Royal Dutch Shell: Corporate Rap Sheet

Royal Dutch Shell

By Philip Mattera

With operations in more than 100 countries, Royal Dutch Shell is one of the handful of massive companies that dominate the global petroleum industry. Formerly an unusual Dutch-British hybrid with two boards of directors, the company was reorganized in the wake of a scandal involving inflated reporting of its oil reserves. For the past decade it has been a frequent target of criticism by human-rights campaigners because of its practices in Nigeria and by environmental campaigners because of contamination, leaks, explosions and other toxic events at many of its operations around the world.

 

Environment and Product Safety 

Although Shell has made efforts in recent years to adopt some more environmentally conscious policies, many of its facilities around the world have been major sources of pollution and the sites of serious accidents.

For example, during the 1980s Shell Oil’s refinery in Martinez, California near San Francisco experienced numerous fires and major spills. In 1986 some 48,000 gallons of toxic waste water spilled into a local waterway. Local authorities fined the company $75,000, saying Shell had been negligent in not repairing a stuck valve. Two years later, some 440,000 gallons of crude oil were spilled at Martinez, contaminating wetlands and 11 miles of shoreline. Shell, which did not report the accident for four weeks, entered into a consent decree with the U.S. Environmental Protection Agency and California officials in 1989. The settlement included a payment of $19.8 million by the company.

Shell Oil and the U.S. Army were found liable in 1985 for large-scale environmental contamination at the Rocky Mountain Arsenal near Denver. The army built the plant during the Second World War to make nerve gas, and Shell leased part of the site in the early 1950s to produce pesticides, ceasing operations in 1982. Local residents reported a variety of symptoms such as miscarriages and chronic nausea they said were linked to the dumping of toxics and carcinogens by Shell and the Army. A Colorado official called it "one of the most contaminated sites on the planet." Shell spent years fighting with the Army, its insurance companies, and environmental authorities about financial responsibility for the clean-up.

Shell's Norco Manufacturing Complex in Louisiana ranked 2nd among all industrial facilities in the United States in terms of toxic releases in 1988. The following year there was a huge reduction in such releases because of the adoption of a new process to convert toxics to a marketable product. In May 1988 an explosion at the refinery in Norco had killed seven workers. The U.S. Occupational Safety and Health Administration fined the company $3,000 for safety violations in connection with the accident. Shell paid out more than $40 million in damages to settle suits brought by injured workers and the families of those killed.

In 1989 there was a major explosion at a North Sea offshore oil platform partly owned by Royal Dutch Shell. This was only one of a series of explosions at North Sea facilities, which the company blamed on worker carelessness and union officials said were the result of cost-cutting efforts by management.

In the United Kingdom Royal Dutch Shell came under fire because of reports that its Permithrin product, used as a mothproofing agent in the carpet and wool processing industry, had caused significant water pollution in several rivers. Also in Britain, a problem at a company pipeline led to the 1989 spill of some 10,000 gallons of crude oil in the River Mersey. The company was fined a record £1 million.

In 1991 Shell was one of ten major oil companies in the United States cited by the Environmental Protection Agency for discharging contaminated fluids from service stations into or directly above underground sources of water. The company paid a fine of $56,000 and agreed to clean up the sites by the end of 1993.

In 1995 Shell agreed to pay $3 million to settle a lawsuit brought by the California Public Interest Research Group charging that the company had dumped illegal amounts of selenium into San Francisco Bay and the Sacramento-San Joaquin River Delta.

In 1995 Royal Dutch Shell was also the target of a boycott and other protests in Europe over a plan by the company and its joint venture partner Exxon to sink an obsolete offshore oil storage facility known as Brent Spar in the North Sea rather than dismantling it. Environmental groups, led by Greenpeace, warned that the structure, which contained oil sludge, heavy metals and some low-grade radioactive waste, could damage the food chain for fish in the area. The company gave in the pressure and brought the Brent Spar to shore.

In 1998 Shell Oil agreed to pay $1.5 million to settle federal charges that its refinery in Roxanna, Illinois was responsible for illegal discharges of pollutants into the Mississippi River. That same year Royal Dutch Shell was fined £20,000 for an oil spill in the Manchester Ship Canal in Britain.

In 2001 Shell Oil and three other major petroleum companies settled a lawsuit filed in California by agreeing to clean up some 700 sites in the state that had been contaminated by the gasoline additive MTBE.

