BHP Billiton’s London AGM, Thursday 24 October 2013: nearly the full works

BHPBilliton Dirty Energy
By Richard Solly, Co-ordinator, London Mining Network

In the days when Don Argus was Chairman of BHP Billiton, the company’s critics could rely on getting a metaphorical kick in the throat from a man not noted for courtesy. Jac Nasser is as smooth as silk but his answers to the same criticisms are just as unsatisfactory.

This AGM was made more interesting by the nomination of Ian Dunlop as an independent director. Ian, a former coal company executive, is now a convinced campaigner against climate change, and wanted BHP Billiton to begin to pull out of coal and oil. The Board opposed his nomination and he only received around 3% of votes cast, but his nomination and the points made by his supporters brought a welcome emphasis to the importance of ending reliance on oil and coal if we are to save the planet from climate catastrophe.

You can watch a video of the introductory speeches by the company’s Chair and Chief Executive on the company’s website. A number of shareholders asked questions and made points. The account below consists only of the points made during shareholders’ questions by London Mining Network’s friends and colleagues and on the issue of climate change.

Hendrik “Beggy” Siregar from JATAM, the Indonesian mining advocacy network, asked why BHP Billiton continued mining operations in Kalimantan. He said that although BHP has a history in Indonesia when dealing directly with Indigenous Peoples and conservation areas, such as in Sumba and Weda Bay, BHP has pulled out or stopped operating in most places. Why is it continuing to operate at the IndoMet Coal Project in Central Kalimantan? Does BHP like dirty energy exploitation, damaging the earth and contributing to climate change?

Jac Nasser said the company understands how important this issue is to JATAM. The Board have been consistent in their responses and actions in recent years. They will not sanction a major project in Kalimantan this year. They have progressed a small project involving road works, loading facilities and employee accommodation for a small mine. This is what they had said they would do. But they are not approaching this any differently from any other project in any other country. Any changes in what they are doing or thinking of doing will be discussed in the usual way. They had invited Andrew Hickman to visit them in Kalimantan and would welcome dialogue after the meeting.

Andrew Mackenzie added that a number of companies had been allowed to move into protected forest areas but that this does not apply to BHP Billiton. If the company did seek to mine in protected forest areas it would not be by open cut.

Andrew Hickman responded that he had visited the site of the proposed Haju mine and it was one of the most beautiful places he had ever seen. Mining operations around the area display an obscene level of destruction. He had talked to communities in the area. CEO Andrew Mackenzie had talked about gains to local communities, but these communities had said that they do not want any more mining in their area and that it does not contribute to their health, welfare or livelihoods. Hendrik had travelled from Indonesia to speak to the Board and shareholders. The company’s model of development is top-down, related to money, and not pursued out of concern for the wellbeing of communities. A declaration by twelve community organizations in Kalimantan rejects the railway being constructed in Central Kalimantan – they do not want this railway. There will not be agreement on models of development and probable impacts in Central Kalimantan, but the company should listen to the voice of civil society in Central Kalimantan regarding the railway, which will drive a spear into the heart of the forest there. Andrew asked what was the company’s relationship to the railway, and what the company would do to respect communities.

Jac Nasser said that the company takes this matter seriously but that it is not inconsistent with what the company holds itself to. The company will not do anything against its own charter. It is not like other companies.

Andrew Hickman pointed out that the hugely destructive Borneo Lumbung project bordered BHP Billiton’s concession.

Jac Nasser broke in to say that this is a different company [brushing aside the concern about the cumulative impacts of opencast mining in the area]. BHP Billiton is not progressing investigation or development of railway facilities.

Andrew Hickman asked whether this meant that, even if the railway is built, BHP Billiton would refrain from using it.

Jac Nasser suggested talking about the matter after the AGM, and stated that the company had made its position clear.

What was abundantly clear was that he was not going to give any public undertaking not to mine and not to use the railway.

