IMPERIAL OIL LIMITED | Report impact of energy transition on asset retirement obligations at IMPERIAL OIL LIMITED

4.36% votes in favour
AGM date
Previous AGM date
Proposal number
Resolution details
Company ticker
Resolution ask
Report on or disclose
ESG theme
  • Environment
ESG sub-theme
  • Net Zero / Paris aligned
Type of vote
Shareholder proposal
Filer type
Company sector
Company HQ country
Resolved clause
RESOLVED: Shareholders request that the Board provide an audited report estimating the quantitative impacts of the International Energy Agency Net Zero by 2050 pathway (IEA NZE scenario) on all asset retirement obligations. The report should disclose, as the Board deems appropriate, the estimated undiscounted costs to settle, in aggregate, related upstream and downstream Asset Retirement Obligations (AROs), and separately, identify both recognized and unrecognized amounts, as applicable. The Board
should publish the report by February 2024 at reasonable cost and omitting proprietary information. Alternately this information could be disclosed in the 2023 consolidated financial statements.
Supporting statement
The Proponent recommends the report be supported with reasonable assurance from an independent auditor. In the Board and management’s discretion we recommend such report also disclose quantitative key assumptions used to estimate the AROs and whether, based on known information, it is reasonably possible that assumptions and estimates will change in the near term.

Oil and gas companies are legally required to decommission long-lived tangible assets at the end of their useful lives. However, given uncertainty around lives of assets in midstream and downstream segments (e.g., refineries, pipelines, and wells), most oil and gas companies have only recognized upstream AROs (presented on a discounted basis). For example, Imperial Oil has generally not recognized the relevant liabilities or disclosed estimated costs for downstream and chemical facilities, maintaining that ‘’these sites have
indeterminate lives based on plans for continued operations, and as such, the fair value of the conditional legal obligations cannot be measured, since it is impossible to estimate the future settlement dates of such obligations.’’1 As such, investors lack the requisite transparency to assess the financial impact associated with the energy transition, how the IEA NZE scenario would affect the assumptions, costs, estimates, and valuations underlying AROs in the financial statements, and the potential for accelerated remediation and closure
As companies are not disclosing estimated undiscounted costs or discount rates used and/or the payment schedule of those obligations, investors also have limited insight into the estimates and assumptions that underpin reported AROs, making it difficult for them to analyze the impact of the energy transition on these obligations and to formulate their own risk-adjusted values. However, peers such as bp2 have disclosed the estimated undiscounted ARO [“decommissioning”] amounts and estimated timing thereof. Shell3 has also noted
that some previously unrecognized AROs [“decommissioning and restoration” provisions] would have to be recognized, given the energy transition. Ideally, corporate disclosures would include discount rates, asset types, the range of potential settlement dates and probabilities associated with those dates given potential accelerated timing of the energy transition.

We ask shareholders to vote FOR this proposal

How other organisations have declared their voting intentions

Organisation name Declared voting intentions Rationale
CoreCommodity Management, LLC For
KBI Global Investors For Oil and Gas companies need to recognise the impact of the Energy Transition on their decommissioning and restoration assumptions. This level of transparency is an essential action that oil and gas companies must undertake to present a more comprehensive picture of long term valuation.

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