Cenovus said to be in talks with Indigenous groups for MEG Energy bid
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A group of First Nations and Metis communities including Chipewyan Prairie First Nation and Heart Lake First Nation are in talks with Cenovus about taking a $2 billion stake in MEG, according to people familiar with the discussions. The Indigenous stake would be backed by financial support from the federal and provincial governments, while Cenovus would bid for the rest, the people said.
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A joint offer for MEG could be made as early as September, though talks may fall apart.
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The deal, if successful, would mark the first large, direct Indigenous stake purchase in an oil sands producer. It would also unite two Calgary-based companies with significant operations in the oil-rich region of northeastern Alberta. MEG's Christina Lake project includes 200 square kilometres of leases in the area, and the company has regulatory approvals to produce around 210,000 barrels a day.
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MEG was put into play in May when Strathcona Resources Ltd. made an unsolicited cash-and-stock bid that valued MEG at about C$6 billion. Strathcona, controlled by former investment banker Adam Waterous, made the bid after taking a 9.2% stake in the company. MEG's board advised shareholders to reject Strathcona's bid, calling it inadequate. The board also started a strategic review that may include finding other offers.
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MEG traded at C$25.85 a share at 11:45 a.m. in Toronto on Tuesday. That's above the C$23.27 offer from Strathcona, signalling investors are expecting a higher bid.
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Alberta's First Nations have increasingly sought ownership of large energy-related infrastructure projects such as pipelines and tank storage farms to earn revenue. Canadian energy companies have been partnering more frequently with the communities whose land is affected by their projects in a bid to head off potential environmental and legal opposition.
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Policies under threat The oil and gas emissions cap, first proposed by Trudeau in 2021 and frequently touted by his government on the world stage as a symbol of Canadian climate leadership, is likely to be dropped in favour of tougher industrial carbon pricing. A briefing note prepared last year for then-finance minister Chrystia Freeland about the proposed oil and gas emissions cap — which Canada's National Observer obtained with a federal access to information request — notes the oil and gas sector is the country's largest source of emissions, with nearly half coming from the oilsands subsector. The heavily redacted briefing also confirmed the policy would be 'technically feasible' for companies to achieve and help Canada reach its emission reduction goals. But that was a different government. In contrast, Carney's election platform pledged to improve industrial carbon pricing but did not commit to the cap. In June, the Toronto Star reported the cap was on the chopping block. 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It is not known precisely what was discussed, but those oil and gas executives have recently been on the record demanding the gutting of environmental regulations they claim choke their growth. 'We continue to believe the federal government's cap on emissions creates uncertainty, is redundant, will limit growth and unnecessarily result in production cuts, and stifle infrastructure investments,' reads an open letter from 38 oil and gas companies published after April's federal election. However, oil and gas executives aren't stopping there. They are pushing for a major clawback of environmental safeguards, and want the West Coast tanker ban and the federal industrial carbon pricing scrapped. Carney promised to strengthen the latter during his campaign and, if it were abandoned, it would give companies virtually unfettered ability to spew carbon pollution. The former, meanwhile, is seen as a precursor to reviving the Northern Gateway pipeline. That executive meeting was far from the only one with federal officials. The Canadian Association for Petroleum Producers, the apex lobby group for the fossil fuel industry, recorded 13 meetings in May and June, the most recent months available on the federal lobbyist registry, with government officials like PMO policy coordinator Joshua Swift, Hodgson and his chief of staff Eamonn McGuinty, and several deputy ministers at Environment and Climate Change Canada. Among the organization's stated list of priorities are accelerating approval of major projects like LNG terminals and persuading the government to 'not proceed' with the proposed oil and gas emissions cap to focus on 'other effective collaborative solutions.' On a recent earnings call, Enbridge CEO Greg Ebel, one of the signatories to the open-letter, told investors