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BRITISH BROADCASTING CORPORATION RADIO 4 TRANSCRIPT OF: -

“FILE ON 4”

CURRENT AFFAIRS GROUP TRANSMISSION: Tuesday 23rd March 2004

REPEAT: Sunday 28th March 2004

REPORTER: Allan Urry PRODUCER: Andy Denwood EDITOR: David Ross

PROGRAMME NUMBER: 04VY3012LHO

THE ATTACHED TRANSCRIPT WAS TYPED FROM A RECORDING AND NOT COPIED FROM AN ORIGINAL SCRIPT. BECAUSE OF THE RISK OF MISHEARING AND THE DIFFICULTY IN SOME CASES OF IDENTIFYING INDIVIDUAL SPEAKERS, THE BBC CANNOT VOUCH FOR ITS COMPLETE ACCURACY.

“FILE ON 4” Transmission: Tuesday 23rd March 2004

Repeat: Sunday 28th March 2004

Producer: Andy Denwood Reporter: Allan Urry Editor: David Ross

URRY: The world’s third largest oil and gas group, a British icon, is reeling from a scandal.

EXTRACT FROM BBC1 10 O’CLOCK NEWS, 3rd March 2004

NEWSREADER: Good evening. The chairman of Shell, Sir Philip Watts, has resigned. He’s been under pressure to go since the company admitted that its reserves of oil and gas had been over-estimated. This led to a sharp drop in the company’s share price ….

URRY: It’s not just its oil reserves which are causing problems. Since the mid 1990s, Shell has been telling us it’s cleaned up its act, proclaiming its environmental and social credentials alongside its blue chip reliability, a model of corporate citizenship. But the company is facing legal action around the world, from groups including those trying to protect marine life, and communities suffering ill health living close to refineries. Is this Anglo-Dutch oil giant delivering what it promises? File on 4 asks, can we be sure of Shell?

SIGNATURE TUNE

ACTUALITY AT STOCK EXCHANGE

URRY: Here at the New York Stock Exchange on January 9th, billions of dollars were wiped off the value of Shell’s stock. Shell had announced it had over-estimated by 20% the amount of oil and gas reserves it could reliably extract at a reasonable price, and that’s a shortfall of nearly 4 billion barrels. The size of this write-down was unprecedented, and it took everyone by surprise. The regulators here started an inquiry. The investors picked themselves up, dusted themselves down and called their lawyers.

WEISS: My name is Melvyn Weiss. My firm is Milberg, Weiss, Bershad, Heinz and Leraq, and we’re the largest class action law firm in the world.

URRY: From his 42nd floor offices in downtown Manhattan, Melvyn Weiss can see more than the nearby Chrysler Building. He sees a company which may have violated federal security laws.

WEISS: We started an action on behalf of people who bought Shell oil stock in the last couple of years, alleging that anybody who bought during that period was misled because the financial statements artificially inflated the values of their proven reserves.

URRY: What have investors actually lost in this?

WEISS: There are estimates that the losses could be as much as $15 billion.

URRY: But in human terms, what does that actually mean?

WEISS: Well, it depends on who you are. If you lose $10,000 and that’s meaningful to your ability to send your kids to school or to take a earlier retirement or to take your annual vacation, it’s a very meaningful amount of money.

URRY: Those who do put money into companies like Shell have a right to accurate information on which to judge performance and prospects. So, in the United States, oil companies whose stock is traded have to file annual returns to the regulator, the Securities and Exchange Commission, about what’s called their proven reserves. These are the commercial stocks underground. Although what constitutes a proven reserve is a complex series of calculations, there is a simple rule of thumb – they should be economically viable, and you need to be able to extract and transport them to agreed customers with reasonable certainty before you can actually book them in your returns. How much reserves an oil company has is a key measurement of its performance. According to Neil McMahon, an equity analyst in New York, Shell has been falling behind its rivals, even before its 20% downward revision.

MCMAHON: If you look at the five major oil companies in the world, Exxon Mobil, BP, Shell, Total and Chevron Texaco, Shell has been one of the companies that has got the lowest track record in terms of reserve replacement over the past let’s say five or six years. It was hovering around the sort of 80% mark. What you want to be seeing is a company that is able to replace 100% of its reserves every year. Basically, if you produce x amount out of the ground, have you been able to replace that and hopefully replace that more than you extracted so that you can actually grow the production base of this company.

