What changed in this filing

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Item 1A. Risk Factors

2021-02-24 compared with 2020-02-26 · 59 added, 29 removed, 159 unchanged (36% of the section changed)

13 unchanged sentences

seasonal weather patterns, which affect the demand for our products, including lower demand for gasoline, impacting Downstream results in the winter;

increased competitiveness of alternative energy sources;

increased competitiveness of, or government policy support for, alternative energy sources;

new product quality regulations;

technological changes or consumer preferences that alter fuel choices, such as technological advances in energy storage that make wind and solar more competitive for power generation or increased consumer demand for alternative fueled or electric transportation;

technological changes or consumer preferences that alter fuel choices, such as technological advances in energy storage that make wind and solar more competitive for power generation;

changes in consumer preferences for the company’s products, including consumer demand for alternative fueled or electric transportation or alternatives to plastic products;

broad-based changes in personal income levels;

and security or public health concerns.

and security or public health issues and responses such as epidemics and pandemics.

Commodity prices and margins also vary depending on a number of factors affecting supply.

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Similarly, increases in industry refining or petrochemical manufacturing capacity relative to demand tend to reduce margins on affected products.

Crude oil, gas and petrochemical supply levels can also be affected by factors that reduce available supplies, such as adherence by member countries or others to Organization of the Petroleum Exporting Countries (OPEC) production quotas and the Government of Alberta curtailment regulations, the occurrence of wars, hostile actions, natural disasters, disruptions in competitors’ operations, or unexpected pipeline or rail constraints that may disrupt supplies.

Crude oil, gas and petrochemical supply levels can also be affected by factors that reduce available supplies, such as adherence by member countries or others to Organization of the Petroleum Exporting Countries (OPEC) production quotas, government policies that restrict oil and gas production or increase associated costs, including the Government of Alberta curtailment regulations, the occurrence of wars, hostile actions, natural disasters, disruptions in competitors’ operations, or unexpected pipeline or rail constraints that may disrupt supplies.

Technological change can also alter the relative costs for competitors to find, produce, and refine oil and gas and to manufacture petrochemicals.

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Gulf Coast are uncertain and changes in the heavy or light crude oil differentials could have a material adverse effect on the company’s business.

Increased differentials in 2018 also led the Government of Alberta to impose temporary mandatory production curtailment in 2019.

Although mandatory production curtailment decreased throughout 2019, it continues to be imposed on larger producers and the duration of these regulations is uncertain.

Increased differentials in 2018 also led the Government of Alberta to enact temporary mandatory production curtailment regulations in 2019.

These regulations enable the government to impose production limits on large producers in Alberta such as Imperial.

Although mandatory production curtailment decreased throughout 2019 and 2020, and was eliminated in December 2020, the regulatory authority to impose curtailments remains in place and there is the potential for curtailment to be re-imposed

and increased.

The duration of these regulations is uncertain, and could have an adverse effect on the company’s business.

A significant portion of the company’s production is bitumen, which is blended with diluent for transportation and marketability of heavy crude oil.

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Changes in government policy or regulations, changes in law or interpretation of settled law, third-party opposition to company or infrastructure projects, and duration of regulatory reviews could impact Imperial’s existing operations and planned projects.

This includes actions by regulators or other political actors to delay or deny necessary licenses and permits or restrict the operation of third-party infrastructure that the company relies on, such as pipelines to transport the company’s upstream production to market or that supply feedstock to the company’s refineries.

Additionally, changes in environmental regulations, assessment processes or other laws and increasing and expanding stakeholder consultation (including Indigenous stakeholders), may increase the cost of compliance or reduce or delay available business opportunities and adversely impact the company’s results.

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Governments and others are also promoting research into new technologies to reduce the cost and increase the scalability of alternative energy sources, and the success of these initiatives may decrease demand for the company’s products.

Governments may establish regulations with respect to the control of the company’s production, such as when increased price differentials in 2018 led the Government of Alberta to impose temporary mandatory production curtailment regulations effective 2019.

Although mandatory production curtailment decreased throughout 2019, it continues to be imposed on larger producers.

The duration of these regulations is uncertain, and could have an adverse effect on the company’s business.