In 2002 a judge in Nicaragua ordered Royal Dutch Shell, Dow Chemical and Dole Food to pay US$489 million to a group of about 500 workers who had charged that the pesticide DBCP— produced by Shell and Dow and used by Dole—had rendered them sterile and caused other adverse health effects. After the companies refused to pay, the workers filed suit in the United States (where the pesticide had been largely banned in the late 1970s). But a federal judge declined to enforce the verdict against Shell.

In 2005 Shell was fined £900,000 in connection with the 2003 deaths of two workers on a North Sea oil platform as the result of a major gas leak.

In the late 2000s, Royal Dutch Shell found itself facing increasing criticism for its huge liquefied natural gas project on the island of Sakhalin in the Russian Far East. Pacific Environment, a San Francisco-based advocacy group collaborated with Russian activists to form Sakhalin Environment Watch, which challenged the offshore Sakhalin project because it threatened the survival of the world’s most endangered species of whales, Western Pacific Grays.

The situation became more complicated in late 2006, when Shell was forced by Russia to sell half of its holdings in the project at a bargain-basement price to Gazprom, which is publicly traded but controlled by the Russian government. This gave Gazprom a majority stake of 55 percent, with Shell’s interest reduced to 27.5 percent. The holdings of the other partners, Mitsui and Mitsubishi, were also slashed. In 2008 the British newspaper The Observer reported that it had obtained dozens of internal e-mails showing that Shell officials in London sought to influence the conclusions of a purportedly independent environmental review of the Sakhalin project.

In 2007 the Argentina government ordered the closure of a refinery operated by a Shell subsidiary in Buenos Aires because of leaks, soil contamination and other environmental problems. The facility was allowed to reopen after the company prepared a clean-up plan.

In 2007 a U.S. federal appeals court temporarily blocked a plan by Shell Oil to initiate offshore oil drilling in the Beaufort and Chukchi seas off the coast of Alaska. The order came in response to petition from environmental and community groups concerned about the impact of the drilling on Native subsistence fishing. Although the order was later vacated, Shell postponed the launch of the operation.

In 2008 Shell UK Oil Products was fined £300,000 and ordered to spend millions more on improvements at its Liverpool refinery in connection with a 2003 gas leak.

In 2005 Motiva Enterprises, a joint venture of Royal Dutch Shell and Saudi Aramco, announced plans for a vast expansion of its refinery in Port Arthur, Texas. The existing facility had been the target of protests by local groups such as Community In-power Development Association (CIDA) over the high level of toxic releases. CIDA’s campaign in opposition to the expansion was suspended after Motiva agreed to spend $3.5 million on health and air quality projects. In 2009 the $7 billion expansion was postponed for at least a year because of weak market conditions.

Over the past decade, Royal Dutch Shell has been repeatedly targeted by advocacy groups such as Friends of the Earth because of what the groups called a pattern of environmental and human rights abuses around the world. In 2003 FoE issued an alternative annual report on the company and staged a protest at its annual meeting in London.

In 2007 the Shell Accountability Coalition issued an updated counter-report that looked at the Sakhalin controversy noted above, the Nigeria controversy described in the Human Rights section below and other environmental issues involving its SAPREF refinery joint venture in South Africa, its planned Corrib gas pipeline and refinery project in Ireland, its Pandacan joint venture oil depot in a heavily populated section of Manila in the Philippines, and lingering contamination from formerly owned facilities in places such as Sao Paulo, Brazil; Curaçao, Netherland Antilles; and Barbados. The campaigners called on the company to use some of its record profits to “clean up its mess.”

A 2009 report called Shell’s Big Dirty Secret published by Friends of the Earth Europe concluded that it is “the most carbon intensive oil company in the world.”

Among other things, that report based its conclusion on Shell’s large role in the highly controversial Canadian tar sands projects. Shell owns 60 percent of the huge Athabasca Oil Sands project in Alberta (Chevron and Marathon have the rest). It also controls two smaller projects called Peace River and Cold Lake.

Numerous analyses have found that using tar sands as a fuel source requires massive quantities of natural gas, making the entire process highly inefficient. It also results in large emissions of greenhouse gases. A report by WWF and the Pembina Institute called tar sands “among the most environmentally costly sources of transport fuel in the world.”