URRY: Shell has been extracting more oil and gas than it’s been finding. Neil McMahon believes the organisation began to rethink its strategy on how it classified what it already had.

MCMAHON: When companies are under pressure, given the fact that they haven’t found many reserves, you do want to sort of look across your portfolio and see what is possible to actually book as proven reserves. So to some degree you can get a bit more aggressive in looking at reserves across your portfolio.

URRY: But 20% is a little bit more, isn’t it, than simply being a bit more aggressive about how you calculate how much reserve you’ve got?

MCMAHON: Well certainly there are a few instances, such as the Gorgon Field in North West Australia, which is a very large gas field. They booked it very early in 1997, whereas even today Exxon Mobil and Chevron Texaco have not booked reserves from that field, as they are awaiting gas contracts and environmental approval to develop the field. That is quite aggressive, I think, by any stretch of the imagination, certainly based on my industry background.

URRY: Shell has admitted filing inaccurate reports, but argues that arose from mistakes rather than corruption. The Securities and Exchange Commission is putting that assertion to the test in a formal investigation. Other regulators in the UK and in Holland are also looking into the issue. The lawyer, Melvyn Weiss, is alleging Shell’s returns were deliberately misfiled.

WEISS: Under our law we have to prove that they had an intent to deceive. Intent to deceive can mean reckless disregard of information that they should have had knowledge of, as well as a formed mental intent to deceive somebody. In this case there are very clear guidelines that are set forth by the Securities and Exchange Commission as to the criteria in booking underground reserves, that’s what we call proven reserves. Our experts have told us that to be off by 20% - in some of these fields they were off by 100% of the reserves that they carried - is a very very serious matter. URRY: At first it looked as though the man at the top was going to put his own house in order.

ACTUALITY FROM NEWS CONFERENCE WATTS: I’m not going to resign. I’m determined to see this thing through. It’s come up on my watch, we’re going to put it right.

URRY: But weeks later, Sir Philip Watts was gone. Before he left, he maintained the company had acted swiftly over the reserves issue, declaring its errors as soon as it found out. However, that’s now being called into question. The contents of company documents leaked to the Wall Street Journal cast serious doubt on that explanation. Journal reporter, Chip Cummins, says senior people were sounding alarm bells long before the January announcement.

CUMMINS: Shell has maintained that it came to its determination that it had significantly overstated reserves at the end of 2003, after several reserve reviews, internal audits and other company-wide reviews. These documents paint the picture that at least Sir Philip and possibly other senior executives knew of at least some significant, possible overstatements much earlier than that.

URRY: We wanted to ask Shell about how it came to over-book reserves and about when it was first aware of that. But no one from the company would be interviewed about the matter. We were told there would be no statement until the conclusion of the group’s own internal review and audit of the affair. One of the world’s biggest blue chip companies, a by-word for steadiness and conservatism, has lost its lustre because of the unresolved questions which hang over it. And some of Shell’s biggest investors are now beginning to doubt the trust they placed in it. Isis Asset Management hold nearly 140 million shares for institutional investors. At current values that’s worth about £650 million. Isis are among the top 20 stakeholders in the company. Their head of governance and socially responsible investment, Karina Litvack, admits to being shaken by what’s happened.

LITVACK: Our view for a long time has been that Shell is one of the best managed companies in terms of corporate social responsibility, integrity and things like that. We’re a long term investor. We manage pension funds, we manage life assurance, we’re not in and out of the market on a daily basis, and we’re looking for signs in the management that the profitability of the company is going to be sustained over many many years. And so what’s happened recently has given us a bit of a shock, because if we trust this company to make decisions with integrity across a whole range of issues, is this symptomatic of problems in other areas of the company?

URRY: You’re now saying ‘if we trust this company’ rather than your former position, I suppose, which was ‘we do trust this company.’

LITVACK: Well, we very much did trust this company and now we’re going to wait for the results of the inquiry.

URRY: The reason Karina Litvack and others are so concerned is that Shell has set itself high standards of ethical business practice. Its reputation had been damaged by past controversies in Nigeria and over proposals for disposing of the Brent Spar oil platform. So, according to Greg Muttit, a specialist researcher on oil companies, Shell decided on a radical redefinition of what it was about.