Government intervention in free markets may introduce unintended consequences such as market volatility and uncertainty, misallocation of resources, and erosion of investor confidence.

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As well, environmental regulations are imposed on the qualities and compositions of the products sold and imported.

Changes to these requirements, such as the International Maritime Organization (IMO) 2020 global Sulphur limits for marine fuel oil, could adversely affect the company’s results by impacting commodity prices, increasing costs and reducing revenues.

Changes to these requirements could adversely affect the company’s results by impacting commodity prices, increasing costs and reducing revenues.

Environmental legislation also requires that wells, facility sites and other properties associated with the company’s operations be operated, maintained, monitored, abandoned and reclaimed to the satisfaction of applicable regulatory authorities.

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The failure to operate as anticipated and adhere to conditions, the delay or denial of approvals and changes to conditions or regulations could impact the company’s ability to operate its projects and facilities and adversely affect the company’s results.

The implementation of, and compliance with, policies and regulations related to air, water and land, such as Alberta’s Lower Athabasca Regional Plan and Wetland Policy, could restrict development in current and future areas of operation.

The implementation of, and compliance with, policies and regulations related to air, water and land, such as Alberta’s Lower Athabasca Regional Plan and Wetland Policy applicable to the company’s oil sands assets, could restrict development in current and future areas of operation.

The company also depends on water obtained under licences for withdrawal, storage, reuse and discharge in both its Upstream and Downstream businesses, including future projects and expansions.

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It also includes a reliance on strategic and regional assessments and adjusted regulatory review timelines.

The impact of this legislation is not yet known, but it may impact the cost, manner, duration and ability to advance large energy projects.

The impact of this legislation is not fully apparent, but it may impact the cost, manner, duration and ability to advance large energy projects.

Compliance with environmental legislation can require significant expenditures and failure to comply with environmental legislation may result in the cessation of operations, imposition of fines and penalties and liability for clean-up

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Future changes in environmental legislation could occur and result in stricter standards and enforcement, larger fines and liability, and increased capital expenditures and operating costs, which could have a material adverse effect on the company’s financial condition or results of operations.

There are operational risks inherent in oil and gas exploration and production activities, as well as the potential to incur substantial financial liabilities, if those risks are not effectively managed.

There are operational risks inherent in oil and gas exploration and production activities, as well as the potential to incur substantial financial liabilities, if the company does not manage those risks effectively.

The ability to insure such risks is limited by the capacity of the applicable insurance markets, which may not be sufficient to cover the likely cost of a major adverse operating event.

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Climate change and greenhouse gas restrictions

Due to concern over the risks of climate change, a number of provinces and the Government of Canada have adopted, are considering the adoption of, or have revised, regulatory frameworks to reduce greenhouse gas emissions.

Driven by concern over the risks of climate change, a number of provinces and the Government of Canada have adopted, are considering the adoption of, or have revised, regulatory frameworks to reduce greenhouse gas emissions or production and use of oil and gas.

These include adoption of carbon emissions pricing, cap and trade regimes, carbon taxes, emissions limits, increased efficiency standards, low carbon fuel standards and incentives or mandates for renewable energy.

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Under the GGPPA, provinces are required to either adopt the GGPPA, or obtain equivalency by adopting a price-based system or cap and trade system.

In December 2020, the Government of Canada proposed to increase the carbon price by $15 per year starting in 2023, rising to $170 per tonne in 2030.

Further, in 2020 the Government of Canada proposed legislation to formalize Canada’s target to achieve net-zero

emissions by 2050 and establish interim emissions reductions targets at five year intervals.

The Government of Alberta has obtained federal equivalency for its Technology Innovation and Emissions Reduction Regulation (TIER) that came into effect in 2020 and applies to facilities with CO2 emissions in excess of 100,000 tonnes per year.

1 unchanged sentence

Further, the Alberta Oil Sands Emissions Limit Act

sets a limit of 100 megatonnes of CO2 per year of emissions in the oil sands sector, but oil sands emissions remain below the limit and it is not yet possible to predict the impact of this act on future oil sands operations in Alberta.

