Bear attack injures worker at Suncor Oil site as producer faces safety scrutiny

Robert Tuttle, Bloomberg News

May 10,2023

A worker at a Suncor Energy Inc. oil-sands site in Canada was injured in a bear attack over the weekend, adding to concern about the company’s safety record after a string of fatalities in recent years. 

The person was transferred to a hospital and released hours after the encounter with the animal, which occurred at about 8 p.m. on May 6 at the Base Plant operation in northern Alberta, company spokesman Leithan Slade said in an email. A bear attack in 2014 resulted in the death of a Suncor oil-sands worker in the same area.

“A full investigation is underway, and it would be premature and inappropriate to speculate on the cause,” Slade said. “Suncor does provide personal deterrents such as bear spray, together with training, for workers who work within or close to wildlife habitat. We also have standards with respect to the use of wildlife fencing and an on-site professional wildlife contractor for bear surveillance and monitoring.”

The incident comes as Suncor’s new chief executive officer, Rich Kruger, has pledged to focus on improving worker safety. Alberta regulators laid five charges last month against Syncrude, a Suncor oil-sands joint venture, in the death of a worker who drowned at the facility in June 2021.

The fatality was one of several in recent years at Suncor-owned sites — a record that was a central theme of activist Elliott Investment Management LP’s campaign to shake up the company’s management. Suncor’s former CEO, Mark Little, stepped down in July after a death at Base Plant.

YOU CAN'T CUT COSTS AND BE HEALTH AND SAFETY DRIVEN

New Suncor CEO Kruger focused on cost-cutting, will 'play to win'

Amanda Stephenson, The Canadian Press

The new top boss at Suncor Energy Inc. says he will be sharply focused on cost-cutting as he embarks on the task of improving performance at the oilsands giant.

Rich Kruger, who took over as Suncor's new CEO on April 3, pledged Tuesday that the company will become a "simpler and more focused organization" under his leadership. 

On a conference call with analysts to discuss the company's first-quarter financial results, he promised to be candid, transparent, and operate with a "sense of urgency" as he seeks to fulfil his mandate to make changes at the Calgary-based company.

"I consider myself to be reasonably decisive, and very competitive," Kruger said. "I play to win."

A familiar face in the Canadian oilpatch, Kruger led Imperial Oil Ltd. as president and CEO from 2013 until his retirement in 2019. His time at the helm of Imperial Oil was the culmination of his 39-year career with parent company ExxonMobil Corp.

Kruger's appointment to the top job at Suncor — replacing interim CEO Kris Smith, who stepped in to fill the role after Mark Little resigned in July 2022 — came after months of investor pressure in the wake of a spate of workplace deaths and safety incidents, production challenges, and a lagging share price.

Kruger said Tuesday that in his first five weeks on the job, he has visited half of the company's major facilities and met with workers and management.

While he said Suncor is a proud company with excellent people and high-quality assets, he believes it has untapped potential.

"I see a gap between our current performance and what I would consider best-in-class in many, many areas," he said.

He also talked up the importance of "organizational efficiency" and suggested that there are ways to trim the company and reduce costs.

"I think we can eliminate work. I think we can do away with work that doesn't add value," he said, adding that all employees need to consider how their role helps to generate revenue for Suncor.

"I very much believe in making money. We are in the business to make money and as much of it as possible, and everybody starting with me needs to see how they do that," Kruger said.

In an interview later Tuesday, Kruger said he hasn't been with the company long enough to know whether its current workforce is the right size or not. But he said he isn't going in with any arbitrary staffing number or target in mind, adding that instead he sees his rule as "clearing the pathway for employees to perform at the top of their ability."

"I want to be sure that everything they're doing adds value to the bottom line," he said. "So I will look hard and long at the work people do."

Kruger's ability to turn around the flagging fortunes of one Canada's largest energy companies will be heavily scrutinized by many — including U.S.-based activist investor Elliott Investment Management, which had been pushing for change at the top of Suncor.

Two of the board directors serving on the CEO search committee that recruited Kruger were named to Suncor's board last summer, as part of a deal the company struck to appease Elliott Investment Management.

