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Is the Oil Industry Canada’s ‘Deep State’?

From influencing politicians to shaping public opinion, industry strives to control energy policy.

Bruce Livesey 17 May

Bruce Livesey is an award-winning journalist. His writing has appeared in most major magazines and newspapers in Canada.

Keith Stewart is an energy strategist with Greenpeace Canada, and part of his job is to file, track and review access to information requests he submits to the federal government. It’s an often tedious task — plowing through documents that are heavily censored and reveal little more than what appears in official press releases.

But last November, the somewhat world-weary Stewart received a package that pricked his interest: among the papers were briefing notes written by unnamed civil servants for two meetings: one between Andrew Leslie, a Liberal MP and parliamentary secretary to Chrystia Freeland, Canada’s foreign affairs minister, along with Russell Girling, the CEO of TransCanada Corp., one of North America’s largest pipeline companies; and another between Leslie and staff from the Canadian Association of Petroleum Producers (CAPP), the oil industry’s principal lobby group. The meetings between Leslie and Girling and Leslie and CAPP were held in the winter and spring of last year.

Yet the briefing notes revealed that while Prime Minister Justin Trudeau’s Liberal government was presenting itself publicly as a stalwart defender of all things Canadian against the bullying new regime south of the border — on the environment, trade and NAFTA especially — in this instance there was celebration of the fact that Donald Trump and his administration were pro-oil and pro-pipelines.

In particular, they expressed delight over the U.S. president’s decision to approve building the Keystone XL (KXL) pipeline, which TransCanada is constructing, overturning Barack Obama’s rejection of the project.

“We support TransCanada’s KXL project and efforts to expand its market in North America” was one of the notes’ talking points Leslie was given, consistent with the government’s public position on the pipeline. The briefing notes omitted any hint that climate change was on the agenda — and CAPP confirms the topic was not discussed during its meeting with Leslie. TransCanada and Leslie refused to respond to questions about these meetings.

For years Stewart has seen this sort of language in internal government memos, with cabinet ministers, MPs and civil servants seeing themselves as allies and partners of the energy industry.

It’s one reason Stewart believes the oil industry constitutes a so-called “deep state” in Canada.

“When we’re talking about a ‘deep state,’ it’s usually when supposedly democratic institutions and the will of the people is being replaced by the will of special interests,” he observes. “And I think if you look at the development of environmental policy in this country, the oil industry is so powerful, their influence is so pervasive that I think it’s fair to call it a deep state.”

Today the term “deep state” is bandied about by both conspiracy-minded alt-right and left-wing adherents, usually referring to America’s intelligence and national security apparatus. Trump lobs the term frequently, as do outlets such as Breitbart News.

But to academics, deep state is another way to refer to governments that have been captured by corporate or military/intelligence interests, or both.

“Captured state is a term political scientists have used for a very long time to characterize the relationship in which the government is essentially under the influence of the dominant sector of the economy,” explains Laurie Adkin, a political scientist at the University of Alberta.

Has the federal government — along with certain provincial governments — been captured by Canada’s energy sector?

Kevin Taft, a former leader of Alberta’s Liberal Party (2004-08) believes so. He’s the author of a new book, Oil’s Deep State. “In Canada, the fossil fuel industry has captured really key democratic institutions and in some ways has captured so many of them that it has formed what I call a deep state,” explains Taft. “So democracy stops functioning for the people and begins to function first and foremost for the fossil fuel industry.”

Those who believe the oil industry has become a deep state point to how the political elites, whether Liberal, Conservative or NDP — from Justin Trudeau to Stephen Harper to Rachel Notley — go to bat for the industry, even if it means Canada’s greenhouse gas emissions rise and jobs are needlessly lost. Or how Canada has never forced the oil industry to curb emissions — even as the impacts of global warming become more catastrophic. And why Canada is highly unlikely to reach its targets under the Paris climate agreement.

“As things now stand, there is no chance in the world that Canada is aimed towards our Paris targets,” says Elizabeth May, the federal Green Party leader.

