Indecent Proposals: How Activist Investors Hijacked Responsible Corporate Governance

It’s a central tenet of the free-market economy: a corporation’s job is to maximize investment returns to its shareholders. Bluntly, to make money. And “shareholder proposals” have been a powerful tool enabling investors to pressure a company’s board to take a particular action to increase its value. In recent years, however, activist groups have been weaponizing shareholder proposals to pressure companies into pursuing ideological goals, especially environmental and “progressive” social-welfare causes. In the case of the oil and natural gas industry, they’ve even pushed for companies to take actions that would drive them out of business. Veteran markets expert Gina Pappano examines this damaging phenomenon – and the new movement pushing back.

No matter what business they engage in, the purpose of all corporations – their raison d’être – is to generate returns on their shareholders’ investment and to maximize shareholder value by achieving a rising price in the stock market, paying dividends to shareholders, and eventually perhaps engineering a profitable “exit” from the market by being taken over at a premium. This understanding is known as “shareholder primacy” and it is so central to good corporate governance that companies and regulators have developed a mechanism, the shareholder proposal, whereby anyone who holds stock in a corporation can petition its board of directors to examine some practice or other with an eye towards improving the company and its value.

But in the 21^st century – especially in the last decade or so – activist groups have repurposed shareholder proposals into weapons used to pressure companies to adopt policies informed by the group’s ideological concerns. No sector in Canada has been targeted by ideologically driven agendas more than the oil and natural gas industry, a crucial branch of Canada’s economy that includes hundreds of producers, pipeline companies, refinery operators and service companies, many of which are publicly traded. Using shareholder proposals whose goal is the limitation and eventual elimination of Canada’s oil and natural gas production, activists who are shareholders-of-convenience are attempting to villainize one of the most productive, vital and longstanding pillars of our country’s economy.

Popular delusions: Climate activists push for an end to the oil and natural gas industry even as an energy-hungry world set records last year for energy consumption and oil production; the world will need crude oil and natural gas for decades to come and Canada could be a preferred supplier. (Sources: (photo) Rainforest Action Network, licensed under CC BY-NC 2.0; (chart) Energy Institute)

Stand.earth, Investors for Paris Compliance, the BC General Employees’ Union, Environmental Defence Canada, the Shareholder Association for Research and Education and MÉDAC are just a few of the activist groups that over the past few years have presented anti-fossil-fuel shareholder proposals to Canada’s “Big Five” banks and to oil and natural gas companies. Last year, for example, Stand.earth demanded that the Royal Bank of Canada’s (RBC) “Board of Directors adopt a policy for a time-bound phase-out of the RBC’s lending and underwriting to projects and companies engaging in new fossil fuel exploration, development and transportation.” In other words, they were asking Canada’s biggest bank to stop supporting an industry that provides hundreds of thousands of Canadian jobs, pays tens of billions of dollars in taxes annually and forms the economic backbone of three Canadian provinces.

The demands of these groups are premised on convincing shareholders that eliminating one of our country’s most productive sectors will benefit Canada socially and environmentally and reduce global CO₂emissions, when the facts demonstrate that nothing Canada could do domestically could influence emissions on a global scale. The most recent Statistical Review of World Energy, for example, described 2023 as a “year of record highs in an energy hungry world”.

The world will continue to need crude oil and natural gas for decades to come – not only the energy these fuels provide, but the thousands of crucial products that are made from them. Canadian oil and natural gas companies, with their high environmental and safety standards and technical expertise, should be among the preferred suppliers of the energy that powers the world. Yet the activists driving these economically ruinous crusades, based on dogma and ideology, want shareholders, investors and Canadians at large to vote in favour of their proposals. How did we get here?

The Annual General Meeting as Town Hall Meeting

Annual general meetings (AGM) used to be mostly stodgy affairs, dedicated to discussing a company’s financial statements and general business; the rise of shareholders’ proposals has made some of them much more contentious. Depicted, (top) Ford’s AGM, 1980; (middle) Bank of America’s AGM, 2024; (bottom) an activist is removed from Shell’s 2023 AGM. (Sources of photos: (top) Ford Motor Company; (middle) Rainforest Action Network, licensed under CC BY-NC 2.0; (bottom) Sky News)

Historically, the annual general meeting (AGM) of a corporation (whether privately held or publicly traded) was called to present and discuss the previous year’s results as embodied in the audited annual financial statements, to elect any new directors that might be required, to announce the retirement of existing directors if applicable, to announce any major changes to the company’s executive team, and to discuss any other relevant business as the company’s leadership might deem necessary. These were often stodgy and boring events, especially if things were ticking along smoothly. And these are still the core matters to which the majority of AGMs are devoted among Canada’s approximately 3,500 publicly traded companies as well as the vastly more numerous privately held companies.

But since the Second World War, and especially over the past 30 or so years, AGMs have become more – much more. In the United States’, the Securities and Exchange Commission’s (SEC) Shareholder Proposal Rule (Rule 14-a8) came into force in 1942. In testifying before Congress on the then-new rule in 1943, SEC Commissioner Robert H. O’Brien explained that its motivation was to “approximate the widely attended town hall meeting type of forum characteristic of the days when nearly all corporations were closely held and geographically limited.”

The Town Hall analogy is a good one. In a 2022 speech entitled The Shareholder Proposal Rule: A Cornerstone of Corporate Democracy, former SEC Director Renee Jones laid out the role and the rights of the shareholder. “Shareholders, that is individuals or institutions that invest in a corporation, are purchasing a share of the company with the understanding that the board of directors and senior management team will use their investment wisely, making sound corporate decisions with the intent of increasing profits, to which [the shareholders] are entitled to a share. They are also entitled to certain governance rights including the right to elect directors, approve major corporate transactions and express their views on corporate governance matters and other fundamental issues related to the corporation’s business. Additionally, shareholders generally have the right to bring matters before other shareholders for a vote at a shareholder or ‘town hall’ meeting.”

In 1969 a group called the Medical Committee for Human Rights filed a shareholder proposal asking Dow Chemical Corporation to stop manufacturing napalm, an explosive chemical used with at-times horrifying effects in the Vietnam War.

Tweet

The bulk of the foregoing paragraph is a good synopsis of a shareholder’s rights and roles as it has been understood for the past 200-300 years. But Jones packed a lot into the sentence following the word “Additionally”. What she mentioned has in fact happened – with a vengeance. Since the enactment of the U.S. Shareholder Proposal Rule and the U.S.-inspired Canada Business Corporations Act’s Shareholder Proposal Regime, the number of shareholder proposals being presented every year in each country has increased exponentially.

The mechanism allows for any shareholder to present a proposal to a corporation provided the shareholder meets certain technical requirements set out by the SEC or the Canada Business Corporations Act, as the case may be. The proposal is printed in the set of corporate documents sent to all stockholders prior to any AGM. At the AGM, the shareholder presents the proposal and there is a vote.

In the early years, most shareholder proposals concerned matters of corporate governance. It was not until the 1960s and 70s that the phenomenon took off, possibly reflecting the era’s increased social activism. For example, in 1969 a group called the Medical Committee for Human Rights filed a shareholder proposal asking Dow Chemical Corporation to stop manufacturing napalm, an explosive chemical used with at-times horrifying effects in the Vietnam War. In the 1970s and 1980s, the anti-Apartheid movement used the shareholder proposal process to pressure corporations to terminate their business dealings in South Africa.

Renee Jones, a former director of the U.S. Securities and Exchange Commission, defended the right of shareholders to bring matters to a vote at AGMs; many such proposals have focussed on left-leaning environmental, social and governance (ESG) topics, and companies have been anxious to play along. At right, a screenshot from the presentation entitled “Unlocking the Power of Environmental, Social and Governance Data” by the World Economic Forum. (Source of right photo: World Economic Forum, licensed under CC BY-NC-SA 2.0)

Most such proposals did not tend to get very far, however; Boards of Directors typically recommended voting against them, and that tended to be the end of it. Most shareholders in publicly traded companies do not delve very deeply into the affairs of the often-numerous companies in which they might hold a position. A small business owner who is saving for retirement, for example, might well hold shares in several dozen companies via their RRSP portfolio; what they or their investment adviser monitor above all is whether dividends are being paid and share prices are doing well.

Accordingly, most shareholders take their cue from the Board of Directors and vote according to their recommendation, via so-called “proxy” forms, which also cover votes on standard matters like approving the financial statements and electing new directors. In this vein, proxy advisory firms have arisen, which institutional investors and large public pension funds rely upon to guide their voting. This is why it is very difficult to vote against a board and why most shareholder proposals fail at the AGM ballot.

Still, the number of shareholder proposals has grown dramatically and this increase has coincided with a rise in ideologically driven proposals. And none more than those associated with the environmental, social and governance (ESG) movement. In even a cursory investigation into this issue, one is struck by the degree to which shareholder proposals and ESG have become inextricably linked. Many of the current definitions of shareholder proposals one comes across, in fact, claim that they are “an important corporate governance tool which allow[s] shareholders to engage with public companies with respect to environmental, social and corporate governance issues.” Effectively, the shareholder proposal mechanism has been hijacked and harnessed to one dominant purpose.