Elliott publicly expressed frustration last spring at what it called a recent decline in performance at the energy producer.

The activist investor also criticized Suncor for its safety record. At least 12 workers have died at the company's oilsands operations in northern Alberta since 2014, and former CEO Little resigned just one day after the most recent fatality.

In a note to clients Tuesday, RBC Capital Markets analyst Greg Pardy said with a recharged leadership team under the direction of Kruger, Suncor is "poised to re-establish operating and financial momentum in the months to come."

"We like what we heard on the call, and look forward to improved results in the coming quarters," Pardy wrote.

Interim CEO Smith will assume the role of chief financial officer and executive vice-president of corporate development later Tuesday after Suncor's annual general meeting.

Alister Cowan, the current CFO, is set to retire at the end of the year.

Suncor, which reported its first-quarter earnings after the close of markets on Monday, said it earned $2.05 billion in the first quarter of 2023, down from $2.95 billion in the same quarter of 2022.

The Calgary-based energy giant's net earnings included a $302-million gain on the sale of the company's wind and solar assets, which the company recently sold to Canadian Utilities Ltd. for $730 million.

On an adjusted basis, Suncor says its operating earnings for the first quarter were $1.81 billion, or $1.36 per common share, a 34-per-cent decrease year-over-year.

The company says the decrease in earnings was primarily due to decreased crude oil realizations, increased operating expenses, lower upstream production and refinery throughput and weakening crude oil prices.

This report by The Canadian Press was first published May 9, 2023.

Canada-China spat could sour business relations, experts say

The Canadian Press

Souring relations between Ottawa and Beijing could affect Canadian companies in China, potentially tarnishing the appeal of Canadian brands for some Chinese consumers, experts said on Tuesday. 

Companies like Canada Goose, Roots, Lululemon and Tim Hortons have expanded in China in recent years, leaning into Canada's reputation as a source of quality goods and often featuring the red maple leaf in store and product branding.

China is central to the growth plans of many Canadian companies eager to tap into the country's compelling consumer market, retail analyst Bruce Winder said.

"If you look at the drawing boards of those companies, China's a big factor in the growth strategy," he said. "It's a huge market. There are over 1.4 billion people and folks in China are getting rich, so you have a massive middle class."

But a diplomatic spat between Ottawa and Beijing could spur a "soft boycott" of Canadian brands in China, Winder said. 

"Canada's supply chain is very dependent on China, but consumer-facing Canadian brands in China could be at risk too," he said. "It's something that could potentially impact the future growth prospects of Canadian companies in China."

Beijing declared a Canadian diplomat as "persona non grata" on Tuesday in retaliation for Ottawa's expulsion of a Chinese consular official over allegations of foreign interference.

China's Foreign Ministry said in a statement posted to its English website that China was deploying a "reciprocal countermeasure to Canada's unscrupulous move,'' which it said it "strongly condemns and firmly opposes.''

Sarah Kutulakos, executive director of the Canada China Business Council, said diplomatic relations between the two countries have been strained for years but the economic relationship has remained.

"These sort of diplomatic issues happen and they're playing out right now," she said. "We are always hopeful that trade doesn't get thrown into the mix of other complications in the relationship."

The bilateral non-profit business council, which has seven offices in Canada and China, encourages both governments to resolve their differences "and where there are irreconcilable differences, understand the other side's perspective," Kutulakos said. 

She added that Canada's reputation in China remains strong, and hostilities between the two countries have not impacted the impression of Canada in the past.

"Tim Hortons in China looks more Canadian inside than any Tim Hortons in Canada," Kutulakos said, noting the abundant red maple leaves and other Canadian decor inside the coffee shops in China. 

Tims China chairman Peter Yu said in February that the coffee and doughnut chain had 600 locations in China, with plans to grow to a thousand by the end of 2023.

Lululemon had 117 stores in China as of the end of January, according to the company's most recent annual report.

Calvin McDonald, Lululemon CEO, said during the company's fourth-quarter earnings call last month that the retailer's potential in China is significant. 