MUTTIT: In 1998 Shell published an extremely clever document called ‘Profits and Principles, does there have to be a choice?’ where it, I think, quite successfully reinvented itself, recreated a perception of itself as a company which is responsive to these concerns, which takes them seriously and which listens. Shell has tried to suggest that it’s responsive to a number of different drivers and a number of different measures of success, and it’s tried to suggest that as an organisation it’s equally responsive to environmental issues, social issues and financial issues – what’s been referred to as the triple bottom line.

URRY: For Karina Litvack of Isis Asset Management, the financial crisis at Shell raises questions about how the company’s two other defining principles are being handled.

LITVACK: In our view, the social and environmental, and the governance and the finance are inextricably linked, so if there is a problem that has been detected, as it happens in this particular case with the valuation of reserves, which has a very direct impact on the share price in the short term, that causes panic. But it causes panic for us because of what it tells us about the integrity of their management systems across the board. And this is what we’ve always said in the past about the integrity of management systems on social and environmental risk factors. What does that tell you about the soundness of their financial planning and strategy and control systems? These things all work together. It’s fundamental to the long-term survival of the company.

URRY: Nowhere is Shell’s commitment to its triple bottom line being put to the test more than in the remote far east of Russia. A long narrow finger of land in the Pacific Ocean called Sakhalin has become a battleground between conservationists and the oil companies. There are vast quantities of hydrocarbons under the seabed. But the waters support a rich variety of marine life, including a species on the edge of extinction.

ACTUALITY OF WHALES

URRY: The cry of Western Grey whales, a critically endangered species which relies on feeding grounds close to Sakhalin Island. GORDON: The Western Pacific Grey whale was thought to be in serious decline and even thought to go extinct in the 1970s.

URRY: David Gordon, the director of a pressure group called Pacific Environment. Since the Western Grey’s re-emergence, marine biologists have been trying to find out more about a species clinging on to survival.

GORDON: They discovered that there were a hundred individuals in this population. Of these individuals they have identified only 23 reproductive females, and that has raised a lot of concern among the scientists about the viability of this population over the long run. In 1999 the scientists working in the area started identifying what they called skinny whales, emaciated whales. These were whales that were clearly under-nourished.

URRY: The question is, are the whales being affected by oil development. For Shell this is an area of importance at a time when the group has been unable to replace its reserves fast enough. There are one billion barrels of crude in the field, and enough liquid natural gas to supply current global demand for four years. Shell is the senior partner in a company called Sakhalin Energy, which has been recovering oil in the area since 1999. And according to David Gordon, that’s already had an impact.

GORDON: We are very concerned that that first phase of the project has already had some very negative effects on the whale population, in particular when they installed the platform there was a great amount of sedimentation that came up and drifted into the whale feeding area. Also, since 1997, Shell and Sakhalin Energy have been dumping drilling muds and cut-ins. These are toxic materials that come up when they are drilling their wells. They have been dumping these overboard into the waters, and we’re very concerned also about the impact these types of drilling muds and cut-ins have been having on especially the benthos organisms, which is what the grey whales feed upon.

URRY: So far, scientists have not been able to prove that oil work has been harming the whales, but conservationists allege the reason there’s no proof is because Shell is interfering with the science. When oil was discovered off Sakhalin, the Russian and American governments ordered Shell and the American company Exxon to pay for research into the Western Greys. A group of marine biologists was appointed, but according to David Gordon they fell out of favour once they started trying to publish research critical of the drilling.

GORDON: They started to come up with results that Shell and Exxon did not much like, and that led to pressure on the scientists to change their conclusions, to rewrite language in their reports. And I must speak highly of this Russian-American group of scientists. They held to their guns and they said, ‘No, we are going to produce and publish good science.’ As a result, however, Shell and Exxon have stopped funding these scientists, and they have now gone to consulting companies willing to go along with Shell and Exxon in these discussions, and willing to produce results that the oil companies want to see. URRY: What do you make of that sort of approach?