Shareholders vs. Stakeholders

The evolution away from shareholder primacy to what is known as stakeholder primacy in the purpose and governance of corporations has been closely aligned with the rise of ESG investing. Proponents of so-called “stakeholder capitalism” contend that corporations should care less about superficial concerns like profits for shareholders and instead focus on the good of all their “stakeholders”, by which they mean anyone who is affected by, depends on or makes use of a company: customers, employees, the communities in which a company operates, the environment, governments and society as a whole. Klaus Schwab, founder of the World Economic Forum, is a prominent proponent of stakeholder capitalism, writing a book of that title.

Under the ESG or ‘responsible investing’ vision, society presumably no longer has much need for profitable companies whose earnings help build up the retirement accounts of tens of millions of future pensioners, but has become primarily focused on saving whales, fighting climate change or paying for free social housing.

Tweet

The company’s actual investors, who make its work possible, should presumably get some consideration as well, but their good tends to get lost in the idealistic rhetoric which accompanies the ESG approach. The corporation’s original purpose as a profit-maximizing entity dedicated to serving its shareholders’ financial interests becomes subsumed by the deluge of social welfare-oriented activities (“giving back to the community”) and support for environmental causes. It is noteworthy that all of this is heavily skewed towards “progressive”, i.e., left-leaning, causes. In some cases, this has become self-destructive if not borderline suicidal, such as the BP CEO who some years ago infamously stated that the “B” in British Petroleum should be reimagined as “Beyond”.

Advocates of “stakeholder capitalism” believe companies should care less about profit – but it’s the push for those profits that makes companies successful, creates jobs and wealth, and finances retirement for millions. (Source of photo: Scott Beale, licensed under CC BY-NC-ND 2.0)

An important and current statement of ESG principles can be found in the United Nations-supported Principles of Responsible Investing (PRI), which has been signed by over 3,500 asset managers pledging to further “environmental, social, and corporate governance” goals in order to “better align investors with broader objectives of society.” Under this vision, society presumably no longer has much need for profitable companies whose earnings help build up the retirement accounts of tens of millions of future pensioners, but has become primarily focused on saving whales, fighting climate change or paying for free social housing.

It is interesting to note that the Canada Pension Plan (CPP) Investment Board is one of the PRI’s founding signatories. As a future beneficiary of Canada’s public pension system, I find myself worried by this fact. Like millions of other Canadians, my future wellbeing depends on the continued solvency of the CPP which, in turn, depends on the ongoing profitability of the companies in which it invests. The same can be said about dozens of other pension funds such as those for teachers, nurses and government employees.

The United Nations-supported Principles of Responsible Investing, signed by 3,500 asset managers – including the Canada Pension Plan Investment Board – demanded that companies pursue ESG goals to “better align investors with broader objectives of society”; ideological dogma has replaced the pursuit of shareholder value. (Source of photos: (left) expatpostcards/Shutterstock; (right) Sheila Fitzgerald/Shutterstock)

The two most prominent concepts among ESG investing principles and in shareholder proposals meant to push ESG agendas are: (1) diversity, equity and inclusion (DEI), and (2) “sustainability”. DEI is a highly ideological, neo-Marxist doctrine with which C2C readers are by now amply familiar. Sustainability is a somewhat older term that refers to goals pursued by the environmentalist movement, which currently include “net zero”, so-called decarbonization and the divestment from, reduction or outright banning of fossil fuel production and consumption.

Most shareholder proposals focused on sustainability are sector-specific. Oil and natural gas companies and financial institutions received the largest number in the 2023 AGM season. In Canada, most proposals have been aimed either at pushing oil and natural gas companies to net zero and decarbonization goals or at pressuring the Big Five chartered banks to stop investing in oil and natural gas companies and projects.

In 2022, for instance, Investors for Paris Compliance (I4PC) asked Calgary-based pipeline and utilities giant Enbridge Inc. to “strengthen their net zero commitment such that the commitment is consistent with a science-based, net zero target.” I4PC defines net zero to mean “no new oil and gas fields are required beyond those already approved for development in conjunction with a historic investment surge in clean technologies.” So not only was I4PC demanding that Enbridge officially commit to long-term decline in its business (since all oil and natural gas fields deplete over time, requiring continuous reinvestment in new fields merely to maintain current production), but it was also prescribing a huge (“historic”) amount of investment in so-called “clean” technologies that are outside Enbridge’s core business (wind turbines do not require pipelines).

Oil and natural gas companies and financial institutions have been the primary targets of shareholder proposals in Canada, which typically demand aggressive decarbonization and divestment from the energy sector. Shown at bottom, protesters march at the RBC AGM, Toronto. (Sources: (chart) Harvard Law School Forum on Corporate Governance; (photo) Rainforest Action Network, licensed under CC BY-NC 2.0)

The Gathering Pushback in the United States

There are glimmerings of an awakening that the wave of activist shareholder proposals and ESG investing is materially impairing investment returns and could prove economically ruinous. Investors are, in effect, being defrauded by companies diverting capital, executive attention and employee talents towards expensive social goals that do not, say, develop new products or generate revenue.

In the U.S., pushback has been gathering from several directions. Warren Buffett, the famous “Sage of Omaha,” has openly expressed skepticism about ESG investing and things like corporate reporting on climate change efforts – although it is a sign of the ideology’s thorough penetration of the investment world that Buffett’s stance would be labelled “unconventional” in a business magazine.

One of the world’s most successful investors, Warren Buffett, has been decidedly lukewarm on ESG, a position one business magazine called “unconventional” – an indication of how thoroughly the ideology has penetrated. (Source of photo: Fortune Live Media, licensed under CC BY-NC-ND 2.0)

More substantively, new asset management firms have been launched by entrepreneurs who concluded that the stakeholder primacy model just does not work. Strive Asset Management was founded in early 2022 explicitly to “live by a strict commitment to shareholder primacy – an unwavering mandate that the purpose of a for-profit corporation is to maximize long-run value to investors.” Its founders are private equity manager Anson Freriks and flamboyant commentator Vivek Ramaswamy, who was a candidate for the most recent Republican Presidential nomination, won by Donald Trump.

Strive believes that companies should do what they do best and not fall prey to other agendas. The fund was started specifically to “solve a problem,” as its website explains: “Large financial institutions, including the biggest asset managers, were using their clients’ money to advance social, cultural, environmental and political agendas in corporate America’s boardrooms. Asset managers and for-profit corporations have a fiduciary duty to maximize value, and that duty had been neglected.”

Strive’s pitch clearly resonated with investors, as the firm soon became one of the fastest-growing asset managers in the U.S. And its position appears to be having an effect. The latest edition of Strive’s newsletter, The Fiduciary Focus, includes the following headlines: “The Financial Times Credits Strive for Pushing Companies to Drop ESG-Linked Compensation,” “John Deere Pulling Back on ESG,” and “Wall Street Cools on Sustainable Funds.”

“Asset managers and for-profit corporations have a fiduciary duty to maximize value,” says Vivek Ramaswamy, co-founder of Strive, an asset management firm committed to the primacy of shareholders’ financial interests; the firm’s data on the fall of ESG-focussed fund launches suggests his approach is resonating with investors. (Source of left photo: AP Photo/J. Scott Applewhite)

There is also growing concern in the political arena that ESG investment and other socially motivated corporate activities pose a threat both to the financial integrity of public pension funds and a challenge to democratic governance. A number of U.S. states have taken formal steps to confront and counter the ESG investment behemoth. One such measure is the non-profit State Financial Officers Foundation (SFOF). According to its website, “SFOF’s mission is to drive fiscally sound public policy, by partnering with key stakeholders, and educating Americans on the role of responsible financial management in a free market economy.”

The organization and its members are firm and vocal defenders of shareholder primacy. Among their activities have been letter-writing campaigns to corporations and fund managers that urge them to scale back political activism and instead focus on the interests of their shareholders. They are putting teeth to their words: according to a recent Torys Report, 18 of the SFOF’s member states have enacted anti-ESG laws, including prohibiting fund managers from considering ESG factors in their investments and state entities from investing with asset managers deemed to be discriminating against or boycotting the fossil fuel industry.

ExxonMobil’s bolder, more confrontational tactic may be pointing the way, because in late June both activist groups not only dropped their proposals but promised not to bring forward similar demands in future; in return, ExxonMobil agreed to have its lawsuit dismissed.

Tweet

Some of the SFOF member states have also put their money where their mouths are in pushing to restore shareholder primacy. The organization recently supported the State of Texas Permanent School Fund (a large investment fund with US$53 billion in assets that helps pay for the state’s school system) as it cancelled a US$8.5 billion investment with BlackRock, one of the world’s largest investment funds and a prominent proponent of ESG investing. As SFOF urged, “BlackRock should withdraw from international organizations seeking to orchestrate opposition to fossil fuel investment, abandon ‘decarbonization’ policies that are a form of boycotting fossil fuels, and stop using its proxy voting authority to promote an anti-fossil fuel agenda.”