The company is planning to open up to 35 new stores in international markets this year, with the majority planned for China, Lululemon's chief financial officer Meghan Frank said during the call. 

Meanwhile, Roots has more than 100 partner-operated stores in Asia, including many in China, the retailer said in its annual report in January. 

"Our focus on international expansion continues to remain in the U.S. and China, where we see long-term potential for the brand," Meghan Roach, Roots CEO, said during a recent earnings call. 

Canada Goose appointed Larry Li as president of its China operations last year, part of what it called a new phase of expansion in China.

This report by The Canadian Press was first published May 9, 2023

China's ban on Canadian beef still in place 

year-and-a-half later; industry in dark

Amanda Stephenson, The Canadian Press

A Chinese ban on Canadian beef that industry officials expected would be short-lived remains in place 17 months later, and industry representatives say they remain in the dark about the reasons.

China has been blocking beef shipments from Canadian processing plants ever since an atypical case of BSE, a rare variant of classical BSE (sometimes called mad cow disease), was found on an Alberta farm in December of 2021.

At the time, Canadian officials expressed little concern that the case would have lasting market impacts. Atypical BSE develops spontaneously in about one in every one million cattle and unlike the classic BSE strain — which has been linked to the fatal neurological disorder Creutzfeldt-Jakob disease — it poses no health risk to humans and is not transmissible.

While most of Canada's trading partners did not respond with any form of trade restrictions after the discovery of the case, South Korea and the Philippines joined China in suspending beef imports from this country.

However, both South Korea and the Philippines lifted the restrictions less than two months later, while China — which in 2021 was Canada's third-largest beef export market, importing $193 million worth of product — has still not resumed trade.

"Most countries do not close when you find an atypical case," said Dennis Laycraft, executive vice-president for the Canadian Cattle Association.

"It's just a few that did and you know, all those other countries opened up fairly quickly. So yeah, really the outlier here is China.”

Adding to the confusion, Laycraft said, is the fact that both Brazil and Ireland have also recently had their beef blocked by China due to cases of atypical BSE in those countries. But China has resumed beef trade with both of those countries, and it took only a short time — in the case of Brazil, only four weeks.

Laycraft said he doesn't know what the sticking point is when it comes to Canada, adding only that he doesn't believe there is a scientific explanation.

"We're pretty confident all of the technical requirements and information that was needed has been provided, to allow the decision to reopen," he said.

"We certainly don't believe there's, on that side, any reason for it not to be. They just, you know, haven’t responded.”

In 2019, China blocked canola shipments from two major Canadian companies, not long after Huawei executive Meng Wanzhou was arrested by Canadian authorities. That ban lasted for three years.

Tensions between Canada and China have recently ratcheted up again, with the Canadian government on Monday expelling Chinese diplomat Zhao Wei, alleging he was involved in a plot to intimidate Conservative MP Michael Chong and his relatives in Hong Kong.

The renewed tensions have even led the canola industry to express concern that China will retaliate to Canada's expulsion of its diplomat by blocking agricultural shipments.

But Gordon Houlden, director emeritus of the China Institute at the University of Alberta, said the beef industry's ongoing issue demonstrates that some of Ottawa's trade challenges with Beijing are pre-existing.

"Some people are jumping to the wrong conclusions and because of this latest exchange, the question of the diplomatic expulsions, they assume that it's going to immediately lead to a whole series of further restrictions," Houlden said. 

"But some of these problems go back a long way."

Houlden said it's not abnormal for China to move slowly on the regulatory front, due to a combination of "bureaucracy and lethargy." He added that China is not always keen to wield trade as a weapon because it is a major exporter itself and knows such tactics can backfire. 

However, he said the fact that China has lifted similar restrictions against beef imports from other countries suggests that at some level, politics is likely playing a role in the delay. Houlden added that while it's hard to know for certain what China's motivation is on any given issue, it's fair to say that Canada's current relationship with China is frosty enough that Beijing is unlikely to make an effort to fast-track the beef issue.

