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Shareowners Challenge Shell to Report on Oil Sands Risks

CSRWire.com The Corporate Social Responsibility Newswire

03.16.2010 – 05:17PM

By CSRwire Contributing Writer Bill Baue

Oil or tar: the first term suggests a productive (but polluting) energy source; the second, a sticky mess. This linguistic difference captures the divide between proponents of exploiting Canadian oil sands (or transforming bitumen deposits embedded in sand and clay in Alberta into usable petroleum), and those who question the financial, social, and environmental impacts of what they call tar sands (the term coined in the late 19th Century to describe the pitch-like substance that First Nations peoples had used for years to waterproof their birch bark canoes.)

Shell, for example, promotes its Athabasca Oil Sands Project as a way to navigate the triple bind of rising global energy demand, diminishing supply of “easily accessible oil and gas,” and “[r]emaining within desirable levels of CO2 concentration in the atmosphere,” according to the company fact book on the project. This language echoes the “More Energy, Less Carbon Dioxide” mantra of the Shell Energy Scenarios to 2050 report from late 2008.

However, Lauren Compere of Boston Common Asset Management cites research finding that extracting and refining oil from tar sands produces three times as many greenhouse gas emissions on average than extracting and refining conventional crude oil. When I asked her to compare this fact with Shell’s mantra, she said, “I think it’s not consistent. In terms of investing in low-carbon-intensive energy resources, oil sands are certainly not a strategic move.”

Boston Common is one of more than 140 institutional investors supporting a shareowner resolution asking Shell to report on the strategic risks of Canadian oil sands investments in the face of “future carbon prices, oil price volatility, demand for oil, anticipated regulation of greenhouse gas emissions and legal and reputational risks arising from local environmental damage and impairment of traditional livelihoods.”

In the lead-up to the vote at Shell’s May 18 Annual General Meeting, support for the resolution has been gaining steam. This week, Mercer Investment Consulting (one of the world’s biggest advisors to institutional investors) responded to client demand by taking the “unusual step” of writing to about 120 investment managers asking them how they intend to vote on the Shell oil sands resolution (as well as a similar resolution at BP), according to Responsible Investor. Last week, a cross-party group of Members of Parliament in the UK advocated for their own Parliamentary Pension Fund back the resolution, and last month FairPensions, the advocacy organization coordinating the resolution-filing, launched a campaign urging pension fund beneficiaries to email their fund managers to support the resolutions at Shell and BP. (In the US, many other companies face oil sands resolutions, including ExxonMobil and ConocoPhillips.)

The past couple of years have seen a raft of reports analyzing the financial, environmental, and social impacts of oil sands.

“Compared to other oil sands operators, Shell stood out for the relative carbon efficiency of its projects,” stated a November 2009 report from Northwest & Ethical Investments and Ceres. “It was the only company with targets for absolute emissions reductions, and the company that had most strikingly reduced its absolute global emissions—although this can be attributed partly to a declining production trend over the past several years.”

A July 2008 oil sands report by Trucost advanced similar findings. “Shell has been amongst the leaders at being as efficient as they can as we go toward the harder-to-reach sources of energy,” said Trucost Vice President Cary Krosinsky at the Future Scenarios: Energy & Economy panel discussion that Audubon hosted and Shell sponsored (and I produced/moderated.)

A January 2008 WWF / Pembina Institute report graded Shell in the middle of the pack on emissions intensity, and a laggard on intensity and absolute emissions reduction targets. In the overall ranking in five categories (general environmental management, land, air, water, and climate), Shell received a 37 percent grade (a little above the average 33 percent average) to rank fourth amongst the 10 companies assessed.

Shell is not deaf to stakeholder input. Earlier this year, Shell agreed to assess sustainability performance as a significant part of executive bonus packages in response to requests from shareholders. And the company has hosted webchats on the ShellDialogues.com website on doing business in Nigeria, biofuels, and carbon capture and storage – but not yet on the controversial issue of oil sands.

“Compared to BP, they’ve done a fairly good job of disclosing the operational end of their oil sand projects,” said Lauren Compere. “Ultimately, you’d hope that BP and Shell would look at all of [the material] issues and reset their thinking around the future of oil sands. If it needs to be part of their portfolios, it needs to reflect the true costs involved in that production.”

The unanswered question is whether even the most responsible corporate behavior can mitigate the true costs of social upheaval borne by the First Nations inhabitants (who have filed lawsuits) and environmental destruction absorbed by the earth (which is increasingly signaling it’s reaching and perhaps surpassing its ecological limits).

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