Pushing back: The U.S. State Financial Officers Foundation has urged corporations and fund managers to put shareholders first; 18 member states have enacted anti-ESG laws, including prohibitions on state entities investing with asset managers deemed to be discriminating against or boycotting the fossil fuel industry. (Source of photo: Center for Media and Democracy)

Further pushback is coming from some of the recipients of activist shareholder proposals. It is perhaps not surprising that ExxonMobil is among the leaders here. The company has long been reviled by environmentalists for its insistence on keeping profitability, technical excellence and energy production central to its business. To some, it is the ugly face of “Big Oil”.

In January, ExxonMobil filed a lawsuit to block a shareholder resolution put forward by the groups Follow This and Arjuna Capital, whose stated objective was to force the company to commit to precipitous cuts in CO₂emissions, including with respect to the downstream effects from the combustion of its products by customers. Exxon argued that such a resolution would force the company to “change the nature of its ordinary business or to go out of business entirely.” Which is what these “shareholders” intend; Exxon’s lawsuit quotes Arjuna Capital’s contention that “Exxon should shrink” and Follow This’s statement that its goal is “to wind down the company’s business in oil and natural gas.”

As Follow This states on its website: “We buy shares in order to work on our mission to stop climate change.” And, it says, its shareholder proposal aims to make ExxonMobil “stop exploring for more oil and gas.” While this kind of agenda is no longer surprising, ExxonMobil’s response was. Corporations generally try to deal with motivated activists by adopting some version of their favoured policies in the hopes they’ll go away (not that they do). ExxonMobil’s bolder, more confrontational tactic may be pointing the way, because in late June both activist groups not only dropped their proposals but promised not to bring forward similar demands in future; in return, ExxonMobil agreed to have its lawsuit dismissed.

Blazing the trail: ExxonMobil early this year filed a lawsuit to block two activist groups from submitting shareholder proposals demanding that the company stop exploring for oil and natural gas and, thereby, “change the nature of its ordinary business or to go out of business entirely”; in June the activist groups backed down. (Source of photo: ET Auto)

Still more pushback in the U.S. is coming from the small but growing number of advocacy organizations submitting anti-ESG shareholder proposals that call on corporations to refocus themselves on shareholder-centred capitalism. The National Center for Public Policy Research and the National Legal and Policy Center are two such organizations. According to a recent SquareWell Partners report entitled “What Do Shareholders Propose?” these kinds of proposals surged by 64 percent in 2023.

Now What About Canada?

This process is still at a much earlier stage in Canada. Last year the not-for-profit organization I lead, InvestNow, submitted and presented shareholder proposals to three Canadian banks asking for explicit commitments to continue to invest in and finance the Canadian oil and natural gas sector. These were the first proposals of this nature presented to Canadian banks and their shareholders. The overwhelming majority of the vote – 99.5 percent of it – was against InvestNow’s proposal. However, fellow shareholders and even some board members approached me after the meeting and thanked me for standing up to the banks and for advocating on behalf of Canadian oil and natural gas and everyday Canadians.

We were back again doing the same this year, presenting shareholder proposals at the AGMs of all five big chartered banks – BMO, CIBC, Scotiabank, RBC and TD – asking them to commission and issue reports qualifying and quantifying the impacts and costs of their net zero commitments. This time we received one percent support for our proposal, a 100 percent increase over last year.

Although InvestNow’s proposal was rejected by Suncor’s board, our hope is that we planted a seed in the directors’ minds about their duty of care and fiduciary obligations to the company’s shareholders and that they will soon find the courage and conviction to say ‘No’ to the activists and ‘Yes’ to shareholder proposals like ours.

Tweet

This year InvestNow also submitted our first shareholder proposal to an energy company. We asked Suncor Energy Inc., one of Canada’s largest oil producers and refiners (with production this year estimated at approximately 800,000 barrels per day), to drop its pledge to achieve net zero carbon emissions by 2050 and rededicate the company to its core business of producing and refining crude oil. In our view, Suncor should be producing more oil and getting it out to more customers in Canada and around the world – not contributing to its own demise and that of its industry. And it should do this unapologetically. In the face of growing global demand and concerns over energy security, Suncor should increase Canada’s energy supply, thereby helping to reduce energy costs for Canadians and the world.

In the first actions of their kind in Canada, the not-for-profit group InvestNow – led by the author – submitted several shareholder proposals to Canadian banks, asking them to commit to keep investing in the oil and natural gas sector, and to Suncor Energy Inc., asking it to drop its “net zero” commitment; Suncor, the author points out, has held its overall greenhouse gas emissions virtually flat year-over-year, and should unapologetically keep producing oil. (Sources: (photo) Suncor; (graph) Statista)

Like Exxon, Suncor has received many anti-fossil-fuel shareholder proposals over the years. Unlike Exxon, however, Suncor has not yet publicly pushed back. But why not? Suncor has worked concertedly to improve its “emissions intensity”, which is the volume of greenhouse gas emissions per unit of oil or natural gas produced, and has held its overall greenhouse gas emissions essentially flat, as the accompanying graph shows. [Editor’s note: the recent passage of the Liberals’ Bill C-59, which makes it illegal for energy companies and advocacy groups to defend themselves, on pain of criminal penalties, caused a vast amount of useful technical information to be abruptly removed from the internet.] Why commit to an arbitrary target like net zero, especially one that would necessitate massive declines in the use of oil and natural gas? Net zero wouldn’t increase shareholder value. Quite the opposite, since fossil fuels are Suncor’s main business.

Although InvestNow’s proposal was rejected by Suncor’s board, our hope is that we planted a seed in the directors’ minds about their duty of care and fiduciary obligations to the company’s shareholders and that they will soon find the courage and conviction to say “No” to the activists and “Yes” to shareholder proposals like ours.

Canada’s shareholder proposal regime was put in place as a response to the U.S.’s rule on shareholder proposals. Hopefully, the boards of directors at Canadian corporations and financial institutions, investors, customers and citizens at large will see what is happening south of the border and will add to the still-budding pushback movement in our own country. It’s time.

Gina Pappano is executive director of InvestNow and was formerly head of market intelligence at the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV).

Source of main image: Kenzie Todd, retrieved from History and Future of Divestment at St. Olaf.

Related Topics:#C2CJournal #EnergyIndustry #ESG #NetZero ActivistInvestors CorporateGovernance feature GinaPappano InvestNow ShareholdersVSStakeholders

Up Next

Biden-Harris admin releasing known, suspected terrorists into US

Don't Miss

Poll shows Canadians want to shrink bureaucracy

Todayville

Todayville is a digital media and technology company. We profile unique stories and events in our community. Register and promote your community event for free.

Follow Author

Rand Paul Releases Report Detailing $1,000,000,000,000 In Gov’t Waste. Here Are The Worst Offenders

armed forces / 20 hours ago

Canadian military deployed ‘gender advisors’ to Ukraine, Haiti  at taxpayers’ expense

Health / 24 hours ago

Dr. Malone: Bird flu ‘emergency’ in California is a case of psychological bioterrorism

C2C Journal

Why the Trump Administration is Unlikely to Impose Import Tariffs on Canadian Oil and Natural Gas

Published on November 25, 2024

Todayville

From the C2C Journal

By George Koch

Few things about Donald Trump’s recent election are causing worse disarray worldwide than the incoming U.S. President’s vow to erect a tariff wall against all imports in order to spur a resurgence in American manufacturing might. Canada’s up to $200-billion-a-year worth of oil and natural gas exports lie at stake, feared to be among the new Administration’s tariff targets. But how strong is the basis for such fears? Probing the political psychology of Trump’s economic and trade policies and examining the intricate mechanism that is North America’s vast integrated oil and natural gas sector, George Koch illuminates the role Canadian energy can play in the U.S. economic revival and the Trump team’s geopolitical drive for global “energy dominance”.

Tariff,” U.S. presidential candidate Donald Trump was fond of saying with a smirk, “it’s my favorite word.” It was enough to curdle the blood and wobble the knees of political leaders, trade officials and business groups around the world – not least in export-dependent Canada. This was one Trumpian campaign line not swatted aside by critics as bombast, trolling, dog-whistling to the “extreme right” or unhinged fantasy. And with evident good reason.

After all, it was President #45 who after rising to political prominence largely on his promise to go after “bad trade deals” had upended 70 years of U.S. trade policy by imposing tariffs on Chinese (and some Canadian) imports and demanding to renegotiate the North American Free Trade Agreement. It was returning candidate Trump who picked as his running mate J.D. Vance, whose life story growing up amidst family wreckage in rural Ohio is almost the embodied result of a hollowed-out manufacturing economy, and who today is an articulate frontman for the something-less-than-free school of international trade. And it is President-elect Trump who has nominated prominent advocates of “America-first” trade policy – in which tariffs are central – to become his Secretary of Commerce and Secretary of the Treasury.

Tariff king: Consistent with his first presidency, U.S. President-elect Donald Trump has vowed to pursue an “America-first” trade policy this time. Shown, Trump speaking during an America First Policy Institute gala at his Mar-a-Lago, Florida estate, November 2024. (Source of photo: AP Photo/Alex Brandon)

Few sectors in any country stand to suffer greater damage from U.S. tariffs than Canadian energy. Canada’s fossil fuel production is at record levels, with crude oil averaging 5.8 million barrels per day so far this year and natural gas well over 18 billion cubic feet per day. Exports of these key commodities (plus natural gas “liquids” like ethane and propane) are valued at more than $134 billion per year – another measure has it at US$160 billion – with exports of petrochemicals generating billions more. Canada’s oil and gas sector is directly responsible for $210 billion of the nation’s GDP and 25 percent of its exports.