Jazmin Romero Epiayu, from the organization Fuerza de Mujeres Wayuu in Colombia, greeted the meeting in her mother tongue, Wayunaiki and then continued in Spanish. She spoke about the impacts of the Cerrejon coal mine, in which BHP Billiton has a one-third share. Through interpreter Maggie Scrimgeour, of Colombia Solidarity Campaign, she said: “A greeting from my people in Colombia, who are in resistance. We will rise up because our strength is in the defence of our territory. Maybe some of you shareholders are not interested in what I have to say, but for us we are not interested in your talk of money, money, money as you destroy our indigenous communities. We will continue with mobilizations and blockades to stop Cerrejon’s train line. We have already had eight days of resistance and we will not allow further exploitation of our territory – thirty years is enough. I am a spokesperson for our people and we do not want another thirty years more mining, neither do we want the P500 expansion plan or the re-routing of the Rancheria River, the only river in our desertified land. It is a necessity of Mother Earth that we will fight and say no to mining.”

Through her interpreter, Jazmin added that the company appeared to care a lot about money but not about her people, and continued: “We, the Wayuu people are not interested in hearing your colonial imperial and consumer statistics or investment figures. Wealth for us, the Wayuu Indigenous People, is the spiritual richness which we have from Mother Earth, Wounmainkat. It is dignified living, self-determination and the right to live in harmony on our own territory, enjoying our own way of doing things without interference from anyone who does not share our spiritual world view. We reject everything which opposes our spiritual wisdom, which for us represents harmony and biodiversity in the world. Our hopes mirror our defence of Mother Earth, which has been our law and purpose since the beginning. And so the question is, when are you leaving our territory?”

Jac Nasser thanked Jazmin for coming to share her views. He said he knew she cared deeply about the issues and the company respected that. The company does care about her. They do talk about financial results but also about general social, economic, environmental and community issues as well. He said that he appreciated her coming to the meeting. He recognized that Cerrejon is in a very difficult social and political environment. He offered to meet Jazmin after the AGM. Cerrejon had been on the agenda for many years. He proposed to respond to her question fully outside the AGM.

Jazmin said that she was looking for a public response in the meeting. The company was on her people’s land.

Jac Nasser said that he understood this, but that the company needed to consider its response.

Andy Whitmore of Indigenous Peoples Links noted that the International Council on Mining and Minerals had issued a new position statement on Free Prior Informed Consent (FPIC), and that BHP Billiton was working to get FPIC for major new projects and major changes to exisiting projects from May 2015. This was an improvement over its current policy. Would the Chair comment?

Jac Nasser said that he welcomed continued dialogue over this matter. The company was updating its internal documents to reflect the latest position of the ICMM. He asked Andy Whitmore to meet the company’s Vice President for Community Relations and Sustainability, Ian Wood, after the meeting.

Richard Solly, of London Mining Network, asked what the company thought about the Papua New Guinea government’s nationalization of the Ok Tedi mine and the attempt to take over the long-term fund for affected landholders around the mine. He also asked what were the implications of the removal of legal impunity from the company.

Jac Nasser replied that BHP Billiton had decided to pull out of Ok Tedi in 2002. It was done because of worries about future environmental issues. He said it was a good example of where the company lived up to its charter. BHP Billiton would have preferred to close the mine earlier. The government did not want to do so for economic reasons. The company gave its share (52%) to PNG SDP, a not for profit independent company. It aims to return money back to the people and specifically in Western Province. It was a very good thing to do. PNG SDP is chaired by a former Prime Minister of PNG. It has accrued about $2 billion. About $600 million has already been committed to Western Province and the rest for future generations.

BHP Billiton wants its shareholders to realise it has no ongoing ownership in Ok Tedi or in PNG SDP. The company thinks the legal position is very clear. The board was aware of what had happened in the last 24 hours. Jac Nasser said that Richard knew as much as the board did about the recent announcements. Overall the company’s position is very clear and has been clear for the last decade. The company finds it a little disappointing what the government is trying to do.