With respect to other provinces, with Ontario cancelling the cap and trade program in 2018, the company’s operations in Ontario are subject to the federal carbon levy and output based pricing system.

British Columbia has carbon pricing in place for all emissions, with pricing currently at $40 per tonne and rising by $5 per tonne in April, 2020 and again in April, 2021.

Although current regulations around carbon emissions pricing are not anticipated to have a material impact on the company’s operations in the near term, uncertainty regarding future regulations make it difficult to predict potential future impact on the company.

There are also various low carbon fuel standards being developed or applicable to the company.

The Government of Canada is progressing draft regulations for the Clean Fuel Standard, which if implemented would require the reduction in carbon intensity of liquid fuels supplied in Canada starting in 2022 and gaseous and solid fuels starting in 2023.

British Columbia has carbon pricing in place for all emissions, with pricing currently at $40 per tonne and rising by $5 per tonne in April, 2021.

Increases in carbon pricing could adversely impact the company’s operations and financial results unless the company can adapt its operations.

There are also various low carbon fuel standards being developed or applicable to the company’s products.

The Government of Canada is progressing draft regulations for the Clean Fuel Standard, which will require the reduction in carbon intensity of liquid fuels supplied in Canada starting in 2022.

The standard is expected to build upon the existing federal renewable fuels regulations that require fuel producers and importers to have a specified amount of renewable fuel in gasoline and diesel.

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Compliance can be achieved by either blending renewable fuels with low carbon intensity or by purchasing credits.

Changes to these standards could adversely impact the company’s operations and financial results.

The Government of Canada recently enacted the Impact Assessment Act

In 2019, the Government of Canada enacted the Impact Assessment Act

, which links environmental assessment approvals to climate change-related goals, and has also discussed a goal of establishing legally-binding policies for being carbon-neutral by 2050.

Changes and policies related to this act could adversely impact the company’s ability to progress new oil sands projects.

International accords and underlying regional and national regulations covering climate change and greenhouse gas emissions continue to evolve with uncertain timing and outcome, making it difficult to predict their business impact.

1 unchanged sentence

Current and pending greenhouse gas regulations or policies may also increase compliance and abatement costs including taxes and levies, increase abandonment and reclamation obligations, lengthen project evaluation and implementation times, impact reserves evaluations and affect operations.

Increased costs may not be recoverable in the market place and could reduce the global competitiveness of the company’s crude oil, natural gas and refined products.

Increased costs may not be recoverable in the market place, could negatively affect our returns and could reduce the global competitiveness of the company’s crude oil, natural gas and refined products.

Governments may also impose restrictions on production of oil and gas to the extent they view such measures as a viable approach for pursuing national and global energy and climate policies.

Concern over the risks of climate change may lead governments to make laws applicable to the energy industry progressively more stringent over time.

Political and other actors and their agents are also increasingly seeking to advance climate change objectives indirectly, such as by seeking to reduce the availability of or increase the cost for financing and investment in the oil and gas sector and taking actions intended to promote changes in business strategy for oil and gas companies.

Prices for commodities produced by the company are commonly benchmarked in U.S.

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Imperial is reliant on a number of key chemicals, catalysts and third-party service providers, including input and output commodity transportation (pipelines, rail, trucking, marine) and utilities providing services, including electricity and water, to various company operations.

The lack of availability and capacity, and proximity of pipeline facilities and railcars could negatively impact Imperial’s ability to produce at capacity levels.

Transportation disruptions, including those caused by events unrelated to the company’s operations, could adversely affect the company’s price realizations, refining operations and sales volumes, as well as potentially limit the ability to deliver production to market.

The lack of availability, capacity or proximity with respect to pipeline facilities and railcars could negatively impact Imperial’s ability to produce at capacity levels.

Transportation disruptions, including those caused by events unrelated to the company’s operations, could adversely affect the company’s price realizations, refining operations and sales volumes.

This includes outages of key third-party infrastructure, such as pipelines servicing the company’s oil sands assets or pipelines supplying feedstock to its refineries, which could impact the company’s ability to operate its assets or limit the ability to deliver production and products to market.

