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Royal Bank of Canada Oil Sands Risk 2011

WHEREAS:  RBC’s  2009  Environmental  Blueprint  believes  that  “preservation of  the environment  is  fundamental  to  the  sustainability  of  our  communities,  our clients and our company."
 
This  document  recognizes  that  “it  is  of  vital  importance  that  we  all  contribute to  efforts  to  reduce  greenhouse  gas  emissions”  and  that  “the  identity,  cultural beliefs  and  economies  of  some  indigenous  peoples  are  intrinsically  tied  to their  region’s  history,  biodiversity  and  natural  landscapes”  and  that  “financial institutions  should  play  a  role  in  supporting  efforts  to  address  global  water issues.”
 
Notwithstanding these policy commitments, RBC is among the largest financiers of  companies engaged  in  oil  sands  operations  in  the  Canadian  boreal  forest region.  Oil  sands  extraction  presents  a  unique  set  of  resource-intensive environmental challenges, including  heavy  water  use,  land  disturbance,  toxic waste  storage,  and  emission  of  air  pollutants.  These  impacts,  along  with their implications for local residents and wildlife, can introduce market risks and legal, regulatory and reputational problems to bank clients.
 
These impacts and risks include:
 
  • Alberta’s  oil  sands  are  Canada’s  fastest  growing  contributor  to  global warming  emissions,  and  the  largest  emitter  of  industrial  pollutants.  Cumulative greenhouse gas emissions (GHGs) from Alberta’s oil sands are increasing fast. They  more  than  doubled  between  1990  and  2008,  and  if  growth  proceeds  as planned, will triple from 2008 levels by 2020.
  • Volatile  oil  prices  and  changing  oil  demand  can  impact  operational  costs, income and overall financial health.
  • Industrial logging and oil sands have reduced the boreal to less than 40% of its original size;  the  remaining  forest  is  fragmented,  with  harmful  impacts  on  many species. According to the Canadian Parks and Wildness Association, it will take more than 300 years before reclaimed areas become functioning forest again.
  • The  industry  has  not  proven  that  full  reclamation  of  toxic  tailing  ponds  is possible.  The  long-term  presence  of  these  ponds,  which  have  been  shown  to leak toxic pollutants into local water sources, presents additional challenges.
  • Extracting one barrel of bitumen requires 2-5 barrels of fresh water and enough natural gas  to  heat  a  Canadian  home  for  1.5-5.5  days;  four  tons  of  earth  are removed. While processed sand must be replaced and the site reclaimed, in 40+ years from the Canadian government.
  • Litigation  from  First  Nations  presents  possible  problems  to  clients engaged in oil sands  extraction  and  related  infrastructure,  which  may  result in increased costs and  restrictions  on  development.  Even  after  approved,  a project can  be subject to lawsuits.
 
RESOLVED: Shareholders request that an independent committee of the Board prepare  a  report (at  reasonable  cost  and  omitting  proprietary  information)  on the  financial risks  associated  with  RBC’s  financial  exposure  to  expanding  oil sands operations  in  the  Canadian  boreal  forest.  The  report  should  consider the implications  of  a  policy  of  discontinuing  these  relationships  and should  be available to investors by October 1, 2011.