In 2009 opponents tried to get Canadian regulators and then the courts to block Shell’s plan to expand its tar sands operations but were unsuccessful. In September and October 2009 Greenpeace protesters staged a series of occupations and other actions at Shell’s tar sand facilities.

In August 2011 a Royal Dutch Shell pipeline off the coast of Scotland leaked some 1,300 barrels of oil in the worst North Sea oil spill in a decade. The incident occurred as the company was seeking a license from U.S. officials for drilling off the coast of Alaska.

In September 2012, after a spill containment dome was damaged during a testing accident, Shell announced that it would delay the start of its drilling in the Alaskan Arctic until 2013. Right at the beginning of that year, a drilling rig owned by Shell broke loose from a tug that was pulling it to a maintenance facility and crashed into an uninhabited island off the southern coast of Alaska. The company then said it would put off drilling in the Arctic for at least the rest of the year.

The U.S. Interior Department announced in March 2013 that Shell would not be allowed to resume drilling until it demonstrated to federal regulators that it had adequate controls in place. "Shell screwed up in 2012," declared Interior Secretary Ken Salazar, "and we're not going to let them screw up whenever their pause is removed."

See also the discussion of Nigeria in Human Rights section.

 

Labor

Shell Oil, the company’s U.S. subsidiary, was one of the main targets when union organizing among American oil workers began to escalate in the 1920s. The company fought against union recognition, but later changed its tack, focusing instead on creating easily controlled employee associations. It was not until the 1940s that these independent unions began to ally themselves with the Oil Workers International Union. Eventually, the large majority of Shell workers in the United States came under the protection of contracts with the Oil, Chemical and Atomic Workers, which later became part of the United Steelworkers union.

During the 1980s Royal Dutch Shell came under fire from unions around the world because of its involvement in South Africa. Labor organizations in many countries supported a boycott of the company's products, both as a way of opposing apartheid and because they accused Royal Dutch Shell of engaging in union-busting at the Rietspruit coal mine in South Africa. The management of the mine, half owned by a Royal Dutch Shell subsidiary, suspended four shop stewards affiliated with the National Union of Mineworkers in 1985 because of a memorial service held during working hours for a mineworker who had been killed in an accident at the facility. When 800 miners walked off the job in protest, they were attacked with rubber bullets and tear gas. More than 80 of the more militant workers were fired and evicted from their homes; the rest were forced back to work at gunpoint.

During the early 1990s Royal Dutch Shell was the target of a boycott and other pressure tactics used by British unions to protest the company’s decision to withdraw union recognition for several hundred workers at its Shell Haven refinery in Essex.

In 2009 workers at Shell’s refinery in Sydney, Australia rejected an effort by management to go around the union (the CFMEU) and negotiate concessionary contract terms directly with the rank and file. The company subsequently abandoned its union-busting drive and reached a settlement with the union that was ratified by the workers.

 

Human Rights 

During the 1980s Royal Dutch Shell became the target of a widespread campaign to pressure the company to end its extensive oil, chemical and coal business in South Africa. The company was accused of violating the United Nations embargo on the import of oil into the white-ruled country and of supplying oil products to the South African military and police.

In 1986 the AFL-CIO and other labor organizations in the United States joined with anti-apartheid groups in launching a consumer boycott of Shell products, the first such action against a company because of its South African operations. In 1987 Shell Oil mounted a counter-campaign, code-named the Neptune Strategy, to enlist the support of mainstream labor and religious leaders to defuse the boycott. When the plan came to light, it only served to fuel the efforts against Shell. In 1991 the governor of New Jersey barred Shell service stations from the New Jersey Turnpike because of its South African connection.

In the early 1990s Shell began to face protests over its oil operations in Nigeria. In 1994 the Movement for the Survival of the Ogoni People, then led by Ken Saro-Wiwa, began blockading contractors working on Shell’s facilities to bring attention to the large number of pipeline ruptures, gas flaring and other forms of contamination that were occurring in the Ogoniland region. The group described Shell’s operations as “environmental terrorism.”

The operations also failed to do much to improve living standards for the local population. The protests caught the attention of the Wall Street Journal, which in May 1994 published a front-page story headlined “Shell’s Nigerian Fields Produce Few Benefits for Region’s Villagers.”