Yet while the industry today is a marvel of leading technology, deep expertise and operating efficiency, Canadian energy remains costly to produce, heavily taxed and saddled with ever-increasing regulations, such as the recently announced federal “emissions cap”. Moreover, the remoteness of the Western Canada Sedimentary Basin – the world-scale producing region that covers most of Alberta plus northeast B.C., southern Saskatchewan and a corner of Manitoba – imposes costs not incurred by U.S. producers. Constraints on export capacity effectively trap oil and gas within Western Canada, dampening regional benchmark commodity prices. And the industry remains over-dependent on the U.S. market; the expanded Trans Mountain pipeline will enable at best 20 percent of Canada’s crude oil production to access offshore markets, while the country’s first liquefied natural gas (LNG) export terminal is not yet operational.

This critical industry thus sits exposed and vulnerable to U.S. tariffs. A levy of 10-20 percent – the rate Trump has said he wants to slap on all imports – would be catastrophic, reducing Canada’s energy exports by an estimated 22 percent, causing domestic pricing to collapse and, with it, any new capital investment. Thousands would lose their jobs and government deficits would soar. Rory Johnston, a Toronto-based oil market researcher and founder of Commodity Context, describes Canada as “uniquely vulnerable to market pressure posed by U.S. refineries.”

“Uniquely vulnerable”: Canada’s oil and natural gas production is setting records and generating 25 percent of the country’s overall export earnings; a 10-20 percent U.S. import tariff could wreak catastrophic damage. (Sources: (graph) CAPP; (left photo) MikoFox, licensed under CC BY-NC-SA 2.0; (right photo) Green Energy Futures, licensed under CC BY-NC-SA 2.0)

But is the threat of such a tariff imminent – or even credible? The evidence to date – partial and indirect though it may be – suggests not. More profoundly, the logic of U.S. self-interest and of Trump’s stated policy objectives points away from tariffs on Canadian oil and natural gas.

First the evidence. Trump had barely been declared victor in the November 5 Presidential election before voices on both sides of the border began talking about creating a tariff “exemption” for Canadian fossil fuels. Wilbur Ross, Secretary of Commerce in Trump’s first term, called fears of such a tariff “overblown” and said he “can’t imagine” his former boss imposing them. Alberta Premier Danielle Smith also said she was “not worried”. Then again, she also wrangled for herself invitations to key events such as next month’s meeting of the Western Governors’ Association, as well as Trump’s Inauguration in January, to make sure Alberta’s message gets through.

Similar views have been expressed by other knowledgeable sources from industry, trade and investment organizations. They note that Trump has done this very thing before; the renegotiated U.S.-Mexico-Canada Agreement of 2019 notably excused oil and natural gas flows from any tariffs. A further favourable indication is Alberta’s recent admission to the U.S. Governors’ Coalition for Energy Security, a group of 12 states that have banded together to cooperate on policies that promote reliable and affordable energy.

Guys who get it: Among Trump’s Cabinet nominees are North Dakota Governor Doug Burgum (left) and Liberty Energy CEO Chris Wright (right), both known for their vigorous support of oil and natural gas development and free North American trade in energy products. (Sources of photos: (left) Gage Skidmore, licensed under CC BY-SA 2.0; (right) Gage Skidmore, licensed under CC BY-SA 3.0)

Another positive sign is that alongside Trump’s pro-tariff Cabinet picks have come nominations of individuals with a deep understanding of North America’s petroleum sector. Douglas Burgum, a successful software entrepreneur and currently Governor of North Dakota, is slated to become Secretary of the Interior, chairman of the newly created National Energy Council and a member of the U.S. National Security Council. Burgum’s primary mandate is to promote innovation and investment by cutting through the thicket of new restrictions on oil and gas development that President Joe Biden had imposed. Chris Wright, founder of Liberty Energy and an unashamed industry booster, has been nominated to become what one U.S. commentator describes as “the most knowledgable secretary of energy the nation has ever had.” Lee Zeldin, another pro-industry figure, has been tapped to head the Environmental Protection Agency.

The fundamental objective underlying all of Trump’s trade policy is to strengthen American manufacturing. It is something he has articulated since before entering politics in 2015; it can accordingly be regarded as sincere.

Tweet

Equally noteworthy is that, in contrast to the widespread and bipartisan clamouring for tariffs on Chinese imports, nobody in the U.S. is demanding that Trump target Canadian energy. Even Bernie Sanders, the avowedly socialist Senator from Vermont who wants a “windfall tax” and higher government royalties imposed on all oil producers, appears indifferent to import tariffs. And while U.S. environmental groups don’t like any free trade in oil and gas, they devote most of their energy to pushing their government towards restrictive European/Canadian-style climate-change policies or a new UN “climate damages tax.” The American fossil fuel sector, meanwhile, is not only in favour of tariff-free trade in energy products – including with Canada – it opposes tariffs on anything.

The evidence to date, however hopeful it may seem, remains inconclusive. Trump prides himself on his unconventional and unpredictable nature. This is what causes America’s adversaries – most notably Communist China – the greatest consternation. Regardless of his previous decisions on trade issues, if Trump thinks imposing tariffs on Canadian energy imports make sense now, he will do so.

“Manufacturing superpower”: The fundamental objective underlying Trump’s trade policy is to reverse the long slide of American industry through decades of globalization – mainly by targeting offshore manufacturing. Shown at top and middle, Trump at campaign event at Dane Manufacturing in Waunakee, Wisconsin, October 2024; at bottom, an assembly line for automobile engines. (Sources of photos: (top and middle) AP Photo/Charlie Neibergall; (bottom) Alliance Employment Services)

Logic and self-interest, however, also point away from such tariffs. The fundamental objective underlying all of Trump’s trade policy is to strengthen American manufacturing. It is something he has articulated since before entering politics in 2015; it can accordingly be regarded as sincere. Trump wants to halt and if possible reverse that sector’s long slide through decades of offshoring and globalization that crippled or wiped out whole industries all over the U.S., especially in the Midwest heartland. These are the places Trump promised to help, this lies at the core of his slogan “Make America Great Again”, and these are many of the people who sent him to the White House the first time and stuck by him through the depths of his ignominy following his second, failed Presidential run. This year, Trump ran on a platform to transform his country back into “it’s my favorite word.”.

To accomplish that dramatic – some would say grandiose if not unachievable – objective, Trump intends to punish countries that use subsidies, favouritism and other policies to unfairly advantage their own industries and flood the U.S. with underpriced goods, harming domestic producers and preventing new ones from starting up. China may be hit with tariffs as high as 60 percent. He will also target imports believed to threaten U.S. national security (such as electric vehicles vulnerable to hacking by foreign enemies) while working to reduce dependence on imports of strategic materials or components critical in wartime. And he wants to close loopholes allowing China to bypass U.S. tariffs by locating production in proxy countries – especially the two countries adjoining the U.S.

Mexico has gone quite far down the road of partnering with Chinese companies, and Trump’s key advisors have warned that Mexico will be held to account for it. Canada is certain to be scrutinized as well, but can probably allay similar U.S. concerns by avoiding becoming a backdoor and way-station for Chinese goods, something Deputy Prime Minister Chrystia Freeland already promised last week. This will require several key policy commitments, as well as competent, rigorous enforcement (always a questionable assumption for this Liberal government). It will also be necessary to continue matching U.S. tariff-related moves against China, as Canada did earlier this fall in imposing tariffs on Chinese EVs and aluminum.

Closing the back door: Trump is determined to eliminate loopholes allowing China to bypass U.S. tariffs through “transshipment”, i.e., locating assembly plants in Mexico or Canada. Shown at top, Chinese company setting up facility in northern Mexico; at bottom, transshipment occurring in Texas. (Sources of photos: (top) Kosuke Shimizu/Nikkei; (bottom) T. Hammonds MSW, licensed under CC BY-NC-SA 2.0)

In addition to tariffs, Trump’s critical policies in restoring American manufacturing competitiveness will be reducing taxes, lifting the regulatory burden and, as his campaign platform puts it, ensuring the flow of “Reliable and Abundant Low Cost Energy”. By “energy” one should mainly read “crude oil and natural gas” – something Trump describes over and over as “liquid gold”. (Ending the demonization of coal is also a part; as well there is likely to be a modest revival in nuclear power.) In addition to supporting American industry, cheap energy is intended to help ease inflation and improve the lot of hard-pressed consumers, homeowners and wage-earners.

Among the associated promises and policies Trump has mentioned are to cancel the Biden Administration’s planned pro-electric vehicle policies (similar in effect to Canada’s outright mandate) and its moratorium on new LNG export facilities, end permitting of offshore wind turbines, reopen offshore areas to oil and gas drilling, unlock Alaska’s National Petroleum Reserve, reopen federal lands to drilling and hydraulic fracturing, pull the U.S. out of the Paris Climate Accord (for the second time, in Trump’s case) and otherwise end the Biden-era’s “Green New Deal”, which Trump derides as a “green new scam”.

