Shareholders Vote on BP’s Plan to Move into Canadian Oil Sands

Reporting from London

Activist shareholders lost their bid today to force oil giant BP to disclose detailed information about the risks associated with investing in the energy-intensive Canadian oil sands. Still, they chalked up a significant victory in the company’s response to their effort.

For the first time, BP disclosed information regarding the expectations of demand for tar sands oil and future regulations on carbon emissions that the company used when deciding on the viability of a planned $2.4 billion joint investment with Husky Energy in the Sunrise oil sands field in Alberta.

Special Resolution No. 25, presented to shareholders at BP's annual meeting today in London, asked that BP go farther and commission reports reassessing its decision to proceed with the oil sands project, including looking at the projected price of carbon under potential international climate change treaties and other legislation and at fluctuations in the price of oil.

Supporters of the resolution — including the managers of the multibillion-dollar California state pension funds CalPERS and CalSTRS — worry that oil derived from the tar sands could become more costly with increasing regulation of greenhouse gases and tariffs placed on high-carbon fuels, such as those proposed in California.

“The oil sands are an expensive business — we are asking for relatively innocuous disclosure and transparency,” said Niall O’Shea, head of responsible investing at The Co-operative Asset Management group and a BP shareholder who filed the resolution.

“A company with such expertise and wealth should be innovating in the right direction [with investments in clean energy].”

Just over 6 percent of shareholders voted in favor of the resolution. An additional 9 percent abstained, taken as a sign by some of opposition to the Sunrise project but a reluctance to vote against management.

BP Chairman Carl-Henric Svanberg still recognized the shareholders concerns, telling the meeting:

“This resolution raises perfectly legitimate concerns — I understand the concerns, but I disagree with the analysis.

“The decision to move into the sands is a strategic one — most analysts think it is a stretch to think we can meet future energy demands without fossil fuels, we will need at least 50 million barrels a day of new oil.”

The Problem with Bitumen

The oil sands deposits in northern Alberta are the second largest reserve of oil in the world, behind only Saudi Arabia, and the main reason that Canada is the largest supplier of foreign oil to the United States.

A low-grade mix of bitumen, sand and rock lying beneath northern boreal forest, the oil sands cover an area roughly the size of Florida. About 3 percent of this area has been developed, and this region is considered by many to be the largest industrial project in the world.

Large quantities of water — two to four barrels of water per barrel of oil — is required to isolate crude oil. This water, left with high levels of heavy metals such as mercury and cadmium as well as petrochemicals like polycyclic aromatic hydrocarbons, is collected in large “tailings ponds” covering more than 50 square kilometers. A recent report from RiskMetrics Group warned that new Canadian laws that will require cleanup of those toxic ponds could put a serious dent in the corporate bottom line.

The carbon intensity of oil sands extraction has also brought the region under scrutiny for its impact on climate change. According to WWF, if fully exploited, it would generate enough carbon dioxide emissions to raise atmospheric levels by 12 parts per million.

“This would result in temperature rise of six degrees Celsius and lead the planet into catastrophic climate change,” Louise Rouse, director of investor engagement with FairPensions, told the board.

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