"I think we can surmise that right now politics is not in a position to help solve the problem, and in fact may be part of the problem," Houlden said.

Laycraft said during the year-and-a-half that the Chinese market has been closed, the Canadian beef industry has seen increasing sales into Japan, South Korea, Vietnam and other Asian countries. He said this has been due in large part to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a free-trade agreement between Canada and 10 other countries in the Asia-Pacific region.

"We'd like to see things get back on a more normal track with China. We had some really good customers there that we were starting to build relationships with," Laycraft said. 

“At the same time, we're doing very well in other markets in Asia ... So we’re not in the same vulnerable position that potentially other products from Canada are.”

Atypical BSE, just like classical BSE, is a progressive, fatal disease that affects the nervous system of cattle. However, classical BSE was responsible for the BSE epidemic that started in the United Kingdom in 1986

Classical BSE was also responsible for Canada's own BSE crisis, which began in 2003 with the discovery of a domestic case and led to international borders being closed to Canadian beef exports.

This report by The Canadian Press was first published May 11, 2023.

Canola industry concerned about export access to China after diplomatic spat

The Canadian Press

The canola industry is expressing concern that China will retaliate to Canada's expulsion of its diplomat by blocking agricultural shipments.

China blocked canola shipments from two major Canadian companies in 2019 not long after Huawei executive Meng Wanzhou was arrested by Canadian authorities, and the ban lasted for three years. 

The ban lasted for three years before being lifted in 2022.

On Monday, the Canadian government expelled Chinese diplomat Zhao Wei, alleging he was involved in a plot to intimidate Conservative MP Michael Chong and his relatives in Hong Kong.

Jim Everson, president of the Canola Council of Canada, said maintaining predictable market access is key for Canadian farmers and that although supportive steps have been taken by the federal government, nothing can replace access to an important market like China.

China's block on canola shipments took a toll on the industry as the value of Canadian canola exports dropped from $2.8 billion in 2018 to $1.8 billion in 2021, the last full year under the ban.

This report by The Canadian Press was first published May 9, 2023.

WORKERS CAPITAL

A $211B Canada pension manager hits pause on China deals

Laura Dhillon Kane, Bloomberg News

British Columbia’s public pension manager has paused direct investments in China, the latest institutional investor to rethink its exposure to the world’s second-largest economy due to geopolitical risks.

A senior executive from British Columbia Investment Management Corp. revealed the policy during testimony this week to a Canadian parliamentary committee. Ontario Teachers’ Pension Plan has made a similar move, suspending new investments in private assets in China, Bloomberg reported in January. 

BCI still has Chinese investments, mostly through public markets and index funds, amounting to less than 5 per cent of its holdings, the fund said in an emailed statement. “Across our portfolio, BCI has reduced its exposure in China and Hong Kong by approximately 15 per cent over the past two years, including pausing direct investments in China,” it said. BCI had $211 billion (US$158 billion) in net assets under management at the end of March 2022. 

The firm, which invests on behalf of public-sector pension plans and insurance funds in Canada’s third-largest province, said its remaining exposure to China is part of a broad diversification strategy that includes emerging markets.

Daniel Garant, BCI’s global head of public markets, faced tough questioning Monday from Conservative lawmaker Garnett Genuis, who alleged the fund has invested in a company involved in surveillance of Uyghurs in China. The company, Hangzhou Hikvision Digital Technology, has denied the surveillance claims.

Garant said he couldn’t speak about Hikvision specifically but that BCI was talking with index providers. “We’re not very happy with some of the components of the index and we’re doing something about it,” he said.

Ontario Teachers’ executive Stephen McLennan told the same committee his fund’s decision to cease private-asset deals was “driven by our assessment that the risk landscape in China has substantially changed over the last two to three years.” He cited the country’s difficult relations with the U.S. and Canada, as well as regulatory changes within China.

Canada’s largest pension fund, the Canada Pension Plan Investment Board, has stuck to its China strategy and has 9.8 per cent of its assets invested the country. That exposure gives the fund access to one of the world’s fastest-growing major economies, public affairs head Michel Leduc told lawmakers. CPPIB’s holdings include retail and industrial real estate, private equity funds and stakes in businesses including McDonald’s China and Adopt a Cow, a dairy operation.   

