April 18, 2010
The Next Low Hanging Fruit: The Canadian Tar Sands Oil
Accountability & Transparency Trends
At a recent book launch on NGO strategies for engaging business by Resources For the Future, a Washington D.C. policy think tank, there were frequent references to the so-called “low hanging fruit” strategy used by environmental advocacy groups to create momentum for their causes. NGOs aim to act in places where they know they can get a response or a change in behavior without consuming a large amount of resources. The newest target may be the annual meetings of BP and Shell, and the issue at hand is the exploration of the tar oil sands in Alberta, Canada.
Currently, there are large known reserves in Canada and in Venezuela. Oil sand exploration in Canada makes an attractive target for NGOs because Canadians are generally sympathetic towards environmental causes and often support environmentally oriented initiatives and regulations. Tar sands or oil sand fields are deposits of heavy oil that require more work, in relation to crude oil, when transformed into a consumable petroleum product, such as gasoline. The viscosity of the initial product makes the exploration of those areas more difficult as it is usually necessary to inject solvents or hot air to extract it. It is estimated that this process emits 10 to 45 percent more greenhouse gases in comparison to the exploration of regular crude oil. Although it costs more to extract usable oil from tar sands, at the current price of oil it is economically lucrative to exploit these areas.
One key tactic devised by environmental NGOs is to pressure companies at their shareholder meetings, introducing resolutions aimed at putting a price on the environmental and social costs of the tar sands exploration. BP holds its annual meeting on April 15; Shell’s is a month later. The strategy of utilizing investors to change corporate behavior is being coordinated by FairPensions , a UK based organization that specializes in what it calls “responsible investment in the pensions industry.” It is attempting to mobilize pension fund shareholders to vote on resolutions that would require a re-evaluation of BP’s policies and the environmental impacts that the exploration could have on the area. They have gathered the support of 14 NGOs.
The Financial Times reports that an influential organization of British municipal pension funds, the Local Authority Pension Fund Forum , which was expected to be sympathetic to the protest, has resisted pressure and is supporting BP’s exploration and mining plan. It says it considers BP’s approach towards the oil sand development project well-grounded. RiskMetrics , a leading investment advisor that focuses on fiduciary, rather than social, responsibility also supports BP’s plans on Canadian oil sands, informing their investors to vote against the NGO-backed resolution. Another supporter of the exploration of the tar sands, the Canadian Association of Petroleum Producers , has launched a website to engage the public on its perspective. The initiative is aimed at promoting awareness of the environmental mitigation efforts already employed in the exploration of the region. The government of Alberta is also involved in a similar initiative to advance knowledge of the state of production of oil sand. They conducted surveys to assess public opinion about the exploration of the oil sands and its environmental impacts. The survey showed that the public is at the same time supportive of the exploration and development of the tar sands and concerned with the environmental impacts and sustainability of the project, mainly about the potential for air pollution and greenhouse gas emissions.
The economic potential of these projects may be the ultimate determinate of whether and how extensively the oil sands are explored and exploited. The size of the oil reserves makes exploration extremely important to the economic health of Alberta, Canada and North America. The production of tar sand oil is used to provide a considerable portion of the energy demands of the American market and the non-exploration of it could mean the need to seek for dirtier and less stable sources of oil. If the US does not recognize the importance, there are Chinese companies eager to do so. Earlier this week, Chinese oil giant Sinopec announced it will pay more than $4.6 billion to ConocoPhillips to buy its 9% share of Syncrude, the largest of the Canadian oil sands producers.
Frederico Ferreira is a Spring researcher at the American Enterprise Institute
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