Oilsands needs special reporting rules: Environment, investor groups
Posted by mhudema on September 17, 2008
|Canwest News Service|
Canada’s oilsands industry, already the target this week of a major British investment firm’s campaign against the “climate-hostile fuel,” is now under fire from an international alliance of environment and investor groups, which has urged the U.S. securities regulator to rewrite proposed new rules on reporting petroleum reserves to reflect the “potentially enormous risks” – financially and ecologically – associated with the “carbon-intensive” Canadian energy source.
The latest challenge to the Alberta-based oilsands sector, which has been championed by Prime Minister Stephen Harper as a key part of Canada’s push to become a global “energy superpower”, comes after NDP Leader Jack Layton promised a moratorium on new oilsands developments and three federal parties traded campaign barbs over the controversial resource.
A letter sent last week to the U.S. Securities and Exchange Commission – signed by 19 advocacy organizations and investment companies, including Ontario-based Meritas Mutual Funds – argues the regulator should “pay more careful attention to the implications of climate change and carbon-related regulations before finalizing the new reserves reporting requirements,” which are intended to modernize antiquated rules governing companies’ estimates of how much oil could be extracted from their properties.
“We are concerned that climate change, and policies adopted to combat greenhouse gas emissions, could render certain assets – particularly those with high carbon intensity – uneconomic,” the signatories stated, insisting special reporting rules must be imposed on oilsands because they produce more carbon pollution than conventional oil.
“We do not believe that companies should be allowed to disclose additional oil and gas reserves (other than proved reserves) unless such additional categorical and descriptive information is required, along with any other potential liabilities that could be expected,” concludes the letter, obtained by Canwest News Service. “Unless and until the SEC adopts a strict and diverse disclosure framework, including geographic location and these risks, the current restrictions on including oil and gas reserves from sources that require further processing (e.g. tar sands) should be maintained.”
In June, the SEC announced plans to allow “previously excluded resources, such as oilsands, to be classified as oil and gas reserves.” Deposits of the resource, which require costly inputs of water and energy to extract useable fuel from oil-rich sand as thick as peanut butter, are currently classified by SEC as mining reserves.
“The energy consumption required to extract a barrel (of oil) from the tar sands is very different to a simple barrel of crude from the Gulf of Mexico,” said Elizabeth McGeveran, senior vice-president with U.K.-based investor F&C Management Ltd., which manages about $200 billion in global assets.
“Understanding climate risk will assist investors in understanding and evaluating reserves.”
Meritas CEO Gary Hawton told Canwest News Service that “oilsands operations present considerably higher risks to companies and their investors. We think investors should be made fully aware of those risks,” which he said include financial, environmental, social and “reputational risks.”
But Greg Stringham, vice-president of markets and fiscal policy the Calgary-based Canadian Association of Petroleum Producers, said the SEC petitioners are asking the regulator to “duplicate” reporting data that is already available, in Canada, under federal environmental regulations.
“It’s not necessary that the SEC also collect the same data,” Stringham said, adding that the petitioners “shouldn’t be picking on one fuel” and are lacing their arguments with “potentials and hypotheticals” beyond the purview of the U.S. securities regulator.
“Investors can inform themselves through the government of Canada” about carbon emissions and other costs facing oilsands projects, said Stringham, “as they can with all the other issues associated with biofuels or natural gas production or off-shore (resources). All of that is readily available to the investor, so it doesn’t have to be in the SEC regulation.”
This week, one of Britain’s largest investment companies – ethical funds firm Co-operative Asset Management – launched a campaign to pressure petroleum giants BP and Shell to scale back their plans to exploit Canada’s oilsands.
Widely seen as a future driver of the Canadian economy in a world confronting oil scarcity and premium prices, North America’s oilsands and oil shales have also been targeted by environmentalists as “dirty oil” that produces more carbon pollution than conventional sources, and requires massive inputs of energy and water to extract.
Last week, Layton used an election flyover of an oilsands project in Alberta to highlight “toxic” environmental impacts and to promote his party’s moratorium policy.
The proposal was lambasted Saturday by Conservative Leader Stephen Harper, who accused the NDP of trying to “shut down a big chunk of Canada’s oil industry, the oilsands.”
The Liberals’ natural resource critic, Omar Alghabra, has argued the oilsands should be seen as an “asset, not an enemy,” but the party’s centrepiece Green Shift proposal has been denounced by Harper as an attack on Western Canada’s energy industry.