Andrew MacKenzie added that what government is trying to do is to take a fund that BHP Billiton helped set up. It was set up partly to benefit the people around the mine, and the government seems to want to confiscate it for other, national reasons, and that is political interference. It is something the company thought might happen. That is why at the time of exiting BHP Billiton set the new company up in Singapore. BHP Billiton has taken legal advice that the fund is secure. That also underpins those liabilities as BHP Billiton settled all that at the time. The company has received legal advice that it is highly unlikely there will be any new liabilities.

Max Lansman, representing Share Action, said:

“In the context of the international political agreement to limit global warming to two degrees, there has been increasing public discussion about the concept of ‘unburnable carbon reserves’ if the world is to meet this target. Indeed, there is growing scientific and policy consensus that up to 80% of known fossil fuel reserves are effectively “unburnable”.

“I have a straightforward yes/no question which I would then like to follow up with a short supplementary question.

“Does BHP Billiton accept the concept of unburnable carbon reserves and that a considerable portion of known fossil fuel reserves are effectively unburnable if we are to stay within the two degree limit?”

Jac Nasser replied that nobody could give yes or no answers. BHP Billiton agrees that mainstream science is right and that global carbon emissions need to decrease. This had been a key priority for the company for twenty years. The company’s annual reports include information on the potential risks of climate change to the company’s operations. The company has taken a lead in this matter. It has invested $430 million in emissions reduction since 2007. The company’s target was to reduce greenhouse gas intensity by 6% between 2007 and 2012 and it in fact reduced it by 16%. It aims to hold its absolute emissions below their 2006 level. It has engaged constructively in public debate. In 1996 BHP Billiton started talking about reducing its greenhouse gas emissions and has reported on performance every year. In 2010 it publicly stated its support for a price on carbon. It did so while a member of organizations that had not reached this view at the time. BHPBilliton is accountable for its emissions and it states what it believes to be right in the long term – but it cannot decide the energy requirements of the world: this is up to communities and governments. What is needed are policies that are fair, good for the planet and take into account the need to raise living standards.

Andrew Mackenzie said that the company had looked at the concept of unburnable carbon to understand its impacts on the company’s portfolio, and the board will adjust the portfolio accordingly. Carbon pricing is important. The company can move its portfolio around and still deliver strong results for shareholders.

Max said, “So you accept that there is some level of carbon that cannot be burnt, so why spend £1.7 billion in further exploration for new deposits? Why not put it back into dividends for shareholders?”

Andrew Mackenzie replied that half that exploration sum was not related to energy. Much of it is related to copper, which will be required in greater quantity for renewable energy.

Madge Poole, representing the Ecumenical Council for Corporate Responsibility, said:

“I would like to express my disappointment in your rejection of Ian Dunlop’s board nomination. I feel as though his perspective would add significant value to the BHP board. I’m interested in the immediate exposure of BHP Billiton to carbon risk. Given the previous discussion about unburnable carbon reserves, what would be the impact on BHP’s balance sheet if, as projected, 80% of global fossil fuel reserves are effectively unburnable?”

Jac Nasser said he would deal with the issue of Ian Dunlop’s nomination later. He said that some aspects of the company’s portfolio would benefit from unburnable carbon and overall the board does not think that the company will suffer financially because of it. The board will keep it under review. It is a matter of intense review and analysis by the company.

A representative of CCLA Investment Management said that CCLA is keen to support extractives companies going through the transition to low carbon. CCLA welcomes what BHP Billiton is doing to investigate unburnable carbon. But according to the Carbon Disclosure Project, BHP Billiton’s performance has declined against other companies, from a B rating to a C. Would the company improve?

Jac Nasser said that the company was very disappointed at the change in rating, which is at odds with the improvements that the company believes it has made. It takes this matter very seriously and will work with CCLA to improve its standing again.

Later on, Ian Dunlop presented his case for election to the Board.

He said: “Chairman, Directors, Ladies and Gentlemen, thank you for the opportunity to speak in support of my election. My platform is focused on climate change, and I would like to acknowledge at the outset that BHP Billiton is more advanced than most companies in acting to address it, as the Chairman has indicated. However, I believe that action now has to be taken to a far higher, strategic, level.