During his election-night acceptance speech, Trump pointedly told Robert F. Kennedy, Jr., his pick to be Secretary of Health and Human Services and formerly a vocal anti-oil activist, to keep his nose completely out of energy issues. Chris Wright, his recently announced nominee to be Secretary of Energy, has written a 180-page paper which contends that “Zero Energy Poverty by 2050 is a better goal than Net Zero 2050.”

Trump’s energy policy includes cancelling President Joe Biden’s moratorium on new liquefied natural gas (LNG) export facilities, reopening offshore areas to oil and gas drilling and unlocking Alaska’s National Petroleum Reserve. Shown at left, Trump visits the Cameron LNG liquefaction terminal in Hackberry, Louisiana, 2019; at middle, an oil drilling platform at Green Canyon in the Gulf of Mexico; at right, the National Petroleum Reserve. (Source of right photo: mypubliclands, licensed under CC BY 2.0)

Trump’s energy policy, in short, is “drill, baby, drill” – often written in all-caps. Where might Canadian-produced oil and natural gas fit into this picture? Right in the middle, as it turns out – figuratively and literally.

It cannot be said often or loudly enough: inexpensive, reliable and plentiful energy is essential to economic competitiveness, national prosperity and modern civilization. But many Western governments – Canada’s among them – act as if it is optional. Right now, industries in authoritarian China use low-cost coal-fired electricity to produce the pricey solar panels and wind turbines that are exported to Western countries where they produce exorbitantly expensive electricity that in turn renders their domestic industries uncompetitive. Industrial users in Great Britain, for example, currently pay five-and-a-half times as much for electricity as those in the U.S., while German industry pays more than three times as much. Both countries are seeing their industrial base evaporate before their eyes. If Canada remains on its current policy path, it will be next.

Oil and natural gas are critical inputs that make American manufacturers more competitive, reduce the operating costs of nearly any business and allow American consumers to pay less to fuel their vehicles and heat/cool their homes. Canadian oil and natural gas not only do not undermine Trump’s economic and trade policies, they strengthen and advance them.

Tweet

Trump is unshakeably determined to avoid that for his country – and this is where Canadian energy enters the picture. Crucially, Canadian fossil fuels are not manufactured goods except in the narrowest technical sense. Unlike cars, smartphones, toys, shoes or furniture, they are commodities rather than finished products. They aren’t produced with unfair subsidies. They don’t contain secret chips enabling the Chinese to spy on U.S. military bases. They don’t threaten to displace or bankrupt age-old American companies, throw thousands of employees out of work or transform once-thriving cities into ghostly husks.

They are the very opposite: critical inputs that, by being priced competitively, make American manufacturers more competitive, reduce the operating costs of nearly any business and allow American consumers to pay less to fuel their vehicles and heat/cool their homes. Canadian oil and natural gas not only do not undermine Trump’s economic and trade policies, they strengthen and advance them.

Integrated system: Western Canada’s producing region supplies the U.S. heartland with crude oil and natural gas, where it can be refined and distributed, meeting the Trump test of (as his campaign platform puts it) “Reliable and Abundant Low Cost Energy”. Shown at top, an oil refinery in Rosemount, Minnesota. (Sources: (photo) Pexels; (map) CAPP)

This beneficial role is accentuated by some geographical quirks. Although North America’s vast interlinked system of energy pipelines is a near-miracle of technology, operating efficiency and reliability, it is not perfect or seamless. Major consuming regions tend to get most of their oil, natural gas and liquids from the nearest producing region; why ship the stuff farther than you must? Consequently, the U.S. Midwest and portions of the “near South” and northeast are heavily supplied from Canada.

If this supply were to be curtailed or disrupted by tariffs or other measures, manufacturers in these dependant regions would suffer immediately as wholesale and consumer prices jumped substantially. Regional oil refineries, gas/liquids facilities and petrochemical plants would pay more for their feedstock, face shortages as Canadian producers “shut in” no-longer-profitable production, and/or would operate below capacity or inefficiently as they sourced sub-optimal feedstock from elsewhere.

Even a 10 percent tariff would raise the average retail gasoline price across the U.S. by 5 percent, according to commodity pricing analysts at Montreal-based BCA Research. But the regional effects would be much greater. Regional prices not only for gasoline and heating fuel, but on any goods related to oil and natural gas, would rise far more than is implied by a mere 10-20 percent import tariff. And keep in mind, much of this region is MAGA country. Over time, some pipelines that currently ship product out of the Midwest might need to be “reversed”, no longer exporting to the Gulf of Mexico and Northeast regions but drawing energy from them. The U.S. might even need to increase imports from geopolitical adversaries like Venezuela or dodgy and corrupt African states.

All of this would be damaging not only to American consumers, business and manufacturing industries, but to U.S. foreign policy and even to the U.S. energy industry itself, the ostensible “competitor” that one might intuitively think stands to benefit from import tariffs. It hardly needs to be said that this would run counter to the new Administration’s objectives.

Despite being dubbed “dirty oil”, “unsustainable” and a “sunset industry”, the energy sector has led America’s productivity gains over the last decade while providing well-paying jobs to hundreds of thousands of Americans – including Hispanics, Blacks and American Indians. (Source of bottom photo: Sahara Group)

In addition to its roles in supporting manufacturing and consumers, America’s oil and gas industry is seen by Trump and key members of his nascent Administration as a competitive advantage for the economy as a whole, as a major source of wealth-creation in its own right and as a geopolitical weapon. For this to make sense, one needs to know a few things about this industry. In contrast to its image as “dirty oil”, “unsustainable” or a “sunset industry”, oil and natural gas is among the most technologically advanced, innovative, entrepreneurial and dynamic industries in the economy. This sector led the entire American economy in productivity gains over the previous decade, as the accompanying graph indicates.

The million or more jobs it provides across the continent are by turns technically intricate, dangerous, physically hard, intellectually stimulating – and very lucrative. Just as more and more Canadian First Nations are becoming proponents of natural resource development because they recognize the benefits to themselves, the U.S. industry provides jobs to hundreds of thousands of Hispanics, Blacks and American Indians – an impressive number of whom just voted for Trump.

This is all thanks to one of the most remarkable industrial turnarounds in history: America’s transformation from an insatiable importer of oil and natural gas, its domestic production sagging by the year towards apparent oblivion, its producing sector increasingly demoralized and decrepit, into a country that’s not only energy self-sufficient but has leapfrogged to a net exporter. All in the dizzying time-frame of barely a dozen years, starting in 2008, the year U.S. crude oil production reached its nadir of a mere 5 million barrels per day. (Not long after, just as U.S. oil production was showing sparks of revival, President Barack Obama contemptuously declared that, “Anybody who tells you that we can drill our way out of this problem doesn’t know what they’re talking about, or just isn’t telling you the truth.”)

By last year the average rate had soared to 12.9 million barrels per day which, the U.S. Energy Information Administration recently pointed out, represented “more crude oil than any country, ever.” U.S. production isn’t just higher than Saudi Arabia and Russia’s – it’s nearly 30 percent higher. How this came about is its own story. But suffice it to say that Canadian visionaries and companies played an important role. So, interestingly, did prospective energy secretary Wright and his company, Liberty Energy, which helped pioneer the development of formerly inaccessible shale reservoirs by using horizontally drilled wells completed with multiple hydraulic fractures. In short, this transformation has fundamentally changed the energy game for the U.S., domestically and internationally.

Since its nadir at 5 million barrels per day (mmbpd) in 2008, U.S. crude oil production has soared to an average of 12.9 mmbpd in 2023 – more than any other country in history and trumping Saudi Arabia and Russia. Concurrently, exports of liquefied natural gas have zoomed from zero a decade ago to 12 billion cubic feet per day. (Sources of graphics: (top) eia.gov; (bottom) S&P Global, retrieved from The New York Times)

Here again, imported Canadian energy is neither a competitive threat nor a hindrance – but a source of economic value. The quirks of geography combined with the refusal of successive Canadian governments to ensure that Canada’s oil and natural gas could access global markets have created what amounts to a gargantuan, continent-spanning arbitrage mechanism that enriches American companies, investors and governments. In brief, cheap Canadian crude oil, natural gas and liquids are drawn into the U.S. from the north, enabling domestically produced crude oil, natural gas, liquids, refined fuels and petrochemicals to be exported from the vast Gulf of Mexico energy complex to hungry global markets, where they access premium international prices.

This has become a multi-hundred-billion-dollar opportunity that American entrepreneurs and financiers have exploited with alacrity. Vast investments in LNG export facilities have taken the U.S. from zero LNG as recently as 2014 to approximately 12 billion cubic feet per day this year, a figure forecast to zoom to 20 billion cubic feet per day within two years (the U.S. will thus be exporting more gas than Canada produces in its entirety). U.S. net exports of refined fuels (much more valuable than crude oil) are generating more than US$60 billion annually. The associated processing and export facilities themselves employ thousands.

Trump’s ‘liquid gold’ will soothe American consumers, grease the skids of American manufacturing, fill the financial tanks of American investors and set economic bonfires upon America’s enemies.