Deep states and petro states

Political scientists differentiate between petro-states and deep states. Saudi Arabia, Venezuela and Iraq are petro-states because most government revenue derives from oil and they have little or no history with democracy.

Deep states, however, emerge in countries that are democracies. “With a captured state, there is a strong heritage of democracy,” notes Taft. A deep state occurs when numerous government departments and regulators are captured and serve specific corporate interests at the expense of public interests. “When that happens, you end up with the appearance of democracy but really you have a state within a state,” says Taft.

While corporations and their think tanks have long wielded influence over Western governments, with access to the corridors of power average citizens can only dream of, this power is seen more acutely now than ever before. Janine Wedel, an international commerce professor at George Mason University in Virginia, calls this phenomenon the “shadow state” — whereby private consultants and contractors literally run government bureaucracies and policy-making. “It’s an unaccountable, outsourced state,” she says.

Mike Lofgren, who spent 28 years as a Republican congressional staffer and senior analyst in Washington, D.C., wrote a book in 2016 called The Deep State: The Fall of the Constitution and The Rise of a Shadow Government and believes the “Deep State is the big story of our time.”

In an interview, Lofgren says the deep state is not a conspiracy. “It’s everything where you sense there are big flows of money and there are lots of connections to what the government is doing and a revolving door as far as personalities are concerned,” he says.

And it affects all political parties, no matter whether they’re on the left or right. Hence, elections become less relevant as political parties who win office eventually succumb to the fact so many government agencies are captured.

“I’ve never said there’s no difference between Democrats and Republicans, and that your vote doesn’t count,” says Lofgren. “But it is less important. Because while Democrats are not Republicans, they both heed to the magnetic pull of money.”

Has the oil industry become Canada’s deep state?

Canada has a long history of relying on resource extraction for its prosperity. But there’s never been a source of wealth as rich as Canada’s oil sands — the third largest reserve of petroleum in the world.

Canada's oil sands reserves are made up of deposits of bitumen, a heavy tar-like oil, buried beneath parts of Canada’s boreal forest in northern Alberta and Saskatchewan. Producers need to use vast amounts of water and energy to extract and separate the oil. Overall, the federal government estimates oil sands companies are Canada’s fastest growing source of greenhouse gas emissions.

Oil sand development was largely created by government fiat. After Peter Lougheed became Alberta’s premier in 1971, the sole oil sands operation, Suncor Energy, was producing a mere 30,000 barrels a day. Now the oil sands produce 2.5 million barrels a day.

While Lougheed encouraged development of the oil sands, he took an interventionist approach with industry, making the oil companies abide by laws, regulators and legislators. When the industry boomed in the mid-’70s, Lougheed raised royalty rates, while the federal government hit it with taxes.

But by 1993, the balance of power was shifting. Both Premier Ralph Klein in Alberta and Prime Minister Jean Chrétien were desperate to ramp up oil sands production to boost the economy. In return, the oil industry wanted less regulation, oversight and taxation.

Chrétien and Klein obliged. Royalties were dropped to one per cent and taxes rolled back, while environmental regulations were weakened.

“From then on, oil sands projects would have fewer standards of accountability to democratic institutions and more accountability to investors,” says Taft. “The system of governing and managing the publicly-owned oil sands had been captured by private interests.”

The industry boomed. By 2015, one quarter of all business investment in Canada was going to the energy sector, while oil and gas topped Canada’s exports.

Nonetheless, the economic benefits of the energy sector are highly exaggerated. In fact, it accounted for less than seven per cent of Canada’s GDP in 2016.

It also doesn’t generate many jobs. Two years ago, Stats Canada said less than 300,000 people were directly employed in the energy sector.

In comparison, the finance services sector, which also accounts for seven per cent of GDP, generates nearly 800,000 direct jobs. “It’s politically very risky at this point in Canada for a politician to appear as though they are not supporting the energy industry because the energy industry has become synonymous with Canadian prosperity and jobs — even though it is not actually responsible for the majority of Canadian GDP or jobs,” observes Catherine Abreu, executive director of Climate Action Network.

