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May 2008

Vol. 13, No. 20 Week of May 18, 2008

Shareholders vote against drilling study

ConocoPhillips shareholders voted against studying effects on Teshekpuk Lake in NPR-A; support dropped slightly from last year

Eric Lidji

Petroleum News

Sixty-two percent of ConocoPhillips shareholders voted against asking the company to study the environmental effects of oil and gas development at Teshekpuk Lake, according to preliminary results from an annual shareholders’ meeting in Houston on May 14.

Even with those numbers, though, the shareholder advocacy group responsible for the proposal considers the results encouraging, as 22 percent of those present at the meeting voted in favor of the proposal.

“For the third year in a row, more than 20 percent of ConocoPhillips shareholders voted in favor of asking the company to recognize and potentially stay out of drilling in this sensitive part of Alaska,” said Erin Grey, head of marketing for the Boston-based investment firm Green Century Capital Management, Inc.

Green Century Capital maintains a mutual fund portfolio of companies it considers environmentally responsible, but also uses its position as a shareholder in major companies like ConocoPhillips to push specific issues related to the environment, including “wilderness preservation and biodiversity.”

Together with the Sierra Club, Green Century Capital submitted a proposal to ExxonMobil shareholders this year asking the company not to drill in the coastal plain of the Arctic National Wildlife Refuge.

The Sierra Club and Green Century Capital submitted the Teshekpuk Lake proposal as part of ongoing efforts with ConocoPhillips. Green Century Capital submitted similar proposals to ConocoPhillips shareholders the past two years, and both times received greater support for the idea, around 27 percent of the vote, Grey said.

“We still think it is an extremely strong message and signal,” Grey said about the results of the May 14 vote.

Grey expects Green Century Capital will present a similar proposal next year.

Proposal would have asked for report

The proposal asked ConocoPhillips to report on “the potential environmental damage” of drilling in those parts of the National Petroleum Reserve-Alaska set aside in 1998.

The area covers around 600,000 acres of the Northeast Planning Area of the reserve around Teshekpuk Lake, and over the past decade has been a point of contention between environmental groups and the federal government.

Following the Energy Policy Act of 2005, which pushed for more domestic sources of oil production including Alaska, the Bureau of Land Management amended the 1998 decision to include the area around Teshekpuk Lake for future oil and gas drilling, pending environmental studies of the area.

Many consider the area to be a critical habitat for wildlife and subsistence resources in the Arctic. A coalition of environmental groups took the federal government to court over the decision, forcing the BLM to conduct more research and cancel planned lease sales.

In August of last year, BLM released a draft of a supplemental environmental impact statement for the Northeast Planning Area, keeping Teshekpuk Lake on the table, but not recommending it as the preferred path for developing the area.

ConocoPhillips didn’t like proposal

The ConocoPhillips board of directors asked shareholders to vote against the Green Century Capital proposal, saying the report would not be “a beneficial use of Company resources.”

That’s partially because the future of Teshekpuk Lake remains uncertain. Federal authorities don’t plan to make final decisions about development options for the region until later in the year.

That means any lease sale for Teshekpuk Lake would probably come under a new presidential administration, and none of the major candidates remaining in either party share the Bush administration’s interest in drilling for oil and gas in Alaska.

ConocoPhillips also recommended against the proposal because the company believes it has a “history of operating in sensitive areas around the world in a responsible manner.”

Shareholder votes serve only to recommend

Among other environmental issues at the annual meeting, 59 percent of shareholders voted against setting goals for greenhouse gas emissions, 76 percent of shareholders voted against requiring ConocoPhillips to prepare an environmental accountability report in communities where the company operates and 81 percent of shareholders voted against preparing a report on global warming.

Shareholder votes on proposals like the one concerning Teshekpuk Lake serve as recommendations, but do not force the board of directors to take specific actions.

ConocoPhillips will include final voting results from the meeting in its second quarter filings due later in the year.






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