In announcing a partnership with EnCana Corporation, a Canadian energy company, ConocoPhillips CEO James Mulva said, “The upstream partnership also will provide a secure and stable source of oil supplies that can be refined into gasoline, diesel and other petroleum products needed by U.S. consumers, as well as a significant market for Canada’s abundant oil sands resources.” He added, “This venture builds on our current and planned heavy-oil expansion work at both Wood River and Borger, and provides a stable, long-term supply to our U.S. refineries.”
Mulva’s oil sands strategy is a sound business strategy since it provides a stable and secure oil source from North America. Yet this strategy conflicts with his global warming policy and is meeting strong resistance from Mulva’s USCAP coalition “partners” at the Natural Resources Defense Council (NRDC). NRDC refers to oil sands as “dirty fuels” and, more important, it is putting its words to action.
In August, NRDC joined a lawsuit against the U.S. State Department to block a pipeline that would transport oil derived from oil sands to the U.S. The organization claims Secretary of State Condoleezza Rice failed to contemplate the health and environmental impacts of oil sands in the U.S. before the Department issued a permit.
NRDC also blocked the expansion of a refinery owned by ConocoPhillips and EnCana Corporation in Roxana, Illinois, by successfully challenging a permit from the Environmental Protection Agency. Citing the expansion as an environmental risk, an NRDC attorney said "It is going to cause vast increases in CO2 emissions; it's a huge issue that you have to confront."
Clearly, global warming alarmism is harming ConocoPhillips business, but Mulva – apparently taking a page from the banking CEOs’ playbook – seems disconnected from reality.
With the mortgage crisis fresh in our minds, we can’t simply assume Mulva understands or even cares about the consequences of his actions. Confusing the motivations of adversaries like NRDC and ignoring the consequences of feel-good policies are major signs that shareholders should be concerned.
While Mulva is fiddling, the board of directors is allowing ConocoPhillips’ investment in oil sands to burn. Frequently, corporate boards just rubber-stamp CEO decisions. Even worse, some boards are infiltrated with members who place a personal social agenda over shareholder interests. In fact, former EPA Administrator William K. Reilly is a board member for ConocoPhillips. He also serves as a director for DuPont.
Recent events clearly show that wayward CEOs threaten shareholders and free markets. If Mulva has his way, we will be paying significantly higher energy prices and our economy will be burdened under the weight of a massive regulatory regime to control fossil fuel emissions.
Energy companies beware. If the government can take over banks because they failed to execute their primary responsibility to lend money, it could also take over oil and utility companies if they fail to produce reliable and affordable energy.