“The future prosperity of BHP Billiton is of great importance, both in Australia and globally. In that regard, I would like to make two key points: First, climate change poses a major strategic risk to that prosperity, and to shareholder value – that is a risk which has the ability to fundamentally alter the direction of the Company, or indeed to destroy it. Second, in my view the Board is ill-equipped to deal with this unprecedented challenge.

“The latest science confirms that fossil-fuel emissions from human activity are warming the planet at an accelerating rate, and that both the extent and speed of that warming have been badly underestimated.

“Current climate policies are leading to a world with average temperature increase in excess of 4oC – a world where population would fall from the current 7 billion to below 1 billion. Business in such a world is not possible.

“These impacts are being locked-in by our investment decisions and inaction today, whilst the full, catastrophic, effect will not be seen for some time.

“Dangerous climate change is already happening. To have a reasonable chance of staying below the “official” 2oC limit, we have virtually no carbon budget left, not even the 20% of global proven fossil-fuel reserves frequently quoted. To avoid catastrophic outcomes we must take emergency action now to halt new fossil-fuel investment, and rapidly wean ourselves off established fossil-fuel use.

“But climate change also brings opportunities to achieve the sustainable future to which the Company aspires – provided we change direction in time. Otherwise, the bursting of the global “carbon bubble” will result in the substantial write-down of fossil-fuel assets, destruction of shareholder value and impairment of the Company’s ability to prosper in a carbon-constrained world.

“The Company has comprehensive risk management and corporate governance policies, but I in my view, they are not being applied strategically to climate change. The Board itself has impressive skills and wide experience. But, in common with the boards of most major global corporations, it has fallen into the trap of “groupthink” in failing to grasp the enormity of the challenge that climate change poses to the business.

“The Chairman’s characterization of my nomination as that of a “single-issue” director demonstrates the point. The very fact that the Board see it that way indicates that directors do not understand that climate change from now on will permeate every aspect of the Company’s activities, from broad strategy to operational detail. It is certainly not a single issue in any conventional sense, any more than I would be a single issue director.

“Chairman, you suggested that the Company, on this issue, has to work within the policy confines set out by governments. But it is clear from experience over the last twenty years that governments are never going to show real leadership on climate change. We have now reached the point where business, in its own self-interest, must take the initiative and lead.

“I have industry and governance experience comparable to current directors. In addition, I have the strategic perspective and knowledge to overcome climate change “groupthink”, fill a deficiency in the Board’s current skillset, and complement existing directors in guiding the Company’s response to these critical issues.

“Ladies and gentlemen, the Board has recommended against my appointment. So in appealing directly to you for shareholder support, I re-iterate my two key points: First, climate change now represents a major strategic risk to the Company, and to your shareholder value – a risk which is not being recognized. Second, that the Board is ill-equipped to deal with this challenge.

“Thank you for your consideration, and thank you, Chairman, for the opportunity to
speak to the meeting.

Jac Nasser, of course, rejected Ian Dunlop’s criticisms and opposed his nomination. During discussion, Jenny Williams, representing ECCR, said:

“I am inclined to agree with Mr. Dunlop that climate change poses a material risk to BHP Billiton and that the current BHP Billiton Board is ill equipped to deal with both the challenge and opportunity that this risk presents. The fact that the Board’s response to Mr. Dunlop’s nomination was to dismiss climate change as a single issue seems to indicate that you have failed to grasp the structural and systemic nature of climate change risk as it effects the entire operating environment of the company.

“I have two questions relating to this:

“Firstly, what mechanisms have you put into Director and Senior Executive remuneration policies to ensure climate change risks are managed appropriately?

“Secondly, can you please describe the mechanisms that the Board has instituted to ensure it comprises a diversity of perspectives and expertise, including in relation to climate change?”

Jac Nasser replied that there are performance indicators in the Executive Director’s remuneration package linked to climate change, but no specifics were mentioned about what these indicators were. With regard to the board, Jac Nasser explained that the board was conscious of speaking to a range of experts on a range of topics to ensure that they were getting a broad perspective. When Janny asked for specifics on this point he directed her to the policies regarding choosing board members which could be found in the BHP Billiton annual report.

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