US Securities and Exchange Commission Pressed on Oil Reserve Disclosures
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Thursday, 11 September 2008 |
Leading investors including F&C Asset Management have
joined forces this week with environmental and non-profit groups
to encourage the US Securities and Exchange Commission to request that
oil and gas companies' factor in the carbon impacts of future barrels
when accounting for their reserves.
The influential US regulator is currently considering new proposals for
the way in which oil and gas companies report their reserves to try and
create more internationally consistent standards of reporting. In
particular, the technologies utilised for oil reserve estimations have
evolved significantly in recent years and oil and gas companies listed
in US exchanges are now far more dependent on external reserves than
they were when the rules were originally drafted.
In their letter, F&C and its co-filers argue that climate change
and policies being developed to reduce carbon emissions could over time
render certain assets uneconomic - particularly those which require
high carbon emissions as part of their extraction processes. They
therefore argue that in reporting their reserves, oil and gas companies
should be required to assess the carbon impact of future barrels, not
just the number of barrels a company may have.
Elizabeth McGeveran, senior vice president in F&C's governance and
sustainable investment team, explains: "As investors in oil and gas
companies it is important for us to be able to assess the risk profile
of reported reserves to factor in the costs of carbon emissions,
particularly as global policy frameworks begin to change. For
example, the energy consumption required to extract a barrel from
Canadian tar sands is very different to a simple barrel of crude from
the Gulf of Mexico. Understanding climate risk will assist investors in
understanding and evaluating reserves."
"SEC regulations already require the disclosure of known trends that
companies can reasonably expect will have a material impact on net
sales, revenues or income from continuing operations," added McGeveran,
"and we believe that the disclosure of any estimated additional risks
posed by the extraction and development of additional reserves will be
important."
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