Relations between China and Canada have been frosty for years, particularly since Canadian authorities arrested a senior Huawei Technologies Co. executive at Vancouver’s airport in 2018 on a US extradition request. 

While that situation was resolved in 2021, recent reports that Chinese diplomats sought to meddle in elections, and targeted the Hong Kong-based family of a Canadian member of parliament, have sent tensions soaring again. This week, Canada expelled a Chinese diplomat over the latter allegations, spurring China to boot out a Canadian envoy in response. 

--With assistance from Kevin Orland.

Quebec energy shortfall hurts EV supply chain, says Lithium CEO

Jacob Lorinc, Bloomberg News

The top executive of Sayona Mining Ltd., which just restarted a lithium mine in Quebec, says there isn’t enough electricity in the Canadian province to power the region’s mining projects.

The province that produces North America’s cheapest power faces a looming energy shortfall after years of marketing its hydroelectric power to U.S. states and wooing industry with cut-rate prices. That poses a dilemma for the miners and manufacturers that have been lured to Quebec to build a domestic supply chain for electric vehicles.

“Only a few years ago, you wanted to build a mine, there wasn’t a question of whether you would get the power or not — it was guaranteed,” Sayona’s Chief Executive Officer Guy Belleau said Thursday in a presentation at a mining industry conference in Palm Springs, California. “Today, there’s not enough power for all the projects in the province.”

The Australian company restarted its Quebec lithium mine in March after jointly investing US$100 million into the project with Piedmont Lithium Inc. The project plans to ramp up production over the coming year before shipping lithium to South Korean battery maker LG Chem Ltd. and automaker Tesla Inc. 

CRIMINAL CAPITALI$M

Scotiabank fined US$22.5M by U.S. agencies for use of messaging apps

The Canadian Press

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Bank of Nova Scotia has been fined US$22.5 million by two U.S. agencies for violations related to employee use of unapproved communication methods including text messages and WhatsApp. 

The Commodity Futures Trading Commission issued a $15 million penalty related to record-keeping and supervision failures, while the Securities and Exchange Commission levelled a $7.5 million fine. 

The CFTC said it found that Scotiabank affiliates for years failed to stop employees, including senior staff, from communicating through unapproved methods including text messages and WhatsApp, while the SEC said it found "pervasive and long-standing" use of off-channel communications at the bank.

The agencies said the bank was also required to keep a record of these communications but that they were generally not preserved, violating record-keeping provisions of federal securities laws.

The CFTC said the use of the communication channels violated Scotiabank's own policies, and that some of those tasked with supervising these policies themselves used non-approved methods of communications.

Scotiabank spokeswoman Heather Armstrong said in a statement that the bank is committed to running its business according to the "most current high standards of business conduct and adhering to all regulatory requirements," and has agreed to the resolutions with regulators.

In 2020, the CFTC ordered Scotiabank to pay $127.4 million for manipulation of futures contracts, false statements, compliance and supervision violations.

This report by The Canadian Press was first published May 11, 2023.

CANADA

Grocery rebate bill becomes law, one-time payments will land this summer

The Canadian Press

The Department of Finance says the grocery rebate the Liberals promised in this year's federal budget will be extended to eligible Canadians on July 5. 

That confirmation comes after Parliament passed legislation on the measure this week.

The government has billed the one-time payment as targeted inflation relief for some 11 million low- and modest-income households.

It repeats the temporary boost to the GST rebate that the government offered last year to address growing cost-of-living concerns.

Eligible families of four will receive up to $467 by direct deposit or cheque from the Canada Revenue Agency, while single people without children will get up to $234 and seniors will see a rebate of up to $225.

The new law also enshrines a $2-billion top-up to the federal health transfer that seeks to reduce backlogs and wait times and support pediatric hospitals and emergency rooms. 

This report by The Canadian Press was first published May 11, 2023.