPTER 3 Evaluating Business Ethics 131 around the globe, ern Canadian prov- in the world. Alber In 2015 and 2016, 399 indigenous companies, representing 65 communities from across Alberta, had direct business with oil sands operators, valued at CAD$3.3 billion. rth of the province, rvices. On the other hand, many critics have highlighted the significant environmental problems caused used the bitumen by oil sands development. Although all oil sands developments must meet Canada's environ- mental protection regulations, since production began ramping up in earnest after the turn of the accounts of the oil century, environmentalists and other critics have pointed to a litany of negative environmental cesses to extract conclude that : mpacts. For example, some of the studies conducted by researchers and environmental groups began seriously in it initially occurred Research suggests that oil sands-based petroleum production releases 20% more greenhouse s and early 2000s gases than conventional petroleum production. Oil sands emissions accounted for 10% of Canada's greenhouse gas emissions in 2017 and in extracting crude 0.14% of global greenhouse gas emissions. Canada is now among the top ten greenhouse gas supply from other producers on an absolute basis that began around Planned expansion of oil sands production is predicted to increase global carbon emissions by ace of an unsettled between 50 and 150 million tonnes annually by 2030. Such an increase would impede Canada's tan oil sands in the ability to meet emissions targets as a result of the 2015 Paris Climate Accord. tal, Statoil, Exxon, As of 2017, ponds of toxic sludge produced by the Canadian oil sands industry covered 220 China's largest pro- square kilometres, containing 1 trillion litres of chemical and hydrocarbons which have been found to leak into the local environment. de to boost annual alf a million barrels As of 2017, an area of boreal forest and muskeg habitat the size of New York City has been de- stroyed. lion. Studies suggest that oil sands development pollutes lakes in the Alberta region with toxic car- n 2014 saw invest- cinogens. Furthermore, emissions from oil sands production contain neurotoxins, a number of lars a year in 2018. which are carcinogenic, which have led to numerous reports of local residents with health prob- greenhouse emis- lems, such as elevated levels of cancer. oil sands. In 2011, the oil sands industry used 170 million cubic metres of water, equivalent to the resi- dential water use of 1.7 million Canadians; by 2030 this figure is estimated to climb by almost 170%. the local Albertan Since commercial activities started in the 1960s, by 2016 only 11% of active mining footprint has ch Institute (CERI), been or is in the process of being reclaimed-much of the peatlands and old growth forests that through the stimu have been destroyed will never return to their natural state. dline impacts pro- These and many other environmental criticisms have continued to plague oil sands companies, despite some companies investing considerable resources into environmental enhancements of various kinds, including better water efficiency at mine sites and new technologies such as car- cted to grow from bon capture and storage (whereby waste carbon dioxide is captured and stored to prevent it being released into the atmosphere). Most environmental groups remain unconvinced that these improvements are making a tangi- plied the oil sands ble difference, given the speed and scale of development in northern Alberta. Many have taken a strong position against any further development, with groups like the Canadian NGO Environmental business contracts Defence labelling the oil sands 'the most destructive project on Earth', while Greenpeace is 'calling on oil companies and the Canadian government to stop the tar sands'. Some more moderate voices, such as the Pembina Institute, have a goal to advance what they call 'responsible oil sands develop- dian economy be ment', which involves a cap on environmental impacts and a reduced environmental footprint per r period from 2010 barrel of oil produced. Even the terminology of the oil sands remains contentious, with critics typi- cally labelling it the 'tar sands' while industry and the Canadian government prefer the more benign- and CAD$98 billion sounding 'oil sands'. state product and132 PART A Understanding Business Ethics The 'ethical oil' makeover in the face of such challenges to the reputation of the oil sands, one particularly controversial approach to restoring its tarnished image has been to focus on the country of origin of competing sources of crude. That is, in addition to all of the supposed economic benefits of oil sands develop ment, some also highlight that buying oil from Canada is more responsible than buying from many other oil-producing countries. The basic point here is that because the oil sands are in Canada, they are properly and democratically regulated; they do not fall foul of the corruption and abuses common in oil-rich countries and the proceeds do not go into funding terrorism. Exponents of this argument need only point to the countries with the largest current reserves of oil to make their point (see Table 3.9). Apart from Canada, most other states in the top ten 3 have relatively poor records of democracy and upholding human rights. The Canadian-based NGO eversto with the Ethicaloil.org, which is the most vociferous promoter of this argument, argues that oil-producing countries should, therefore, be divided into those producing 'ethical oil' and those producin pote evension whon flict oil': 'Countries that produce Ethical Oil uphold human rights and have high environmental standards. They ensure economic justice and promote peace. By contrast, Conflict Oil countries s spent became mixed in oppress their citizens and operate in secret with no accountability to voters, the press, or inde- ross the risk of spills in pendent judiciaries. The book that popularized the idea, Ethical Oil: The Case for