Canadian Oil Sands
Background
Oil sands (also known as tar sands) are deposits of bitumen that is converted into crude oil, which is then refined to produce gasoline and diesel fuels. The Canadian Province of Alberta has attracted significant investments in the oil sands sector. According to SHARE, compared to conventional oil extraction, oil sands production is very costly and highly energy and resource intensive, requiring significant quantities of water and natural gas. A combination of higher oil prices, new technologies and increased demand in the United States has made Canada’s oil sands production profitable.
Investor Risks
Air-pollution, a water-intensive mining process and the removal of all surface vegetation thereby affecting Canada’s Boreal forests, present major environmental risks associated with mining the Canadian oil sands. Such mining operations also face considerable opposition from aboriginal communities and could present litigious risks. Finally, regulatory implications flowing from efforts to better manage Canada’s greenhouse-gas emmissions could pose a further risk for investors. Given these considerations, investors are beginning to question the long-term economic performance and shareholder value of oil sands development projects in Canada.
Shareholder Action
A large coalition of investors including pension funds, fund managers, foundations, faith groups and individuals coordinated shareholder resolutions to be discussed at Shell and British Petroleum's 2010 shareholders meetings. The resolutions called on the companies to disclose risks associated with their respective oil sands projects in Canada. According to Fair Pensions, who spearheaded the shareholder campaign, 15% of shareholders either supported the resolution or abstained, despite a strong company recommendation to oppose. At Shell's AGM, 11% of shareholders refused to back management's recommendation to oppose the resolution.