GORDON: I think this is extremely dangerous. They’re trying to buy out science. URRY: Scientists who worked on the whale project were unwilling to come on the programme, but one biologist did confirm to File on 4 that the oil companies had tried to block publication of research findings which suggested the whales were being adversely affected by exploration and development. Shell’s company, Sakhalin Energy, refused to be interviewed. In a statement they told us their operations have not had a negative impact on the Western Grey whales. They said the company:

READER IN STUDIO: Does not seek to influence research findings. The studies were independent of the company, conducted by recognised scientific institutions, and the research findings are published.

URRY: Now Sakhalin Energy wants to press ahead with further development in the area, part of which involves building a pipeline along the 800 mile length of the island, to carry oil and gas to a terminal. But that too is fraught with difficulty.

EXTRACT FROM BBC RADIO 4 “TODAY” PROGRAMME, 29th May l995

REPORTER: In front of me there are cranes bathed in spotlights. It’s still pitch black here now. They’re digging away at the rubble. There are people digging with their bare hands, cutting through concrete, cutting through steel supporting stays to try to get to survivors. And quite frankly it’s a scene of total, total devastation.

URRY: News reports of a major earthquake, which struck in 1995, killing 2,000. Sakhalin Island is on the Pacific Rim, where earthquakes are common. Despite that, Sakhalin Energy is proposing to build a pipeline underground, crossing 22 known active faults. In some other parts of the world, pipelines are placed in cradles above ground at seismic hotspots. The World Wildlife Fund and other non governmental organisations commissioned an independent consultant, who has advised the Alaskan authorities on a major pipeline there, to assess Sakhalin’s plan. Richard Fineberg says there’s been a lack of rigour applied to the project.

FINEBERG: One of the things I wanted to know is, what is their risk analysis of the seismic risk at specific fault crossings. It turns out, when I asked the question over a number of months several times, I finally received documents that indicate that the assumption is that the pipeline will withstand an earthquake and therefore there’s zero seismic risk. That’s not a risk analysis, that’s a presumption.

URRY: How important is that kind of risk analysis?

FINEBERG: It is critical. Sakhalin Energy has fallen woefully short of demonstrating that it will be safe, and it is incumbent upon the builders to do so.

URRY: In a statement, Sakhalin Energy told us they’re using some of the foremost experts in the field of seismic study to advise them. But the statement appears to offer a concession to Richard Fineberg. The company says it’s involved in final design reviews and admits: READER IN STUDIO: Should these reviews indicate that currently anticipated fault crossing construction would not be suitable, then a proper technical review will be performed to determine the safest crossing technique.

URRY: In such an area of environmental sensitivity, the company’s critics will argue that should have been done in the first place. Negotiations between environmental groups and the oil companies have broken down. The World Wildlife Fund and others are taking legal action in the Russian courts to try to force the authorities to implement their strict conservation laws. And the groups are also mounting a legal challenge to the pipeline project. Igor Chestin of WWF says talks with Sakhalin Energy and Shell were just empty dialogue.

CHESTIN: There are few companies willing to talk to us, and Shell of course is among the top of them, and British Petroleum is another one. But what we learnt over the last couple of years is that talking to a company does not necessarily mean that the company actually listens to you. They have special staff to talk to insurers but that does not mean that they are going to change anything.

URRY: Isn’t it the case that you are opposed to this because you are part of a movement that seeks simply to protect the environment and doesn’t take into account the fact that oil companies and others have a living to make?

CHESTIN: No, I don’t think so. We believe that the development can happen, but it has to be done using the best available technologies, and that’s what we cannot find there.

URRY: The disenchantment of organisations like the World Wildlife Fund comes as no surprise to Greg Muttit, the specialist researcher who follows Shell closely. He says when the group introduced its green policies as part of the attempt to reinvent itself in the 1990s, it also put in place a series of business imperatives at odds with them.

MUTTIT: Actually Shell went through two change processes in the 90s, the other of which was geared towards the financial markets. Now its other change process went under what they called a mantra, which had three parts. They were personal accountability, which basically means putting more centralised control into managers. Secondly, cost control. And thirdly, capital discipline, which means only investing in the most profitable business activities. Now all three of those potentially conflict with the other change process into a more listening corporation. If you’re trying to shave off costs as much as possible at the same time as reducing your damage to the environment and improving your social performance, there’s a very strong conflict between the two. And Shell has not tried to, in my perception, reconcile these different pushes for change within the company.

URRY: And what that means is more conflict with those who regard Shell as the neighbour from hell.