Tweet

Clearly, the more Canadian oil and natural gas can be imported from the north, the more American energy – including value-added refined/processed products – can flow from the Gulf of Mexico outward to the world. Indeed, Trump himself has said he would like to reinstate the federal permit for the much-fought-over, 800,000-barrel-per-day Keystone XL pipeline, which he approved early in his first term but was then cancelled by Biden.

The stunning U.S. energy turnaround in barely 15 years plus the current prospect of enormous further growth enable Trump and his policymakers to credibly talk about elevating the U.S. to global “energy dominance”. That is to say, an America liberated from dependency on imported oil not only can act unconstrained by the need to placate oil-producing nations that don’t share U.S. interests, but can use its own energy exports to enrich itself and support allied countries. It can also stare down oil-producing adversaries like Iran and Russia, leaving them weaker, contained and less able to fund wars, terrorism and other foreign mischief. Trump’s stated policy to curtail oil production misused by dictatorships in Iran and Venezuela also implies that Canadian energy exports will be more highly sought-after than ever. More Canadian energy strengthens U.S. energy dominance and weakens its enemies by helping to hold down international commodity prices.

Golden opportunity: The Trump Administration’s stated goal of global “energy dominance” appears achievable, weakening its oil-producing adversaries while holding open the door to Canada – if Canada’s political leadership is intelligent enough to seize the moment. Shown, Trump shakes hands with UFC Champion Jon Jones at Madison Square Garden, New York, 11 days after his election victory. (Source of photo: AP Photo/Evan Vucci)

The U.S. is already the world’s energy giant. Its goal of “energy dominance” is therefore serious and realistic. Standing atop it all will be Trump, the energy dominator: his “liquid gold” will soothe American consumers, grease the skids of American manufacturing, fill the financial tanks of American investors and set economic bonfires upon America’s enemies. That simply does not sound like an Administration about to place tariffs on the very imports that will help it make this happen. Far more likely, the 47^th President’s energy policy will offer Canada a golden opportunity to play a supportive role as a neighbour, friend, trading partner and ally – and to profit greatly from doing so.

George Koch is Editor-in-Chief of C2C Journal.

Source of main image: heritage.org.

C2C Journal

Drinking by the Numbers: What Statistics Canada Doesn’t Want You to Know

Published on November 15, 2024

Todayville

From the C2C Journal

By Peter Shawn Taylor

“The secret language of statistics, so appealing in a fact-minded culture, is employed to sensationalize, inflate, confuse, and oversimplify,” cautioned journalist Darrell Huff in his famous 1954 book How to Lie with Statistics. It’s still useful advice, although Canadians might hope such a warning isn’t required for the work of Statistics Canada. In an exclusive C2C investigation, Peter Shawn Taylor takes apart a recent Statcan study to reveal its use of controversial, woke and unscientific methods to confuse what should be the straightforward task of reporting on the drinking habits of Canadians in various demographic groups. He also uncovers data the statistical agency wants to keep hidden for reasons of “historical/cultural or other contexts”.

Statistics Canada would like to know how much you’ve been drinking.

In October, the federal statistical agency released “A snapshot of alcohol consumption levels in Canada” based on its large-scale 2023 Canadian Community Health Survey that asked Canadians how much they drank in the previous week. The topline number: more than half of those surveyed – 54.4 percent – said they didn’t touch a drop in the past seven days. This is considered “no risk” according to the Canadian Centre on Substance Abuse and Addiction’s (CCSA) 2023 report Canada’s Guidance on Alcohol and Health, which Statcan uses as its standard. Among those who did imbibe, 15.2 percent said they’d had one or two drinks in the last week, an amount the CCSA guidance considers “low risk”, 15.2 percent said they’d consumed between three and six drinks, considered by CCSA to be “moderate risk”, and the remaining 15.1 percent admitted to seven or more drinks per week, what the CCSA calls “increasingly high risk”.

Statcan then sliced this information several different ways. By gender, men reported being bigger drinkers than women, based on their relative share in the “high risk” category (19.3 percent versus 11.1 percent). By age, the biggest drinkers are those 55-64 years, with 17.4 percent consuming at least one drink per day. Perhaps surprisingly, the 18-22-year-old college-aged group reported the lowest level of “high risk” drinking across all ages, at 8.4 percent, an outcome consistent with other observations that younger generations are becoming more conservative.

Statcan’s data also reveals that Quebeckers are the biggest drinkers in the country with 18.1 percent in the “high risk” category, while Saskatchewan and New Brunswick had the greatest number of teetotalers. Rural residents are bigger drinkers than those living in urban areas. By occupation, those holding male-dominated jobs in the trades, equipment operation and transportation were the most likely to report drinking in the “high risk” category of seven or more per week. Finally, the richest Canadians – those in the top income quintile – said they drink more than Canadians in lower income quintiles, an outcome that seems logical given the cost of a bottle these days.

The demographic detail in Statcan’s alcohol consumption survey is extensive and largely in keeping with general stereotypes. The quintessential drinker appears to be a middle-aged blue-collar male living in rural Quebec. (Although the report notes an enormous discrepancy between self-reported consumption data and national alcohol sales, with self-reported amounts accounting for a mere one-third of actual product sold. This suggests many Canadians are far from truthful when describing how much they drink.)

Despite the apparent surfeit of information, however, several demographic categories are missing from Statistics Canada’s report. And not by accident. According to a “Note to readers” at the bottom of the October report, the survey “included a strategic oversample to improve coverage…for racialized groups, Indigenous people, and persons with disabilities. While this analysis does not contain results for these populations (primarily owing to the need to delve into historical/cultural or other contexts for these groups as it pertains to alcohol consumption), the Canadian Community Health Survey 2023 data is now available to aid researchers looking into health analysis for these populations.”

The demographic detail in Statcan’s alcohol consumption survey is extensive and largely in keeping with general stereotypes. The quintessential drinker appears to be a middle-aged blue-collar male living in rural Quebec.

Tweet

The upshot of this word salad: Statcan went to extra lengths to get high-quality information on the alcohol consumption of natives, visible minorities, immigrants and people with disabilities. And then it enshrouded these numbers in a cloak of secrecy, choosing not to release that information publicly because of “historical/cultural or other contexts”. Why is Canada’s statistical agency keeping some of its data hidden?

Canada’s Guidance on Alcohol and Health

Before investigating the missing data, it is necessary to discuss a controversy regarding the alcohol consumption guidelines used by Statcan. As mentioned earlier, its survey is based on new CCSA standards released last year which consider seven or more drinks per week to be “increasingly high risk”. This is the result of recent CCSA research that claims “even a small amount of alcohol can be damaging to health.” By focusing on the incidence of several obscure cancers and other diseases associated with alcohol consumption, the CCSA recommends that Canadians cut back drastically on their drinking. For those who wish to be in the “low risk” group, the CCSA recommends no more than two drinks per week for men and women, and not downing both on the same day.

To your health: The “J-Curve” plots the well-documented relationship between moderate social drinking and a long lifespan, revealing the healthiest level to be around one drink per day, what the new CCSA standards call “high risk”.

Such a parsimonious attitude towards drinking is at sharp odds with earlier CCSA findings. In 2011, the CCSA released “Canada’s Low Risk Alcohol Guidelines”, which defined “low risk” drinking levels very differently. Under this older standard, Canadians were advised to limit their consumption to 15 drinks per week (10 for women) and no more than three per day. It also acknowledged that it was okay to indulge on special occasions, such as birthdays or New Year’s Eve, without fear of any long-term health effects.

These rules were based on ample medical evidence pointing to substantial health benefits arising from moderate drinking, given that social drinkers tend to live longer than both abstainers and alcoholics – a statistical result that, when placed on a graph, yields what is commonly referred to as the “J-Curve”. These rules also aligned with social norms and hence garnered broad public support.

The dramatic contrast between the 2011 and 2023 CCSA drinking guidelines has attracted strong criticism from many health experts. Dan Malleck is chair of the Department of Health Sciences at Brock University in St. Catharines, Ontario, as well as director of the school’s Centre for Canadian Studies. In an interview, he bluntly calls the new CCSA guidelines “not useful, except as an example of public health over-reach.” Malleck argues the emphasis CCSA now places on the tiny risk of certain cancers associated with alcohol ignores the vast amount of evidence proving moderate drinking confers both physical and social advantages. This, he says, does a disservice to Canadians.

“The opposite of good public health advice”: According to Dan Malleck, chair of Brock University’s Department of Health Sciences, the Canadian Centre on Substance Abuse and Addiction’s (CCSA) 2023 guidelines suggesting alcohol in any amount is a health hazard are unrealistic. (Source of photo: Brock University)

“The Opposite of Good Public Health Advice”

“There are two possible responses” to the CCSA’s new drinking guidelines touting near-abstinence as the preferred course of action, Malleck says. “People will hear the message that no amount of drinking is healthy and simply ignore the recommendations altogether because they’re so restrictive – and so we end up with no effective guidance. Or they’ll take it all at face value and become fearful that having just two beers a week will give them cancer. Creating that sort of anxiety isn’t useful either.” Considering the two alternatives, Malleck says the end result “is the opposite of good public health advice.”

