Environmental Protection

Ceres Report: Oil Sands Face Greater Risks than Gulf Spill

A new Ceres report released May 17 shows that the environmental and financial risks of producing oil in Canada's vast oil sands region may be even greater than those from the Deepwater Horizon spill in the Gulf of Mexico.

According to a company press release, $200 billion in funds have been committed to Alberta's oil sands from the world’s leading oil producers, including BP, ExxonMobil and Shell. However, these producers face numerous environmental, production and distribution challenges that will grow as the oil sands industry pushes to boost production amid tighter regulations and resource constraints, concludes the Ceres-commissioned report authored by RiskMetrics Group. Oil sands companies in Alberta are already producing 1.3 million barrels a day, and their goal is to triple production by 2030.

"The risks for companies involved in developing Canada's oil sands are arguably greater than those in the Gulf of Mexico," said Ceres president Mindy Lubber, whose group commissioned the report, Canada's Oil Sands: Shrinking Window of Opportunity. "The energy-and water-intensive nature of oil sands, combined with climate change regulations, permitting obstacles and other challenges, are a recipe for diminishing revenues and returns if not properly managed."

The report recommends that oil sands companies move quickly to examine and respond to these multiple challenges facing the industry, and that investors press the companies for such action, too. Investors have already filed shareholder resolutions on the oil sands topic with Royal Dutch Shell, ExxonMobil, BP and ConocoPhillips. The Shell resolution will be voted on May 18 at its annual corporate meeting in London. ExxonMobil’s shareholder resolution is up for a vote on May 26.

“Investors need to question whether this is a wise use of resources,” says Doug Cogan, a report co-author and director of climate risk management for RiskMetrics Group. “The oil sands process takes natural gas — the cleanest-burning and lowest-carbon fossil fuel — to turn one of the dirtiest and highest-carbon fuels into a saleable product. Large volumes of freshwater are also consumed in the process and end up in toxic tailings ponds. It’s like the Gulf of Mexico spill, but playing out in slow motion. From a climate and ecological perspective, we’re really no better off.”

The report specifically recommends that oil sands producers:

  • review the lasting impact of their proposed development plans and pursue more proactive, incremental strategies to manage environmental and social risks;
  • provide guidance for assumed oil, natural gas and carbon prices in future production forecasts;
  • do a better job of articulating to community groups and other stakeholders their strategies for land use planning, water management and carbon mitigation;
  • disclose information from these more detailed evaluations to investors; and
  • develop stronger ties with the U.S. biofuels industry both for speeding up development of advanced biofuel capacity and sharing existing infrastructure, such as oil sands pipelines that already feed into the Midwest.

Ceres is a coalition of investors, environmental groups and other public interest groups working with companies to address sustainability challenges such as climate change. Ceres also directs the Investor Network on Climate Risk, a network of 90 institutional investors with $10 trillion of collective assets focused on the business impacts of climate change.

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