ACTUALITY IN CAR

URRY: I’m driving across a bridge in South East Texas, which arches over a river. This is one of the few high points in an otherwise flat landscape right by the coast. And in front of me, stretching out, I can see a huge complex of refineries dominating the landscape. There’s nothing on this scale really to be seen in the United Kingdom, and perhaps that’s just as well. This is an area known as Gasoline Alley. The town is called Port Arthur, and as I turn left here heading west, residential neighbourhoods start to appear, among these metal chimneys and pipes and tanks. And the further west you drive, the closer the houses and the refineries get. In fact, in some places they’re only separated by the width of a wire fence. I’m here to meet Hilton Kelley, a native of this town, who left for fame and fortune as a Hollywood stuntman, but who’s come back to campaign against refinery pollution.

KELLEY: The houses sit directly across the street from the refinery itself. The fence is actually maybe about half a block away from the houses. They’re literally in the people’s back yards. A lot of times the air smells like rotten eggs here, or you smell a strong ammonia odour, or sometimes a sweet odour, because these are gases that are being released, and it’s very hard to identify what it is, because there are so many gases being released sometimes in this area at the same time to where when they get into the air and mix together, they create a different type of chemical, and these are the chemicals that a lot of people in this area are inhaling.

URRY: Hilton Kelley and other residents wanted to know what chemicals they were breathing in. They think the Motiva refinery, part-owned by Shell, and other facilities let too much escape into the atmosphere. So they persuaded the Environmental Protection Agency, a federal body, to bring to Port Arthur sophisticated equipment inside a mobile laboratory called a trace atmosphere gas analyser, or TAGA truck. The truck was calibrated to test for thirteen known hazardous chemicals, and for four days it was driven round the residential areas close to the refineries. An award-winning chemist, who is an advisor to the Agency at national level, Wilma Subra, conducted a detailed analysis of the results of those air tests.

SUBRA: The highest concentration was the chemical known as benzene. It’s a known human cancer causing agent. And it is the chemical that is released most frequently by petroleum refineries such as the Motiva refinery. And it was present in concentrations of 175 parts per billion, which is way over the accepted standard in the state of Texas. On an annual basis the state of Texas allows one part per billion, and these hits as the TAGA truck went up and down the residential areas went as high as 175, so it’s 175 times the accepted concentration.

URRY: How much of that could you say Motiva was responsible for?

SUBRA: If you look at what each of the industrial facilities in the Port Arthur report each year as chemicals being released, the Motiva facility releases 2,200lb of benzene into the air in the Port Arthur area.

URRY: Is that figure in itself cause for concern?

SUBRA: Yes it is, because that chemical, when it’s released by the Motiva industrial facility, crosses the fence line, and the fence line on that side of Motiva has residential properties, and so those people are constantly exposed to the chemicals such as benzene that are released from the Motiva refinery.

URRY: Some other refineries produced even more benzene, and Wilma Subra says her analysis showed a toxic soup of hazardous chemicals in the air. Motiva’s head of sustainable development, Bill Wimberley, was keen to give us a tour of the vast refinery, which covers 3,500 acres.

ACTUALITY OF TOUR WIMBERLEY: What I wanted to show you was two specific pieces of equipment that we’ve installed to show our commitment to environmental stewardship. One is on our unit that makes gasoline. There’s wet gas scrubber that takes care of the exhaust gases off the regeneration of that particular unit. And then I’ll show you the newest pollution control equipment we’ve put on, which is a flare gas recovery system.

URRY: In stark contrast to the readings taken from the TAGA truck, Bill Wimberley argues the air is safe to breathe, and that its quality has been improving.

WIMBERLEY: The South East Texas Regional Planning Commission, a cooperative group of local governments, has been operating a series of air monitors in this area for thirteen years. The air quality is getting better every year, continues to get better each year.

URRY: You’ll be aware that the Environmental Protection Agency had a very sophisticated piece of equipment come down here and monitor along the fence line, and what was found there, outside of the premises that we’re now in, is that the air was thick with pollutants.

WIMBERLEY: You could probably find those at Yellowstone National Forest. You can always use data, I guess, but …

URRY: You see, this is an internationally award-winning chemist, isn’t it, who studied these results, which I’ve got right here in front of me.

WIMBERLEY: Yes.