A third-party utilities outage could have an adverse impact on the company’s operations and ability to produce.

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The extent to which Imperial manages these factors will impact its performance relative to competition.

For projects in which the company is not the operator, Imperial depends on the management effectiveness of one or more co-venturers

whom the company does not control.

For projects in which the company is not the operator, Imperial depends on the management effectiveness of one or more co-venturers whom the company does not control.

Project management

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the impact of general economic, business and market conditions;

and respond effectively to unforeseen technical difficulties that could delay project startup or cause unscheduled downtime.

and the company’s ability to respond effectively to unforeseen technical difficulties that could delay project start-up

or cause unscheduled downtime.

Operational efficiency

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and an emphasis on resiliency including business response and recovery.

If the measures the company is taking to protect against cybersecurity disruptions prove to be insufficient, the company, as well as its customers, employees or third parties could be adversely affected.

If the measures the company is taking to protect against cybersecurity disruptions prove to be insufficient or if the company’s proprietary data is otherwise not protected, the company as well as its customers, employees or third parties could be adversely affected.

Cybersecurity disruptions could cause physical harm to people or the environment;

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Imperial’s ability to mitigate the adverse impacts of these events depends in part upon the effectiveness of its rigorous disaster preparedness and response planning, as well as business continuity planning.

As a result of COVID-19,

governments in many countries, including Canada, have mandated quarantines, closures, stay-at-home

orders and travel restrictions that have had a significant impact on demand for the company’s products.

While these effects are expected to be temporary, the resurgence of cases of COVID-19

has led to a highly uncertain business environment.

Although there has been some movement toward pre-pandemic

activity levels, the duration of the business disruptions internationally and related financial impact cannot be reasonably estimated at this time and continued or new restrictions could continue to impact the demand for petroleum products.

Imperial’s future business results, including cash flows and financing needs, will be affected by the extent and duration of these conditions and the effectiveness of responsive actions that the company and others take, including our actions to reduce capital and operating expenses and government actions to address the COVID-19

The impact of COVID-19

could also have an effect on the financial markets and result in an increase to the cost of capital due to risk.

The company’s results will also be affected by any resulting negative impacts on national and global economies and markets from a prolonged decrease of economic activity.

The company has had positive COVID-19

cases, but these cases have not had a material impact on its operations or business.

The company has initiated numerous emergency response and business continuity plans, and a substantial portion of the company’s workforce has implemented remote working arrangements.

However, if the company’s mitigation and response efforts prove insufficient, then large outbreaks of epidemics, pandemics or other health crises such as COVID-19

at operating sites, particularly in remote locations and where work camps are utilized, could materially impact the company’s personnel and its operations, reducing productivity and increasing costs.

The company could also be impacted by disruption to supply chains, methods of distribution and key third-party service providers, which could impact the ability to produce or sell its products, as well as increase the costs associated with its operations and decrease revenues and margins.

pandemic continues to evolve, with changing case numbers and the potential for additional public health restrictions.

Although vaccines are being developed and approved for use, their availability and effectiveness is uncertain, especially in light of the emergence of new mutations of the virus.

The impact of the pandemic remains difficult to predict.

Imperial’s reputation is an important corporate asset.

An operating incident, significant cybersecurity disruption, change in consumer views concerning the company’s products, or other adverse events, such as those described in Item 1A, may have a negative impact on Imperial’s reputation, which in turn could make it more difficult for the company to compete successfully for new opportunities, obtain necessary regulatory approvals, or could reduce consumer demand for the company’s branded products.

An operating incident, significant cybersecurity disruption, change in consumer views concerning the company’s products, or other adverse events, such as those described in Item 1A, may have a negative impact on Imperial’s reputation, which in turn could make it more difficult for the company to compete successfully for new opportunities or obtain necessary regulatory approvals, or could reduce consumer demand for the company’s branded products.

Imperial’s reputation may also be harmed by events which negatively affect the image of the industry as a whole, including public and investor perception of Alberta oil sands in relation to greenhouse gas emissions and environmental impact.

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Legal proceedings

Imperial has elected to use a $1 million threshold for disclosing environmental proceedings.

Mine safety disclosures

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors