Mining, Crude-Oil Production Sector

1 J. Emil MorhardtPacific Sustainability Index Scores2007 mining , Crude-Oil Production Sector AnalysisElgeritte AdidjajaWilliam P. AlstonKathryn Ann BaxendaleMaureen Shulamith GolanKathleen M. HarrisSelene IsaacsonMelissa ItsaraJessica LewisPeter Gregory WeisbergElicia WhittleseyContentsCompany Rankings SummaryDirector's Foreword The Pacific Sustainability Index in a Nutshell Scoring Criteria Environmental Intent Element of the PSI Scores Environmental Reporting Element of the PSI ScoresSocial Intent Element of the PSI ScoresSocial Reporting Element of the PSI ScoresEnvironmental Scores Ranking social Scores RankingSummary of Depth of Environmental Topic DiscussionSummary of Depth of social Topic DiscussionVisual Cluster Analysis Relationship between overall PSI Score and Companies' Economic IndicatorsEndorsements of World's Sustainability GuidelinesCompany Rankings based on the Number of goals ReportedCompany Rankings

2 Based on the Better Performance ReportedCompany Rankings Based on the Number of Preferable Performance ReportedAnalysts Comments, alphabetically listed by company nameRoberts Environmental CenterClaremont McKenna College345789101112131415161718202122232 4 PageThe Roberts Environmental Center publishes analyses of corporate environmental and social reports together called sustainability reports on the web and in special reports. We also write books about environmental and sustainability reporting, the first of which is Clean, Green, and Read All Over: Ten Rules for Corporate Environmental and Sustainability Reporting, available from ASQ Press, and publish articles in academic technical of our Sector reports are available for free download at Printed copies are available for purchase from the same (2007)Chemicals (2004, 2006, 2007)College and Universities (2006)Computer, Office Equipment, and Services (2007)Consumer Food, Beverages, Food Production (2005, 2007)Electronics, Semiconductor, and Peripherals (2004, 2006)Energy (2005, 2006)Entertainment (2007)Forbes 25 Largest Private and Public Companies (2007)Food Services (2007)Forest and Paper Products (2005, 2007)Fortune 1000 Companies in California (2007)General Merchandisers (2007)Homebuilders (2007)Industrial and Farm Equipment (2006)Metals (2006) mining , Crude-Oil Production (2006, 2007)Motor Vehicles and Parts (2004, 2006)

3 Oil and Gas Equipment and Services (2007)Pharmaceuticals (2004, 2006, 2007)Petroleum and Refining (2004, 2007)Railroads (2007)Scientific, Photo, and Control Equipment (2007)Questions should be addressed to:Dr. J. Emil Morhardt, Environmental CenterClaremont McKenna College925 N. Mills Ave. Claremont, CA 91711-5916, USAD irect line: (909) 621-8190 Elgeritte Adidjaja, Research Fellow: (909) secretaries: (909) mining , Crude-Oil Production Industry ReportThe goal of corporate report analysis conducted by the Roberts Environmental Center is to acquaint students with environmental and social issues facing the world s industries, and the ways in which industry approaches and resolves these issues. The data presented in this report were collected by student research assistants and a research fellow at the Roberts Environmental Center. Copyright 2007 by J.

4 Emil Morhardt. All rights Environmental and Sustainability ReportingOverall GradeRoberts Environmental CenterClaremont McKenna CollegeCompany RankingsMining, Crude-Oil Production SectorThis report is an analysis of the voluntary environmental and social reporting of companies on the Fortune Global 500 and Fortune 500 mining , Crude-Oil Production Sector lists. Data were collected from corporate websites during the initial analysis period (dates shown below). A draft Sector report was then made available online and letters were sent to all companies inviting them to review the analysis, to identify anything missed by our analysts, and to post additional material on their websites if they wished to improve their scores. Seven of the 26 companies responded, six increased their scores, but only three improved their 25 50 75 100Ch esap eake En erg y CorpOil and Natural Gas CorporationAlpha Natural ResourcesPogo Producing d -Clif f sEOG ResourcesSurgutneftegas, OjscAp ach e Corp orationNewfield Exploration Energy CompanyNob le En erg yPeab od y En erg yXTO Energy IncAn ad arko Petroleu mCon sol En erg yDevon Energy CorpPion eer Natu ral Resou rcesRAGF reeport-McMoRan Copper and Gold Coal, In MiningBHP BillitonRio T in to Grou pOccid en tal Petroleu mAn g lo Am ericanEnCanaEnCana (Canada)A+Anglo American ( )AOccidental Petroleum ( )B+Rio Tinto Group ( )B+BHP Billiton (Australia)BNewmont mining ( )C+Arch Coal, Inc.

5 ( )C+Freeport-McMoRan Copper and Gold Inc. ( )C+RAG (Germany)CPioneer Natural Resources ( )CDevon Energy Corp ( )CConsol Energy ( )C-Anadarko Petroleum ( )D+XTO Energy Inc ( )D+Peabody Energy ( )D+Noble Energy ( )D+Massey Energy Company ( )D+Newfield Exploration Co. ( )DApache Corporation ( )DSurgutneftegas, Ojsc (Russia)DEOG Resources ( )DCleveland-Cliffs ( )DPogo Producing Co. ( )DAlpha Natural Resources ( )D-Oil and Natural Gas Corporation (India)D-Chesapeake Energy Corp ( )D-11/20/20066/25/20078/20/200711/20/200 7throughthroughAnalysis Period:Draft Sector report available for mining , Crude-Oil Production Industry Report3 SummaryRoberts Environmental CenterClaremont McKenna CollegeHighest Overall ScoresLowest Overall ScoresHighest Environmental Reporting ScoresHighest social Reporting ScoresMost Frequent Environmental Performance TopicMost Frequent social reporting TopicMost Frequent social Performance TopicMost Frequent Environmental Reporting TopicEnCanaAnglo AmericanOccidental PetroleumChesapeake Energy CorpOil and Natural Gas CorporationAlpha Natural ResourcesAnglo AmericanEnCanaOccidental PetroleumRio Tinto AlcanEnCanaBHP BillitonVisionEnergyVisionHuman mining , Crude-Oil Production Industry Report4 Roberts Environmental CenterClaremont McKenna CollegeDirector's Foreword The highest scoring company in the mining , Crude-Oil Production Sector .

6 The Canadian firm Encana (A+), achieves an overall PSI score of 49%, 12 percentage points below the highest scorer in the 2007 Petroleum Refining Sector (Repsol YPF, A+), and even below the fifth-ranked Chevron (A-) in the latter Sector . Why? And perhaps more to the point from Chevron s perspective, should Chevron have received a lower letter grade from us? To address the first question, it doesn t seem to be a matter of potential for environmental or social impact. If anything, mining and oil drilling companies are more likely to be invading pristine wilderness and displacing (or at least irritating) locals who are often enough indigenous peoples. So shouldn t they be working harder at projecting a clean and caring image, and hence, writing more detailed sustainability reports? I don t know the answer, but my working hypothesis (the way I am coming to feel about everything I think I know these days) is that they don t sell much directly to the public, so public relations are not as high on the agenda as for companies that have gas stations on every corner.

7 Whenever I watch the Lehrer News Hour on public television I see advertisements from Chevron and BP pointing out their greenness. They must think that it could influence my purchasing decisions, perhaps of both their products and their stocks. I don t remember ever seeing an ad for Occidental Petroleum, Newmont mining , or Freeport-McMoRan Copper and Gold, Inc., the three highest ranked companies in this report. To be sure, these companies have their activist detractors. I once waded into a drum beating, loudly chanting crowd protesting Occidental Petroleum s Crude-Oil Production activities in the Amazon Basin. The activists were outside a World Environment Center meeting sponsored by Occidental Petroleum in which corporate environmental executives were discussing amongst themselves ways to avoid and solve environmental and social problems in their world-wide operations: the activists told me that they thought the executives were plotting further environmental and social havoc and should be stopped from meeting.

8 But to have any direct effect on Oxy, they felt they would have had to stage sit-down strikes in the Amazon, not on a local street corner, so their actions at that point were essentially theater. The second question addresses parity of grading. This is an issue familiar to professors, so at least I have a good rationale for why we grade on the curve rather than on an absolute scale, and why the curve might be different in different subjects. The answer is that we don t know for sure how much reporting is reasonable to expect from industry, or that the topics we guess might be important are in fact the ones that are. Since we are using Sector -specific questions we know for sure that the topics differ at least a little between sectors, and in any event, we don t know in any absolute sense whether our choice of topics is in tune with what companies in the Sector think.

9 Therefore, we let the best company in the Sector determine the high end of the grade range. Every mining , Crude-Oil Production Industry Report5 Roberts Environmental CenterClaremont McKenna Collegecompany with a score within of the top score also gets an A+, so there is no accounting reason why all companies in the Sector couldn t get that grade as well. The bottom of the range goes all the way to zero, so a company must get less than of the top score to get an F. That seems generous to those of us in the academic world who might think 60% deserves an F. The other effect of this grading approach is that last year s A+ could be this year s B. It all depends on whether another company raises the bar by doing even better than last year s best. This happens in college classes and we think it is a good thing. After all, one of our goals is to encourage good reporting and performance.

10 Some day, when the top 30 companies in a Sector all get A s and B s, we will have to move down the corporate size range to have any Emil Morhardt12/7/2007 Claremont, mining , Crude-Oil Production Industry Report6 Roberts Environmental CenterClaremont McKenna Collegethe PSI Scoring SystemThe Pacific Sustainability Index (PSI) uses two systematic questionnaires to analyze the quality of the sustainability reporting a base questionnaire for reports across sectors and a Sector -specific questionnaire for companies within the same Sector . The selection of questions is based on, and periodically adjusted to, the most frequently-mentioned topics in over 900 corporate sustainability reports analyzed from 2002 through 2007 at the Roberts Environmental Roberts Environmental CenterThe Roberts Environmental Center is an environmental research institute at Claremont McKenna College (CMC).