The latest research from SHARE examines how reclamation liabilities have the potential to impact expenditures, the value of assets, access to capital, and overall financial condition of companies
A new report by the Shareholder Association for Research & Education (SHARE) raises questions about liabilities associated with management of tailings ponds in Alberta oil sand mining operations, as well as the regulatory regime that governs them.
“The uncertainty around oil sands tailings reclamation creates regulatory, reputational, and litigation risks for investors. For investors and other stakeholders, the biggest unanswered question is how reclamation obligations will be met – and by whom,” said Kevin Thomas, CEO of SHARE, about the organization’s latest issue brief Canada’s oil sands tailings reclamation: an unfunded liability?
“The large discrepancy in estimates of the cost of liabilities, coupled with weak discussion of risks in company filings, suggests that oil companies have not considered the full costs and the evolving nature of the risks associated with tailings pond reclamation,” he said.
Oil sands tailings pose ongoing environmental and social impact concerns including waste seepage, harmful emissions, and impacts on Aboriginal and treaty rights. Under current government legislation, land used for oil sands mining must be returned back to how it was before development, through a process called reclamation. To date, only 0.1% of land disturbed by oil sands mining has been certified as reclaimed.
Financial liabilities for oil sands mining could be as high as $130 billion, whereas companies’ calculations of their own mining liabilities add up to only $28 billion.
“From a public risk perspective, the Alberta government currently only holds less than $1 billion in liability security from oil sands companies through its Mine Finance Security Program, leaving the vast majority of reclamation costs hanging in the balance,” said Thomas.
“From a private risk perspective, one of the most important factors for investors to consider is the nature of the liabilities associated with tailings reclamation and how well companies are recognizing and managing these liabilities. Reclamation liabilities have the potential to significantly impact expenditures, the value of assets, access to capital, and the overall financial condition of a company, yet these liabilities are not sufficiently understood or reported,” said Thomas.
Read the Issue Brief here:
About SHARE (Shareholder Association for Research & Education)
Since 2000, SHARE has built a community of values-driven investors who are committed to amplifying their voices in support of a sustainable, inclusive and productive economy. SHARE is the leading non-profit investor voice on human rights and responsible investment in Canada, representing a growing network of institutional investors with more than $23 billion in assets under management. SHARE provides proxy voting analysis, shareholder engagement, education, policy advocacy, and practical research. SHARE’s clients include pension funds, mutual funds, foundations, faith-based organizations and asset managers across Canada.
Notes for Editors
Interviews available with Kevin Thomas, SHARE CEO
Damon van der Linde
Shareholder Association for Research and Education