URRY: And here’s your name right here, look, Motiva releasing benzene, and Motiva releasing butadiene. That’s her conclusions based on the figures that she saw from that truck.

WIMBERLEY: I’m not disputing the findings. The conclusions I may not agree with.

URRY: Residents believe pollution levels rocket because of accidents – or upsets, as the industry here calls them. Machinery is shut down or isolated and chemicals have to be vented to chimneys to be burnt by flares. You can see clouds of smoke billowing out of the chimneys when this happens. Wilma Subra has studied the information Motiva is required to file with the State Regulator whenever these upsets occur.

SUBRA: Motiva is reporting five, ten, twenty events each single day. In the first two months of 2000, two-thirds of the days there were excess emissions in the West Port Arthur area due to accidental releases and upsets. And the largest number of those came from the Motiva refinery, and sometimes there were as many as thirty and forty events in a single day, releasing these same chemicals we have been talking about into the air, and these chemicals crossed the fence line and impacted the health of the citizens in West Port Arthur.

URRY: Motiva says since then it’s significantly reduced the number of upsets. But in the state of Texas, where oil is king, companies are responsible for self-reporting these events to the State Regulator, the Texas Commission for Environmental Quality – or TCEQ. The company has been fined, hasn’t it, for under-reporting its spillages? It was fined in 2002. Thirty seven incidents.

WIMBERLEY: We have not been fined for under-reporting anything.

URRY: You were fined for exceeding permitted emission levels, but part of what you were also fined for was the failure to report these things in a proper manner.

WIMBERLEY: One of the fines, for instance, was, one of them was one minute late and one of them had a number left off, not having anything to do with what was emitted, but the emission point number was left off, and that was what they called under-reporting or improper reporting. TCEQ has never had an issue with us about what was reported, the amount it reported.

URRY: The community has an issue with you, doesn’t it, rather than the State Regulator, who they say is pretty business-friendly round here.

WIMBERLEY: The regulations are the regulations. URRY: But didn’t you breach those regulations 42 times between June of 2002 and July of 2003?

WIMBERLEY: When you have an event, TCEQ’s position is operational perfection is the only criteria that we’re allowed, so if you make mistakes, that is not allowed. URRY: You’ve told me the regulations are the regulations.

WIMBERLEY: They are. URRY: So you did breach them? WIMBERLEY: Yes, if you look at TCEQ’s take, then each one of those was a violation of the regulations. URRY: Families in Port Arthur say they’re paying a high price because of those violations.

ACTUALITY WITH DESTINY AND CLANCE WITH NEBULISER

DESTINY: This is the pulmicort and this is the zopanix.

URRY: These are medicines that you put into a, it’s like a breathing machine, isn’t it? It’s got a face mask here.

DESTINY: Just put this bit ….

URRY: You clip that onto the bottom of the face mask.

DESTINY: Just turn it on.

NOISE OF NEBULISER CLANCE: Mama….

DESTINY: Okay.

URRY: Two year old Clance is having to use a special machine, called a nebuliser, to take medicine he needs to control his asthma. Clance doesn’t like having to put on a mask three times a day to breathe the vapours from the machine. His mother, Destiny, believes the air they breathe is making them ill – and it’s worse when they go outside.

DESTINY: We’ve recognised it since we were younger, when my mum used to tell me that that’s what we were really getting sick from, and so we smelled it every day. We played outside, we had to come back in because my breathing was very bad around smelling it in, and that’s why we think it’s causing it, because it only happens when we’re outside smelling it. So that’s why most of the time my baby doesn’t go outside that much, he’ll run around, he’ll get sick, he can’t really breathe that good and I have to come in and give him this. It just gets worse and worse every day.

URRY: Are there other mothers with other children like this you know about?

DESTINY: Oh yes, I know a lot of mothers like this, I’d say at least about a good thirteen that I know personally that has to go through this with their children. And he’s fighting, he doesn’t really like this on his face.

URRY: He’s taken it off now, hasn’t he?

DESTINY: Uh huh.

URRY: In response to those sorts of concerns, toxicologists at the University of Texas Medical Branch recently conducted what’s known as a symptom survey. People in Port Arthur were asked to give details about their health problems, and the results were compared with a community with similar demographics 75 miles away in Galveston, where refining is largely away from areas where people live. The survey is about to be published, having been peer reviewed. File on 4 has obtained a copy. Genetic toxicologist, Dr Debra Morris, says one of its most disturbing findings about Port Arthur is the very high rates of respiratory problems for people like little Clance and his family. They range from persistent coughing to lung disease.

