The New York Times recently reported that PNC Financial had
joined a growing list of financiers in the United States that have
"distanced themselves from coal companies involved in mountain
top removal."1 The list already includes: Bank of
America, Citigroup, Morgan Stanley, JP Morgan Chase, Wells Fargo,
Credit Suisse and others.
President Obama's comment on "extraordinary dirty"
oil extraction in Canada and the ongoing discussion on
"conflict metals" serve as reminders that coal is not the
only target in the sights of the green movement and there is
increasing pressure not only on producers, but on their source of
funds and their means of product transportation.
Corporate social responsibility programs often focus on local
communities where the extraction is taking place. This continues to
be an important approach to managing project risk. However, the
"distancing" by financiers from a certain type of coal
extraction, demonstrates that it cannot stop there. Environmental
issues can serve as a lightning rod for local conflict and a
pathway to broader political action that extends beyond the local
A recent comprehensive study, "Costs of Company- Community
Conflict in the Extractive Sector" from the Harvard Kennedy
School2 states that:
The most frequent costs [of Company- Community conflict] were
those arising from lost productivity due to temporary shutdowns or
delay. For example, a major, world-class mining project with
capital expenditure of between US $3-5 billion will suffer costs of
roughly US $20 million per week of delayed production in Net
Present Value (NPV) terms, largely due to lost sales. Direct costs
can accrue even at the exploration stage (for example), for the
standing down of drilling programs.
The cost of delay resonates through the recent landmark decision
from the Supreme Court of Canada in Tsilhqot'in Nation v.
British Columbia (see our January 29, 2015 Update,
Tsilhqot' in Nation), where the Court effectively
revoked a logging license after a decade-long court battle that
included a trial spanning over 300 days and two appeals to higher
The costs of delay represent only one cost set associated with
corporate-community conflict. It is clear that reputational costs
amongst a broader group of stakeholders must also be managed.
Diligence in these areas is critical in any transaction in the
1. Andrew Ross Sorkin, "A New Tack in the War on
Mining Mountains", The New York Times (9 March 2015),
2. Davis, Rachel and Daniel M. Franks. 2014. "Costs
of Company-Community Conflict in the Extractive Sector."
Corporate Social Responsibility Initiative Report No. 66.
Cambridge, MA: Harvard Kennedy School.
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
In Bank of Montreal v Bumper Development Corporation Ltd, 2016 ABQB 363, the Alberta Court of Queen's Bench enforced the "immediate replacement" provision in the Canadian Association of Petroleum Landmen 2007 Operating Procedure...
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