the federal government was not creating the conditions for investment to occur, pointing to the emissions cap and West Coast tanker ban as obstacles. In another breath, he assured investors the company would deliver between $40 billion and $45 billion in dividends to shareholders over the next five years. Other Options In 2022, the federal government presented two options when developing the cap. The selected option was a new cap and trade system, but the other option was setting a specific carbon price that would make it worthwhile for the oil and gas industry to drive emissions down. It's possible Carney will reach back to that draft paper for guidance. Privately, some climate advocates who had pushed hard for an emissions cap are coming to grips with the probability it will be axed and are now seeking strong alternatives. If some groups are quietly determining their position, others are vocal. In July, Clean Prosperity — which had never been in favour of the cap — recommended Ottawa cancel the cap and the clean electricity regulations, while strengthening carbon pricing. The group says those policies have 'created significant tensions with provinces, especially Alberta and Saskatchewan,' and would be 'unnecessary with strong carbon markets.' Clean Prosperity recorded eight meetings in May and June with federal officials, according to the federal lobbyist registry. They include two conversations with Swift, as well as meetings with Caroline Lee, chief of staff to Environment and Climate Change Minister Julie Dabrusin, Natural Resources Minister Hodgson and his chief of staff, and Aaron Wudrick, director of policy under Conservative Leader Pierre Poilievre. Similarly, the Canadian Climate Institute weeks later published its own study arguing that strengthening industrial carbon pricing and dropping the cap is the better path for emissions reductions. The reasons are technical, but essentially the group's modelling found that overlapping the emissions cap with carbon pricing policies could inadvertently weaken decarbonizing efforts. Donner said it's possible to achieve the same carbon pollution reductions using an improved industrial price, but unless there is a credible proposal for how that will be done, it's risky. 'We removed the consumer carbon price, but we've yet to replace it with anything,' he said. 'So that took one of the jenga blocks out. You can't keep pulling blocks out. At some point the tower is going to collapse.' Donner said any negotiation with the provinces has to involve strengthening the industrial carbon price at its centre. 'The government can't give in on that,' he said. 'The industrial pricing system, if strengthened, can be a foundation of climate policy going forward. It is not, however, nearly enough on its own. 'We need complimentary efforts on transportation, buildings, electricity, industrial policy and other areas not just to cut emissions, but to prepare Canada for a low-carbon world.' 'Just fossil fuel deals' Catherine Abreu, another member of the Net Zero Advisory Body and director of the International Climate Politics Hub, said there's no evidence any grand bargain has actually achieved anything meaningful for Canadians. 'They're not bargains; they're actually just fossil fuel deals,' she said. She pointed to the Trans Mountain pipeline that cost Canadian taxpayers over $34 billion, and the consumer carbon price that Carney cancelled in March. Another boondoggle was a 2016 proposal called the 100 megatonne cap that was supposed to limit oil and gas emissions in Alberta by introducing a carbon price on the oil sands in exchange for allowing some fossil fuel infrastructure expansion, she said. The 100MT cap 'did nothing to slow the expansion of the oil sands and … just greenwashed the activities of the oil and gas companies that were continuing to lobby hard against climate policies,' Abreu said. Today's discussion of 'decarbonized oil' — a euphemism discredited by experts as "marketing speak' but which Carney has said is crucial to his grand bargain with Alberta, is framed similarly to the discussions around the 100MT cap. 'Deconarbonized oil' is widely accepted to mean oil production paired with carbon capture technology that by design does not capture the majority of emissions associated with the fuel's lifecycle. When used, the technology routinely fails to meet its targets, and also only applies to the emissions required to extract and transport it, but not for when it is actually burned, which is where the majority of emissions come from. In 2022, more than 400 experts urged the federal government to abandon its carbon capture plans citing the risk of locking in fossil fuel production and ruining the ability of Canada to meet its emission reduction goals. The flagship carbon capture project would be the Pathways Alliance's proposed trunkline to pipe carbon dioxide captured from 13 oilsands sites in northern Alberta to an underground storage site south of Cold Lake at a cost of $16.5-billion — at least half of which it wants taxpayers to pay for. Two government sources