The Nigerian government, a partner with Shell in the operations, responded to the protests with a wave of repression, including the arrest of Saro-Wiwa, who was hanged in 1995. Shell denied it was involved, but critics pointed to the role played by the company in supporting the military dictatorship. Protests against the company continued. In 1996 the New York Times published a front-page story about the controversy containing a photograph of a hooded mannequin representing Saro-Wiwa that Greenpeace had hung from an elevated sign at a service station in San Francisco.

A lawsuit brought on behalf of the Saro-Wiwa family was later filed in U.S. federal court under the Alien Tort Claims Act. In June 2009, just before a trial was set to begin, the company announced that as a “humanitarian gesture” it would pay $15.5 million to the plaintiffs to settle the case. An August 2011 United Nations estimated that an environmental cleanup of the Niger Delta would cost $1 billion and take 30 years.

A separate Alien Torts Claims case brought on behalf of the Ogoni people against Royal Dutch Shell in 2002 made its way through the U.S. legal system to the Supreme Court, which in April 2013 ruled that the U.S. courts could not be used to bring claims against overseas acts by foreign companies.

Yet another case--this one brought by Friends of the Earth Netherlands and four Nigerian farmers--was filed in a Dutch court, alleging that spills from Shell pipelines damaged the livelihood of the farmers. The case, which represented the first time a Dutch multinational has been sued in the Netherlands for overseas activities, was mostly dismissed in early 2013.

 

False Reporting and Corruption 

In 2004 Royal Dutch Shell admitted that it had overstated its proven oil and natural gas reserves by 20 percent. This prompted an investigation by the U.S. Securities and Exchange Commission and a decision by the twin boards of the company to oust chairman Philip Watts, who was replaced by Jeroen van der Veer. It later came out that top executives, including van der Veer, knew of the deception about the reserves back in 2002. The company ended up paying penalties of about $150 million to U.S. and British authorities.

Reports released in September 2008 by the Inspector General of the U.S. Department of the Interior listed Shell Oil as one of the companies that made improper gifts to agency employees involving in overseeing offshore oil drilling.

In November 2010 Royal Dutch Shell was one of a group of seven companies that paid a combined $236 million to U.S. authorities to settle charges of having violated the Foreign Corrupt Practices Act by bribing foreign officials to expedite the importation of oil drilling equipment into countries such as Nigeria, Brazil and Angola.

 

Subsidies

In 2012 Pennsylvania awarded Royal Dutch Shell a $1.7 billion, 25-year tax credit for a "cracker" refinery it planned to build in the state.

 

Watchdog Groups and Campaigns

Corporate Watch

EarthRights International

EarthWorks

Environmental Rights Action, Friends of the Earth Nigeria

Friends of the Earth Europe

Friends of the Earth International

Greenpeace

International Federation of Chemical, Energy, Mine and General Workers’ Unions

Natural Resources Defense Council

Oil Change International

Oilwatch International

Pacific Environment

Publish What You Pay

Sakhalin Environment Watch

SOMO-Centre for Research on Multinational Corporations

Transparency International

 

Key Books and Reports

A History of Royal Dutch Shell (a 4-volume authorized history) by Stephen Howarth (2007)

Behind the Shine: The Other Shell Report by Friends of the Earth and others (2003)

Enterprise in Oil: A History of Shell in the United States by Kendall Beaton (1957)

Lessons Not Learned: The Other Shell Report by Friends of the Earth (2004)

Nigeria: Petroleum, Pollution and Poverty in the Niger Delta by Amnesty International (2009)

Riding the Dragon: Royal Dutch Shell and the Fossil Fire by Jack Doyle (2002)

Risky Business: The New Shell by WWF-UK (2005)

Royal Dutch Shell: Overview of Controversial Business Practices in 2009 (SOMO, May7 2010). Also see SOMO's 2008 report.

Shell: 100 Years is Enough by Corporate Watch (UK)

Shell’s Big Dirty Secret by Friends of the Earth Europe (2009)

The Americanization of Shell: The Beginnings and Early Years of Shell Oil Company in the United States by Harry Bridges (Newcomen Society, 1972)

The Seven Sisters: The Great Oil Companies and the World They Made by Anthony Sampson (1975)

Use Your Profit to Clean Up Your Mess by the Shell Accountability Coalition (2007)

Note: This page draws from a corporate profile originally prepared by the author for the Crocodyl website in October 2009.

Last updated April 18, 2013.