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Report Warns Oil Sands Investors of Toxic Wastewater's Financial Risk

Government Mandated Clean-Up Could Wipe Out Earnings of Biggest Producer

By David Sassoon

Mar 3, 2010

For example, the cost to Exxon and Chevron of cleaning up their waste water — based on 2007 production levels — would amount to three-tenths of one percent of net income in the high-cost scenario.

The analysis, in essence, shows that the super majors have a financial edge in oil sands development moving forward. They can absorb the increased costs on their balance sheets and income statements without causing concern among shareholders. The smaller, pure-play oil sands producers, like Suncor, Imperial Oil and the Canadian Oil Sands Trust, will face the greatest risk of stock valuations being negatively impacted by compromised earnings or balance sheets that are over-leveraged.

The RiskMetrics quantification may present good news for environmental advocates. The analysis demonstrates that the sector as a whole can accomplish the massive clean up using bioremediation, the most effective technology, without roiling financial markets and spooking shareholders.

The report also makes clear that the clean-up is vital for the oil producers, as well. The oil sands industry — one of the largest energy development undertakings on the planet — will collapse unless the region's water supply is protected from both overuse and toxic pollution.

The Athabasca watershed, already compromised by oil sands development, cannot tolerate the extraction of almost five million of barrels of fresh water that the Canadian Association of Petroleum Producers estimates could be needed every day for mining operations alone by 2014, the report states. It would exceed the withdrawal limit currently imposed by the environmental regulator. The river provides the lifeblood of one of the largest watersheds in the world, spanning 36,000 square miles of Canadian wilderness, and the oil sands industry is equally dependent upon the natural resource.

Oil sands producers have also been under growing international pressure to lower the outsized of their unconventional oil extraction. The oil sands are the primary reason Canada is failing to honor its Kyoto commitment to reduce its greenhouse gas emissions and instead has substantially increased them.

Last month, shareholders of both BP and Royal Dutch Shell for consideration at upcoming annual meetings, asking for a review of the financial risks posed by oil sands development. A coalition of unions, pension funds and faith groups fear the impact of carbon costs and reputation damage from environmental degradation will be high.

The RickMetrics analysis indicates that waste water clean-up is a more material financial issue than greenhouses gases.

Battle for World Opinion

The waste water issue has been one major reason the oil sands industry has suffered in the battle for world opinion. The tailings ponds drew global attention in 2008 when more than landed on a toxic pond at one of mines, became coated in oil and mining waste and died. The company is now on trial for allegedly violating Alberta's Environmental Protection and Enhancement Act. The deaths also underscored for the public just how dangerous the water is: It is contaminated by phenols, arsenic, mercury, carcinogens such as polycyclic aromatic hydrocarbons and naphthenic acids.

The oil sands industry had assumed these compounds would settle out of the water, and about 35 percent of the particles do end up on the bottom of the ponds within three to five years; but most of the toxic pollution remains suspended in the water as fine tailings which take decades to settle unless they are treated, Reuter said.

bollywood

this company is not providing good servises,

slowly but surely

It seems that there are fixes for the tailings ,but it would put a lot of people out of work, and that bwould be the end of the pumps,ponds, pipes. We are working on a licencing agreement with a fella that has a product that works extremely well in seperating immediately the fines in the tailing pond mix. He has shown all of the top producers how it works, and all that they have done is try to reverse formulate the secret remedy for themselves. Instead of purchasing or licencing the product so that that werent any tailing ponds period. As soon as i have an licencing agreement in placed i will atttempt to go back and bring Native People of the Areas with me for demonstrations that work.we have a system set up with one of the tarsands producers now and are reclaiming 225 brls of sop oils.

"The report shows a handful

"The report shows a handful of companies to be at a financial disadvantage because of their exposure to waste water remediation liabilities." It is obvious that if the companies have not taken the social and environmental liabilities into account, they will be exposed to financial loses due to the lack of their farsightedness. But, for the prudent, it would be a normal company affair.

The company should have

The company should have taken in to account the costs from toxic waste water liabilities in their company's balance sheets to preempt the risk of the financial loses. Though the size of the company does matter in meeting such liabilities, It would have been an avoidable crisis, had proper budgetary rules been followed. However the company should start taking corrective measures to face the crisis.

It would be really

It would be really interesting to see this report somewhere online. I will try to ask RiskMetrics as David suggested. Of course it is nice that possible investors are warned. There are many problems with toxic materials and rivers, seas and oceans. I remember reading about one company which have made many mistakes regarding toxic waste in continental waters. I think that everybody knows that situation near the Mexico when oil had gone in the water of the ocean. I just hope that all those processes which make dirt will stop someday. We must save our climate. Thanks for the nice article by the way. Without you I would never known that such a report exists. Oh and I will be waiting for more nice ones from you in the nearest future too.

It seems that there are

It seems that there are fixes for the tailings ,but it would put a lot of people out of work, and that bwould be the end of the pumps,ponds, pipes. We are working on a licencing agreement with a fella that has a product that works extremely well in seperating immediately the fines in the tailing pond mix. He has shown all of the top producers how it works, and all that they have done is try to reverse formulate the secret remedy for themselves. Instead of purchasing or licencing the product so that that werent any tailing ponds period. As soon as i have an licencing agreement in placed i will atttempt to go back and bring Native People of the Areas with me for demonstrations that work.we have a system set up with one of the tarsands producers now and are reclaiming 225 brls of sop oils.

It seems the full report

It seems the full report itself is not publicly available? Just the Powerpoint presentation and the one hour webcast. Is this impression correct, and will the report remain private?

We heard the webcast and

We heard the webcast and subsequently requested the full report, and RiskMetrics obliged. I suggest you ask RiskMetrics directly whether they plan to publicly post the full report.

BP and Shell investor revolt over tar sands

The resolutions mentioned (shareholders of both BP and Royal Dutch Shell filed resolutions for consideration at upcoming annual meetings, asking for a review of the financial risks posed by oil sands development) are trying to get BP and Shell to report on the risks of tar sands, including those arising from pollution.

There is now an online facility available to take action at:

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