The oil industry also generates minimal tax revenue: a study released last fall shows that Canada imposes taxes on oil and gas companies that are a fraction of taxes imposed on the same companies in countries like Nigeria, Indonesia and the Ivory Coast. In Alberta, the province collects more in taxes from gaming and alcohol sales than it does from oil royalties — while running massive deficits.

Oil sands, environmental destruction and global warming

At the very time Canadian politicians were encouraging development of the oil sands, evidence of global warming — and immediate consequences like wildfires and drought — was mounting.

Yet Canada’s greenhouse emissions kept climbing, from 600 megatonnes in 1991 to 750 megatonnes in 2007 — and have remained close to that level ever since (722 megatonnes in 2015). Today, 26 per cent of greenhouse emissions come from the energy sector — about 190 megatonnes, almost double what it was in 1990.

And then there is the massive collateral damage of oil sands production, including levelling vast swaths of forests and generating more than one trillion litres of untreated and toxic water sit in tailings ponds in Alberta, which will cost tens of billions to clean up.

So why hasn’t such an environmentally destructive industry been held accountable for its damage? And why has it been encouraged to grow?

Critics say one reason is the oil and gas industry built itself a powerful lobbying and public relations apparatus that reaches into every aspect of society — from the entire political system, to the media, academia and Bay Street.

In Ottawa, the oil industry employs a small army of lobbyists, far outstripping other interest groups on the hill. The lobbying is spearheaded by the Canadian Association of Petroleum Producers (CAPP), which represents 90 members and 150 associate members. CAPP alone has 38 registered lobbyists.

“CAPP has had significant influence on all climate and carbon policies through successive governments,” says Elizabeth May.

Last year, according to the lobbyist registry, CAPP lobbyists met repeatedly with top officials within the Prime Minister’s Office and departments of natural resources, environment, finance, fisheries, foreign affairs, Indigenous affairs and transport, as well as with numerous MPs, senators and at least one leader of the opposition (Andrew Scheer). CAPP lobbyists met with ministers Bill Morneau (finance), Jim Carr (natural resources), Catherine McKenna (environment), and Dominic Leblanc (fisheries).

CAPP and oil companies also hire some of the most powerful lobbying firms on Parliament Hill, notably Hill + Knowlton Strategies, Global Public Affairs and Earnscliffe Strategy Group. On top of that are the dozens of lobbyists working for the Canadian Energy Pipeline Association and the Canadian Gas Association and individual oil companies. Since Trudeau was elected in 2015, the lobbyist registry shows these companies and industry groups have held hundreds of meetings with government officials.

For instance, when Kinder Morgan, the Texas-based pipeline company, wanted to expand a pipeline connecting the oil sands to B.C.’s coast, records show the company initiated 368 meetings with federal officials between 2011 and 2016.

Environmental groups also hold many meetings with ministers and civil servants, although evidence suggests far fewer than the oil sector.

Terry Abel, one of CAPP’s vice-presidents, said in an interview: “I certainly don’t think we are any more influential as an industry as any of the other stakeholders who are very actively at the table with the government.” CAPP refuses to divulge what it spends on lobbying every year.

The impact of this lobbying was visible when Harper was in office. From 2008 to 2012, 27 oil companies and eight industry associations registered 2,733 meetings with federal government officials. During this time, the Harper government withdrew Canada from the Kyoto climate accord, government scientists were discouraged from doing climate science and barred from speaking to the media, while the RCMP, CSIS and Canada Revenue Agency were tasked to spy on and audit groups and activists opposed to pipelines and the tar sands.

But the coup de grâce were two omnibus bills Harper rammed through Parliament in 2012 that gutted Canada’s environmental laws, most notably the Fisheries Act and Navigable Waters Protection Act, which were viewed as impediments for building oil pipelines.

In 2013, CAPP successfully lobbied Ottawa to delay proposed greenhouse gas regulations that were supposed to be introduced that summer. Abel says CAPP was worried about keeping competitive with the American oil industry. “Those were just early discussions with the government that need to be considered as we are developing policies and working towards policy,” he says.