Canada's Oil Sands, written by Ezra agaland's crude and it's Levant, became a best-seller in Canada and ended up winning the National Business Book Award. are country was looking Levant went on to set up Ethicaloil.org, which is widely believed to benefit from oil industry funding and support-or, as one Greenpeace spokesperson put it, it is 'a front group for Big Oil'. This senti- ment was echoed by the then climate sceptic Prime Minister, Stephen Harper, who, when referring attention Agency, to give to petroleum production, noted that 'Canada is a very ethical society and a safe source for the United capget would not lower States in comparison to other sources of energy'. week weeks into the Tru The 'ethical oil' debate quickly ignited controversy in Canada, not least because it looked to many ver scourting Keystone XL like an attempt to airbrush out the problematic aspects of the oil sands. John Bennett, executive director of the Sierra Club of Canada, explained that 'the fact that the Saudis or Nigerians or others in 500 barrels of oil a day fr imatristration's disregard Table 3.9 Top ten countries by proven oil reserves as of 2017 essa and the future of the Rank Country Reserves (billions of barrels) a indian Prime Minister, a 1 Venezuela 301 es and policies on climate 2 Saudi Arabia 267 testsgently threw his 3 Canada 170 ference in 2017 as s 4 Iran es ten tree 158 5 Iraq dingding pressure 143 6 chanted and gor Kuwait 102 7 United Arab 98 Emirates 8 Russia 80 Libya 48 10 Nigeria 37 Source: Central Intelligence Agency, The World Factbook: https://www.cia. gov/library/publications/the-world-factbook/rankorder/2244rank.htmlM. Donald's has face other countries. could have 1.1 rticularly controversial of origin of competing CHAPTER 3 Evaluating Business Ethics 133 of oil sands develop an buying from many are worse in human rights and environment is not relevant. We can't do anything about that; we can ds are in Canada, they deal with our oil sands and we are not!' Others, such as the renowned Canadian environmentalist David Suzuki, remarked simply that 'in today's world, all fossil fuels are unethical. There is no such and abuses common thing as ethical oil !' The politics of the oil sands gest current reserves states in the top ten Yet the discourse regarding the ethics of the Canadian oil sands constantly evolves, particularly influ- canadian-based NGO enced by the relationship between Canada and the US and the stance each of the country's leaders takes towards climate change. es that oil-producing The majority of oil sands crude is sold to Canadian and US refineries; for instance, in 2017, 99% lose producing 'con- of Canada's oil exports went to the United States. Nevertheless, despite an increasing share of US 3 high environmental imports, it looked for a while like the oil sands would be vulnerable to US efforts to green its energy onflict Oil countries mix. US environmental groups had long fought restrictions on US imports of 'dirty' oil sands oil, while President Barack Obama made fighting climate change a key plank of his inaugural address back in the press, or inde- 2013 . The issue of the US's relationship with the oil sands crystallized in the long-running debate about nds, written by Ezra the Keystone XL pipeline extension, which was designed to bring more oil sands crude to refin- siness Book Award. ers in the US. The project became mired in controversy during the 2010s due to its own potential oil industry funding environmental impacts (the risk of spills into ecologically sensitive terrain) as well as the divisive Big Oil'. This senti- issue of bringing oil sands crude, and its heavier greenhouse gas burden, into the US energy mix at a time when the country was looking to reduce rather than increase its emissions. The issue who, when referring came to a head during the Obama administration with the President refusing, on the advice of the ource for the United Environmental Protection Agency, to give the executive order required for the pipeline to go ahead, arguing that the project would not lower petrol prices, create long-term jobs, or affect energy inde- e it looked to many pendence. However, weeks into the Trump administration in early 2017, the President signed an Bennett, executive executive order supporting Keystone XL, sanctioning the construction of the pipeline which could carry up to 850,000 barrels of oil a day from Canada to the US, a move seen by many as emblematic Nigerians or others of the Trump administration's disregard for environmental protection, climate change, and sustain- able development. These issues, and the future of the oil sands, were further confused on the election of Justin Trudeau as Canadian Prime Minister, as many believed he would reverse his predecessors' lax atti- tude towards and policies on climate change, given his vocal support of environmental protection. However, he subsequently threw his support behind the Keystone XL project and was quoted at a Texas energy conference in 2017 as saying that 'no country would find 173 billion barrels of oil in the ground and leave them there' Overall, with increasing pressure for a global reduction in carbon emissions, intense commercial pressure affecting the oil and gas industry, and changing political winds buffeting discourse around its ethicality, what the future holds for the Canadian oil sands is far from clear. QUESTIONS 1. Which actors have a stake in deciding whether the oil sands are an ethical source of oil and why do you think they differ so much in their assessments? 2. How would you go about conducting a utilitarian analysis of the oil sands for the purpose of de- ciding whether it is an ethical source of oil? Provide a provisional assessment based on the data in the case and outline what other data you would need to make a full assessment. 3. How would this assessment differ if you focused primarily on principle-based ethics (duties, ights, and justice)? What issues take precedence now and do they give a reasonable perspective on the