Perhaps surprisingly, it appears Ottawa agrees with this assessment. While the CCSA is a federally-funded research organization, it is not a branch of the civil service. As such, its work does not automatically come with an official imprimatur. Rather, its reports have to be adopted by Health Canada or another department to become government policy. This was the case with its 2011 guidance. It is not the case with CCSA’s new report.

In response to a query from C2C, Yuval Daniel, director of communications for Ya’ara Saks, the federal minister of Mental Health and Addictions, stated that, “The Canadian Centre for Substance Abuse and Addiction’s proposed guidelines have not been adopted by the Government of Canada. Canada’s 2011 low-risk alcohol drinking guidelines remain the official guidance.”

Too strict even for the Liberals: Federal Mental Health and Addictions Minister Ya’ara Saks has chosen not to adopt the CCSA’s 2023 drinking guidelines as official policy – yet Statistics Canada insists on using them to measure Canadians’ drinking habits. (Source of photo: The Canadian Press/Adrian Wyld)

It seems the CCSA’s new and abstemious drinking guidelines are too strict even for the federal Liberals. The 2011 standard, which considers anything up to 15 drinks per week to be “low risk”, remains the government’s official advice to Canadians. While this seems like a small victory for common sense, it raises another question: if the federal government has refused to adopt the strict 2023 CCSA drinking standards, why is Statcan using them in its research?

According to Malleck, the appearance of the new, unofficial CCSA alcohol guidance in Statcan’s work “legitimizes” the explicitly-unapproved guidelines. “It further reinforces these seemingly authoritative, government-funded recommendations” and obscures the sensible, official advice contained in the earlier guidelines, he says. It seems a strange state of affairs. But given other odd aspects of Statcan’s alcohol survey, it is in keeping with an emerging pattern of problematic behaviour at the statistical agency. Statcan is no longer merely gathering information and presenting it in an objective way, to be applied as its users see fit; the agency appears to be crafting its own public policy by stealth.

Uncovering the Missing Data

Recall that Statcan’s recent alcohol survey withheld consumption data regarding racial, Indigenous and disabled status for reasons of “historical/cultural or other contexts”. Although the statistical agency collected the relevant numbers, it then restricted access to researchers “looking into health analysis for these populations.” As a media organization, C2C requested this data on the grounds it was public information. After some back-and-forth that included the threat of a $95-per-hour charge to assemble the figures, Statcan eventually provided the once-redacted numbers for free. With the data in hand, it seems obvious which numbers were withheld and why.

The only category that seems worthy of any comment is that of Indigenous Canadians. At 20.1 percent, aboriginals display one of the highest shares of ‘high risk’ drinkers in the country.

Tweet

Nothing about alcohol consumption by immigrant status or race appears newsworthy. Immigrants are revealed to be very modest drinkers, with 68 percent reporting no alcohol consumed in the past week, and only 7 percent admitting to being in the “high risk” seven-drinks-per-week category. Similar results hold for race; Arab and Filipino populations, for example, display extremely high rates of abstinence, at 88 percent and 80 percent, respectively. Disabled Canadians are also very modest drinkers.

The only category that seems worthy of any comment is that of Indigenous Canadians. At 20.1 percent, aboriginals display one of the highest shares of “high risk” drinkers in the country.

Out of sight, out of mind: Statcan’s recent report on alcohol consumption deliberately withholds data on Indigenous Canadians for reasons of “historical/cultural and other contexts”. (Source of photo: AP Photo/William Lauer, File)

According to Malleck, Statcan’s reference to “historical/cultural or other contexts” in withholding some drinking data is a clear signal the move was meant to avoid bringing attention to Indigenous people and their problematic relationship with alcohol. “A lot of people will now err on the side of caution when it comes to this kind of information [about Indigenous people],” he says. This is a phenomenon that has been building for some time. Nearly a decade ago, the 2015 Truth and Reconciliation Commission’s Calls to Action made numerous demands about how governments and universities deal with Indigenous knowledge and history. “I can see the people at Statcan saying that this [new data] will play into the so-called ‘firewater myth’ and be too damaging culturally to justify its inclusion,” Malleck adds.

“The Unmentioned Demon”

It is certainly true that Canada’s native population has been greatly damaged by alcohol since the beginning of white settlement in North America. As early as 1713 the Hudson’s Bay Company told its staff at Fort Albany, in what is now northern Ontario, to “Trade as little brandy as possible to the Indians, we being informed it has destroyed several of them.”

Later, the pre-Confederation era featured many legislative efforts to limit native access to alcoholic spirits. Further, one of the purposes behind the creation of Canada’s North West Mounted Police (NWMP) was to interdict American whiskey traders at the U.S. border to prevent them from selling their wares to Canadian tribes, who were suffering catastrophically under alcohol. The NWMP were notably successful in that mission, earning the fervent gratitude of prominent Indigenous chiefs on the Prairies. More recently, the topic of alcoholism on native reserves has been the subject of several books, including former Saskatchewan Crown prosecutor Harold Johnson’s powerful 2016 work Firewater: How Alcohol is Killing my People (and Yours).

Canada’s native community has struggled with alcohol abuse ever since white settlement began. Many federal policies have attempted to address this, including the creation of Canada’s North West Mounted Police (NWMP) in 1873. Shown, NWMP officer with members of the Blackfoot First Nation outside Fort Calgary, 1878.

With all this as background, it should not come as a surprise that Indigenous communities continue to struggle with high rates of alcohol use and abuse. In fact, such detail is easily accessible from other government sources. The federal First Nations Information Governance Centre, for example, reveals that the rate of binge drinking (five drinks or more in a day, at least once per month) among Indigenous Canadians is more than twice the rate of the general population – 34.9 percent vs. 15.6 percent. Reserves and Inuit communities also display extremely high rates of Fetal Alcohol Syndrome Disorder(FASD), which is caused when pregnant mothers drink. Some research shows FASD rates are 10 to 100 times higher among Indigenous populations than the general Canadian population. This C2C story calls FASD “the unmentioned demon that haunts the native experience throughout Canada.”

Given all this readily available information, it makes little sense for Statcan to collect and then withhold data about Indigenous drinking. Such an effort will not make the problem go away, nor change public perceptions. Indeed, the only way to reduce alcoholism on reserves and among urban native communities is to confront the situation head-on. The first step in Alcoholics Anonymous’ 12-step recovery program is, notably, admitting to the existence of the problem itself.

With regard to sensitivity about identity, Statcan showed no qualms about labelling Quebeckers as being the thirstiest drinkers in the country. Or that men employed in the trades, equipment operation and transportation tend to kick back with a beer more than twice a week. Further, Indigenous Canadians are not even the country’s biggest imbibers. That distinction belongs to the top quintile of income-earners, with 21.5 percent of Canada’s highest earners in the “high risk” category.

Habs fans at work: While Statcan appears unwilling to publish data revealing that Indigenous Canadians are among the biggest drinkers in Canada, it has no such qualms about identifying Quebec as Canada’s thirstiest province. (Source of photo: CTV News Montreal)

This effort to spare Indigenous Canadians the ignominy of being recognized as among the country’s biggest drinkers, even after devoting more time and effort to researching their habits, follows a 2021 federal Liberal directive that requires Statcan to spend more resources on certain targeted groups. The $172 million, five-year Disaggregated Data Action Plan (DDAP), which is referenced in the alcohol report’s footnotes, is an effort to collect more detailed data about Indigenous people, women, visible minorities and the disabled “to allow for intersectional analyses, and support government and societal efforts to address known inequities and promote fair and inclusive decision-making.”

Setting aside the tedious terminology of the diversity, equity and inclusion (DEI) movement, it may well be a reasonable policy goal to collect more and better information about underprivileged groups. With better information comes greater knowledge and, it can be hoped, an improved ability to plan. But such efforts are for naught if this additional data is then hidden from public view because it might cast favoured groups in a bad light.

Ottawa’s $172 million Disaggregated Data Action Plan (DDAP), unveiled in 2021, is meant to collect and distribute more detailed data on targeted groups including women, Indigenous people and the disabled. It doesn’t always work as promised.

Canada’s Statistical Agency Goes Random

The apparent data damage arising from the new DDAP is not limited to hiding results about Indigenous Canadians. It is also affecting results by gender. Recall that the October alcohol consumption report reveals a clear male/female split in drinking habits, with men drinking substantially more than women. On closer inspection, however, this distinction refers only to self-reported gender identity – not to biological sex. As a result of a separate 2018 directive, the statistical agency is now forbidden from asking Canadians about their sex “assigned” at birth.

This is in keeping with woke ideology favoured by the federal Liberals that regards gender as a social construct separate from biology. But such a policy entails several significant problems from a statistical point of view. For starters, it makes it difficult to compare results with previous years, when gender was defined differently. According to Statcan, this is no big deal: “Historical comparability with previous years is not in itself a valid reason to be asking sex at birth.” These days, ideology matters more than statistical relevance, even to those who once held sacred the objective gathering of high-quality data.

As its work becomes more overtly political and ideological following nearly a decade under the Justin Trudeau government, Statistics Canada is endangering its own reputation as a reliable and impartial source of data.