More recently, in 2016 Kinder Morgan Canada lobbied extensively prior to Trudeau approving the expansion of the Trans Mountain pipeline. And due to fears of delays expressed by Kinder Morgan, the Trudeau government even sped up the review process for the project.

Managing the public

The industry’s influence is based on more than just lobbying — it also shapes public opinion.

One way is through funding think tanks. The most famous is the Vancouver-based Fraser Institute, which has received funding from the U.S. oil billionaire Koch brothers and long campaigned in favour of the oil sands and pipelines while opposing climate change measures. Its staff produce a relentless stream of oped pieces for newspapers across the country.

Canada 2020, the Ottawa-based “progressive think tank” closely allied with Trudeau, has been instrumental in shaping the Liberals. It lets industry leaders and lobbyists rub elbows with cabinet ministers and senior government officials. Among the corporate “partners” of Canada 2020 are CAPP and oil industry giants Shell, Suncor and Enbridge.

The influence of think tanks is not to be minimized: representatives from Canada’s 10 leading think tanks appeared at least 216 times before parliamentary committees between 2000 and 2015 and were cited in the Canadian media almost 60,000 times. “It gave them and their research priceless exposure and influence in shaping government policy,” noted the Globe and Mail in December.

And then there is the media. The oil industry advertises heavily in newspapers, on television and online. In 2013, CAPP and the Postmedia newspaper chain struck a deal whereby the media company promised to further the industry’s interests. The Postmedia papers are famous for championing the energy sector while belittling the environmental movement. A study published in 2013 by University of British Columbia and Memorial University researchers found that the Globe and Mail and National Post were failing to provide readers with a complete picture of global warming issues and underemphasizing the impacts.

The oil industry also pours millions into universities — in particular in Alberta. The University of Calgary has been beset by scandals in this regard.

In 2011, one of its political scientists, Barry Cooper, was discovered to have transferred research funds to a climate change denial group called Friends of Science. (Cooper was also a long-time columnist with the Calgary Herald, where he poured relentless scorn on the environmental movement and any opponents of the oil sands.)

But the topper was the Bruce Carson scandal. The federal government spent $40 million to finance a University of Calgary think tank chaired by Carson, a former senior advisor to Harper and a convicted fraudster. The institute worked with the industry on a plan to rebrand the oil sands as responsible and sustainable, and Carson co-ordinated some of his activities with CAPP.

In 2016, Carson was found guilty of violating lobbying laws in connection with his work at the University of Calgary and fined $50,000.

The risk of regulatory capture

Some critics believe key elements of the federal bureaucracy are under the industry’s sway — in particular Natural Resources Canada (NRCAN) and Environment and Climate Change Canada.

“I think NRCAN has become the Department of Oil and Gas and I think Environment Canada was converted under Harper from a public service agency to a corporate concierge service to speed along the approval of oil sands projects,” says May.

In 2015, after the Liberal government was elected, Jim Carr, the new natural resources minister, appointed Janet Annesley as his chief of staff. Annesley had spent five years working for CAPP as a vice-president, and nine years at Shell Oil before that. (Annesley was replaced earlier last year by Zoë Caron, a long-time environmental activist).

When Catherine McKenna became environment minister, her deputy minister was Michael Martin, who had been appointed by the Harper government as chief climate negotiator for the 2009 Copenhagen climate summit, which set no firm targets for reducing greenhouse emissions.

When McKenna attended the Paris climate talks in December 2015, Martin was still deputy minister (he retired later the following year). McKenna had previously suggested the Liberals would improve on Harper’s targets, which called for emissions to be reduced to 30 per cent below 2005 levels by 2030. Instead, she embraced the same targets – considered by environmental groups as the weakest among the G7.

May feels Martin pressed the Liberals to stick with the former government’s target. “There was a shift and suddenly Harper’s target was Trudeau’s target.”

