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Monday, February 18 , 2019, 1:23 am | Fair 48º


Letter to the Editor: Oil Conglomerates Failing to Disclose Risk to Investors

Several disclosures by environmentally-conscious and corporate-savvy organizations are bringing to light the failure of giant oil/gas companies to inform their investors of climate-related risks to which their activities are subject.

The U.S. Securities and Exchange Commission requires public companies to disclose to investors risks that might affect the value of their shares. But news from the Union of Concerned Scientists, the environmental organization Climate Progress and corporate-watch CSRwire posit that many of the most prominent fossil fuel companies have not been disclosing to their investors obvious risks that their activities entail.

In a recent report, “Stormy Seas, Rising Risks”: The Union of Concerned Scientists focused on five oil refiners in the United States: Valero, Phillips 66, Exxon Mobil, Marathon Petroleum and Chevron: “Refineries are critical components of the U.S. Energy system, and they are especially vulnerable to climate change impacts ...” for many reasons that the complete report spells out.

A UCS memorandum to members states that the report's contents, detailing the environmental risks faced by these companies, were “powerful enough that after we shared [it's] findings two of the companies, Phillips 66 and Chevron, rushed to insert language into SEC filings that discuss risk from the physical impact of climate change. ... and Phillips 66 investors who had read the full report successfully added a resolution requesting greater disclosure of the company's climate change risks to the agenda of their next shareholder meeting.”

The organization Climate Progress reveals that the conservation group Oceana and a University of Chicago law clinic have filed a petition with the SEC “requesting that the agency launch a formal investigation into [Royal Dutch] Shell’s risk disclosures to shareholders relating to its activities in the Arctic Ocean.”

The petition claims “If Royal Dutch Shell’s Arctic drilling program leads to a major spill, it could cost the oil company — and therefore its shareholders — an entire year’s worth of profit, … But the company’s investors are not aware of that risk.”

“In December 2012, Shell’s drill rig Kulluk broke its tow line and ran aground near Kodiak, Alaska in an accident that the Coast Guard attributed mainly to the company’s 'inadequate assessment and management of risks.'” (CP)

The Department of Interior's Assessment of the company's behavior stated, “Shell's difficulties have raised serious questions regarding its ability to operate safely and responsibly in the challenging and unpredictable conditions [of] offshore Alaska.”

But - promises, promises -a permit for further Arctic drilling was issued to the company anyway.

In any case, Shell is not about to accept lectures on its investor responsibility.

“'Shell is satisfied its disclosures comply with SEC’s legal requirements,' said Shell spokesman Curtis Smith … 'a very unlikely spill in the Arctic would not be financially material to Shell, due to the prevention and response measures the company has taken.'”

A spill in the Arctic would not be financially material!!??

“According to a recent analysis from the Department of Interior, there is a 75 percent chance of a spill greater than 1,000 barrels should an oil company like Shell discover and fully produce oil in the Chukchi leases.” (CP)

CSRwire, “The Corporate Social Responsibility Newswire” (Aug. 2, 2012): “A new Ceres report says that investors … aren’t getting a clear picture from companies of just how deep the material risks to these investments are.

“The report, 'Sustainable Extraction? An Analysis of SEC Disclosure by Major Oil & Gas Companies on Climate Risk and Deepwater Drilling Risk,' tracks SEC-mandated disclosure on those risks by 10 of the world’s largest publicly-owned oil and gas companies. ...

“The report’s findings are worrying: No company surveyed provided high-quality reporting of the wide-ranging risks they face from deepwater drilling or climate change, and how they’re managing these risks.

“Companies evaluated in the … report were Apache, BP, Chevron, ConocoPhillips, ENI, ExxonMobil, Marathon, Shell, Suncor and Total. The report finds that BP, ENI and Suncor provided relatively better climate risk disclosure than others in the report — Apache, Marathon and ExxonMobil had the weakest disclosure — but that out of an aggregate 60 separate climate disclosure scores just five were good, while 34 (57 percent) were either poor or “no disclosure.”

So once again we see the big boys in oil/gas conducting business as usual, adding to the world's environmental, health and safety dangers while keeping their mouths shut to their investors as to the financial risk the money providers are taking.

Of course this all plays directly into the rationale for the spreading fossil fuel divestment campaigns, who are convincing more and more organizations, pension funds and individuals that putting money into these climate-busters, and climate-denier-liars, is not only immoral, but — proper notice of risk or no — a huge gamble of financial disaster-causing disappearance of value.

William Smithers
Santa Barbara

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