MORRIS: For the respiratory symptoms, we only considered non smokers. The population in Galveston showed about 9% of the individuals complained of ongoing respiratory problems, whereas the individuals in Port Arthur showed levels of almost 70%. So that’s quite a substantial difference.

URRY: So people who didn’t smoke in Port Arthur, 70% of them that you examined had some kind of respiratory problem?

MORRIS: That’s correct. URRY: That’s extraordinarily high, isn’t it, in the population?

MORRIS: That is very high, yes it is.

URRY: Have you been able to make a link between these elevated symptoms and the pollution that’s said to be in the air there?

MORRIS: Certainly the differences in the chemicals that are in the air there are one of the major factors that are involved in these symptoms.

URRY: Motiva’s spokesman, Bill Wimberley, offered an alternative explanation about the high levels of respiratory problems people living close to his refinery are struggling with.

WIMBERLEY: There are a lot of respiratory diseases that are caused by pine pollen, dust in the air, mould and a lot of other things, and the air comes from a lot of places. It is, I won’t say impossible, but it is very difficult to tell what goes where. The air molecules don’t label themselves. Air masses move, and that is well demonstrated. What I’m saying is, one thing may not be connected to the other, and I don’t think anybody has enough data to know whether they’re connected or not.

URRY: Well there was a symptom survey done, wasn’t there, again by renowned toxicologists, and that showed that there were increased levels of certain diseases and problems, including respiratory problems and cardiovascular disease in Port Arthur when they compared that with a test community in Galveston – same demographics.

WIMBERLEY: You know, you can make comparisons based on a lot of different things that still may give you bad conclusions. There’s no telling whether folks’ symptoms came from being in their house, which can have a lot of things inside a house that are just as bad at causing respiratory issues as anything outside, dust, pollen or anything else.

URRY: But really you’re trying to tell me that people’s health problems here are caused by pollen coming off trees rather than huge refineries?

WIMBERLEY: No, I’m telling you that the atmosphere is a complicated thing and there are a lot of different reasons why people have health issues.

URRY: The company denies allegations that it’s causing ill health through toxic emissions. But hundreds of local people are trying to sue Shell’s Motiva and five other refineries. They could be in for a long legal battle with these powerful oil businesses. They say Shell offers sympathetic noises at the top, but real concessions are having to be wrung from the company. So why is Shell not delivering its promises on corporate citizenship? For Greg Muttit, the researcher who scrutinises the group’s affairs, it’s because those responsible for doing so are not the real play makers in the organisation.

MUTTIT: There are certainly people in Shell who very much believe that reform of the organisation is possible, that it’s possible for Shell to work in a more ethical manner. And there are people in Shell who work hard to try and make that happen. Most of those people are not at the core of business decisions. They almost exist as a bolt-on. They’re a department in their own right and part of the problem is that the people who are good at those kind of roles don’t tend to make good business managers, and what’s happening in some of those really big problem areas is that the management are keenly aware of Shell’s unimpressive financial performance, and I suspect are starting to get obsessed with the financial figures. URRY: Shell’s current financial difficulties have started to throw its other problems into high relief. The big cats in the investment jungle are starting to growl. Karina Litvack, head of governance and socially responsible investment at Isis, a major shareholder, is beginning to look beyond what went wrong with its oil reserves.

LITVACK: Why is it that the system failed in this case, and does this mean that it has failed in other cases? I mean, that’s really the question. Will there be other bad surprises elsewhere in Shell? We want to have some clear answers about how they’re going to turn around the company, both in terms of its financial performance and in terms of its governance. URRY: You clearly had a view of the company that in the long term it was a good bet because it lived up to its ideals that it set for itself. Now you’ve given advice and made decisions on that basis, do you think you’ve been hoodwinked?

LITVACK: I think it’s really too soon to say.

URRY: The coming months are going to be difficult for the company. Four regulating agencies are investigating the reserves issue. Its annual report and shareholders meeting have been postponed, fuelling investors’ unease. At the moment there is very little Shell can be sure of.

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