But it’s not just the federal government. Last year, internal B.C. government documents were unearthed that revealed the province’s climate plan unveiled in 2016 had been secretly drafted jointly with CAPP and its members — in part at CAPP’s offices in Calgary.

Then there is the National Energy Board (NEB), which has the task of reviewing things like pipeline applications.

In recent years, the board has been accused of being heavily biased in favour of the oil industry. In 2015, for example, NEB board members met privately with Jean Charest, a former Quebec premier, who was a lobbyist for the pipeline company, TransCanada. This led to the resignation of NEB panel members when the meeting was exposed the following year.

The NEB is also accused of not upholding the public interest when it comes to pipelines. Unifor, a trade union that represents nearly 12,000 workers in the oil industry, is opposed to pipelines designed to ship raw bitumen out of Canada, arguing it should be refined and upgraded in Canada. Over the past 30 years, nearly 20 refineries have been shuttered in Canada.

Unifor has argued before the NEB that it should stop this trend. In a brief presented to the NEB in 2016, the union noted that by exporting raw bitumen “Canada will forego the enormous economic and employment benefits of adding value to Canadian resources through upgrading, refining, and secondary manufacturing. Not only does the bitumen export model undermine investment in value-added production over the long term, it actually threatens the security of supply to existing Canadian refineries… Incredibly, in 2014 Canada actually became a net importer of refined petroleum products: with imports of product now more than offsetting our own exports.”

But this “argument fell on deaf ears repeatedly,” says one of the union’s lawyers. Indeed, the NEB has approved all pipeline applications.

The deep state and Justin Trudeau

The Harper government was eager to do the bidding of the oil industry. Is Justin Trudeau any different, more likely to push back against the so-called “deep state”?

Trudeau did reach a tentative agreement with nine provinces on a national carbon tax, provided $518 million for local governments to help handle the impacts of climate change, is spending money on electric vehicle recharging stations and imposed a five-year moratorium on the licensing of oil and gas drilling projects in the Arctic. And scientists can now talk to the media about their work.

At the Paris climate talks his government pushed for a higher-than-expected goal — holding the planet’s rise in temperature to 1.5 degrees Celsius rather than two degrees. Trudeau also announced a plan to reduce methane emissions by up to 45 per cent from 2012 levels within the next seven years.

But Trudeau has also undermined those goals by supporting three pipelines the industry desperately wants — Kinder Morgan, Enbridge Line 3 and Keystone XL. He also approved the $11.4-billion Pacific NorthWest LNG project to convert fracked gas in B.C.

Prior to the election, Trudeau had promised to cut $1.6 billion in federal subsidies to the oil industry. More than two years later, this has still not happened. While recommendations to overhaul the NEB have been made, they’ve not been implemented. And the environmental laws Harper gutted have not been reinstated, although are under review.

Even the promised carbon tax on industry has been altered to give big breaks to industrial emitters like the oil and gas sector. And regulations on methane emissions have also been delayed.

Most crucially, Trudeau has refused to place limits on the oil and gas sector’s greenhouse emissions.

“If you take a look at the climate plan that Canada articulated… it lays out very aggressive and ambitious plan for decarbonizing the nation,” says Abreu of Climate Action Network. “It impacts almost every sector of the Canadian economy — except the fossil fuel sector.”

The oil industry is the only sector allowed to continue increasing emissions over the course of the plan, she notes. As a result, Abreu says, Canada will fail to meet its commitments under the Paris agreement.

In November, the United Nations released a report saying Canada is on track to miss its targets “by a wide margin” and instead of dropping, Canada's emissions will continue to climb. Environment Canada’s own report to the UN said the same thing.

Meanwhile, the world is moving to wean itself off fossil fuels and shift to renewable energy.

Canada’s capture by the oil and gas industry’s deep state is proving ill-timed.

“The harsh reality is that global warming is real,” says Kevin Taft. “And while much of the rest of the world is moving aggressively away from fossil fuels, Canada is going to get left behind in that transformation if we’re not really careful.”  [Tyee]

Read more: Energy, Politics

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