Tweet

This new policy also means that in situations where biological sex is crucial to interpreting the data – health issues, for example – the results are now muddied by the conflation of gender with sex. This is particularly relevant when it comes to self-identified transgender or non-binary individuals. In following the new rules set out by the DDAP, Statcan now takes all transgender and non-binary responses and shuffles them arbitrarily between the male and female categories – what have since been renamed as Men+ and Women+. As Statcan itself reports, this data is “derived by randomly distributing non-binary people into the Men+ or Women+ category; data on sex at birth is not used in any steps of this process.”

Anti-scientific: As a result of the DDAP, Statcan now randomly distributes responses from people who self-identify as transgender or non-binary into its Men+ and Women+ categories, making a mockery of good statistical practice. (Source of photo: Shutterstock)

In other words, Statcan is now randomly allocating the responses it receives from anyone who says they are transgender or non-binary into the Men+ and Women+ categories. Transgender women who remain biological men may thus be included together with other biological women. Doing so is, of course, entirely unscientific. Randomizing data points that have been carefully collected undermines the entire statistical process and weakens the usefulness of any results. Taken to the extreme, such a policy could produce such medical data absurdities as rising rates of prostate cancer among Women+ or a baby boom birthed by Men+. Consider it a triumph of wokeness over basic science and math.

Statistical Irrelevance in Three Easy Steps

As its work becomes more overtly political and ideological following nearly a decade under the Justin Trudeau government, Statistics Canada is endangering its own reputation as a reliable and impartial source of data. The October survey on alcohol consumption contains three examples of this lamentable slide into incoherence which, if not halted promptly, will lead to growing irrelevance.

First is the presentation of controversial new CCSA alcohol consumption guidelines as an official standard by which Canadians should measure their alcohol use. In fact, these guidelines have no federal standing whatsoever; the actual official standards are much more permissive. It is not clear why Statcan would promote these unofficial and scientifically dubious recommendations. In effect, the agency has teamed up with a temperance-minded organization that seems determined to convince Canadians they are drinking too much booze.

This party can’t last forever: Statcan’s recent survey on Canadians’ drinking habits reveals the many ways in which the statistical agency is becoming increasingly ideological in how it collects (and hides) data. If left unchecked, this will eventually lead to its irrelevance as a source of reliable information. (Source of photo: CanadaVisit.org)

Second, Statcan wants to prevent Canadians from having ready access to information about alcohol consumption by Indigenous Canadians. This may be the result of some misconstrued sense of sympathy or obligation towards native groups. In doing so, however, the statistical agency is hiding an important public policy imperative from the rest of the country. It should be the job of Canada’s statistical agency to collect and distribute high-quality data that is relevant to the Canadian condition regardless of whether the resulting inferences are for good or ill. While the $172 million DDAP program was promoted as the means to shine a brighter light on issues of concern for marginalized groups, it now appears to be working in reverse – hiding from public view issues that should concern all Canadians.

Finally, Statcan’s gender-based data collection policy is doing similar damage – and could do vastly more in the future as long-term datasets become ever-more degraded. Also based on the Liberals’ Disaggregated Data Action Plan, the agency now collects responses from Canadians who identify as transgender and non-binary and then randomly allocates these between its Men+ and Women+ categories, undermining the quality and reliability of its own work. While the actual numbers for nonbinary Canadians may be perishingly small, such a flaw should be a big deal for anyone who cares about rigorous statistical validity. And surely Statistics Canada should care.

Peter Shawn Taylor is senior features editor at C2C Journal. He lives in Waterloo, Ontario.

Internet2 days ago

Gov’t memo admits Canadians are shifting to independent news due to distrust of media, not Russian ‘bots’

armed forces20 hours ago

Canadian military deployed ‘gender advisors’ to Ukraine, Haiti  at taxpayers’ expense

Opinion2 days ago

The idea of ‘democracy’ championed by globalist elites is far from what the people think

Business2 days ago

Canada’s chief actuary fails to estimate Alberta’s share of CPP assets

Business1 day ago

Taxpayers release Naughty and Nice List

Bruce Dowbiggin1 day ago

How The NFL Grinch Bought Xmas: Drowning In A Sea of Football

Business2 days ago

Biden announces massive new climate goals in final weeks, despite looming Trump takeover

Health24 hours ago

Dr. Malone: Bird flu ‘emergency’ in California is a case of psychological bioterrorism

Todayville Calgary

Indecent Proposals: How Activist Investors Hijacked Responsible Corporate Governance

C2C Journal

Indecent Proposals: How Activist Investors Hijacked Responsible Corporate Governance

Todayville

From the C2C Journal

Advocates of “stakeholder capitalism” believe companies should care less about profit – but it’s the push for those profits that makes companies successful, creates jobs and wealth, and finances retirement for millions. (Source of photo: Scott Beale, licensed under CC BY-NC-ND 2.0)

One of the world’s most successful investors, Warren Buffett, has been decidedly lukewarm on ESG, a position one business magazine called “unconventional” – an indication of how thoroughly the ideology has penetrated. (Source of photo: Fortune Live Media, licensed under CC BY-NC-ND 2.0)

Todayville

Follow Author

Rand Paul Releases Report Detailing $1,000,000,000,000 In Gov’t Waste. Here Are The Worst Offenders

Canadian military deployed ‘gender advisors’ to Ukraine, Haiti  at taxpayers’ expense

Dr. Malone: Bird flu ‘emergency’ in California is a case of psychological bioterrorism

C2C Journal

Why the Trump Administration is Unlikely to Impose Import Tariffs on Canadian Oil and Natural Gas

From the C2C Journal

C2C Journal

Drinking by the Numbers: What Statistics Canada Doesn’t Want You to Know

From the C2C Journal

To your health: The “J-Curve” plots the well-documented relationship between moderate social drinking and a long lifespan, revealing the healthiest level to be around one drink per day, what the new CCSA standards call “high risk”.

Habs fans at work: While Statcan appears unwilling to publish data revealing that Indigenous Canadians are among the biggest drinkers in Canada, it has no such qualms about identifying Quebec as Canada’s thirstiest province. (Source of photo: CTV News Montreal)

Ottawa’s $172 million Disaggregated Data Action Plan (DDAP), unveiled in 2021, is meant to collect and distribute more detailed data on targeted groups including women, Indigenous people and the disabled. It doesn’t always work as promised.

Anti-scientific: As a result of the DDAP, Statcan now randomly distributes responses from people who self-identify as transgender or non-binary into its Men+ and Women+ categories, making a mockery of good statistical practice. (Source of photo: Shutterstock)

Conservatives say Singh won’t help topple Trudeau government until after he qualifies for pension in late February

Gov’t memo admits Canadians are shifting to independent news due to distrust of media, not Russian ‘bots’

Canadian military deployed ‘gender advisors’ to Ukraine, Haiti  at taxpayers’ expense

Two major banks leave UN Net Zero Banking Alliance in two weeks

Trending

Todayville Calgary

Indecent Proposals: How Activist Investors Hijacked Responsible Corporate Governance

From the C2C Journal

Advocates of “stakeholder capitalism” believe companies should care less about profit – but it’s the push for those profits that makes companies successful, creates jobs and wealth, and finances retirement for millions. (Source of photo: Scott Beale, licensed under CC BY-NC-ND 2.0)

One of the world’s most successful investors, Warren Buffett, has been decidedly lukewarm on ESG, a position one business magazine called “unconventional” – an indication of how thoroughly the ideology has penetrated. (Source of photo: Fortune Live Media, licensed under CC BY-NC-ND 2.0)

Share this:

Follow Author

Why the Trump Administration is Unlikely to Impose Import Tariffs on Canadian Oil and Natural Gas

From the C2C Journal

Share this:

Drinking by the Numbers: What Statistics Canada Doesn’t Want You to Know

From the C2C Journal

To your health: The “J-Curve” plots the well-documented relationship between moderate social drinking and a long lifespan, revealing the healthiest level to be around one drink per day, what the new CCSA standards call “high risk”.

Habs fans at work: While Statcan appears unwilling to publish data revealing that Indigenous Canadians are among the biggest drinkers in Canada, it has no such qualms about identifying Quebec as Canada’s thirstiest province. (Source of photo: CTV News Montreal)

Ottawa’s $172 million Disaggregated Data Action Plan (DDAP), unveiled in 2021, is meant to collect and distribute more detailed data on targeted groups including women, Indigenous people and the disabled. It doesn’t always work as promised.

Anti-scientific: As a result of the DDAP, Statcan now randomly distributes responses from people who self-identify as transgender or non-binary into its Men+ and Women+ categories, making a mockery of good statistical practice. (Source of photo: Shutterstock)

Share this:

Conservatives say Singh won’t help topple Trudeau government until after he qualifies for pension in late February

Gov’t memo admits Canadians are shifting to independent news due to distrust of media, not Russian ‘bots’

Canadian military deployed ‘gender advisors’ to Ukraine, Haiti at taxpayers’ expense

Two major banks leave UN Net Zero Banking Alliance in two weeks

Trending

Canadian military deployed ‘gender advisors’ to Ukraine, Haiti  at taxpayers’ expense