ACCR Shareholder Resolutions to Origin Energy on lobbying and consent for fracking

The Australasian Centre for Corporate Responsibility (ACCR) has filed Shareholder Resolutions to Origin Energy Limited (ASX: ORG) on two important issues for shareholders: climate related lobbying, and the processes to obtain free, prior and informed consent (FPIC) to undertake hydraulic fracturing from Aboriginal Native Title holders and claimants. Origin Energy accepted the resolutions, and they were voted on at Origin's AGM on October 20, 2020.

Resolution 1, to Amend Constitution to permit advisory resolutions, received 9.16% support.

Resolution 2, on consent and fracking, received 11.8% support.

Resolution 3, on Lobbying related to COVID-19 recovery, received 25.25% support.

This page contains the resolutions and their supporting statements, and will be updated with links to news and additional briefings about this engagement.

Contents

1. Resolution 1

   • Special resolution to amend our company’s constitution
   • Supporting statement to Resolution 1

2. Resolution 2

   • Ordinary Resolution on Consent and Fracking
   • Supporting statement to Resolution 2

3. Resolution 3

   • Ordinary resolution on lobbying and COVID-19 recovery
   • Supporting statement to Resolution 3

Resolution 1

Special resolution to amend our company’s constitution

Shareholders request that the following new clause 8.11 be inserted into our company’s constitution:

Member resolutions at general meeting

The shareholders in general meeting may by ordinary resolution express an opinion, ask for information, or make a request, about the way in which a power of the company partially or exclusively vested in the directors has been or should be exercised. However, such a resolution must relate to an issue of material relevance to the company or the company's business as identified by the company, and cannot either advocate action which would violate any law or relate to any personal claim or grievance. Such a resolution is advisory only and does not bind the directors or the company.

Supporting statement to Resolution 1

Shareholder resolutions are a healthy part of corporate democracy in many jurisdictions other than Australia. As a shareholder, the Australasian Centre for Corporate Responsibility (ACCR) favours policies and practices that protect and enhance the value of our investments.

The Constitution of our company is not conducive to the right of shareholders to place ordinary resolutions on the agenda of the annual general meeting (AGM). In our view, this is contrary to the long-term interests of our company, our company’s Board, and all shareholders in our company.

Australian legislation and its interpretation in case law means that Australian shareholders are unable to directly propose ordinary resolutions for consideration at Australian companies’ AGMs. In Australia, the Corporations Act 2001 provides that 100 shareholders or those with at least 5% of the votes that may be cast at an AGM with the right to propose a resolution^[1]. However, section 198A specifically provides that management powers in a company reside with the Board^[2].

Case law in Australia has determined that these provisions, together with the common law, mean that shareholders cannot by resolution either direct that the company take a course of action, or express an opinion as to how a power vested by the company’s constitution in the directors should be exercised^[3].

Australian shareholders wishing to have a resolution considered at an AGM have dealt with this limitation by proposing two part resolutions, with the first being a ‘special resolution,’ such as this one, that amends the company’s constitution to allow ordinary resolutions to be placed on the agenda at a company’s AGM. Such a resolution requires 75% support to be effective, and as no resolution of this kind has ever been supported by management or any institutional investors, none have succeeded.

It is open to our company’s Board to simply permit the filing of ordinary resolutions, without the need for a special resolution. We would welcome this, in this instance. Permitting the raising of advisory resolutions by ordinary resolution at a company’s AGM is global best practice, and this right is enjoyed by shareholders in any listed company in the UK, US, Canada or New Zealand.

We note that the drafting of this resolution limits the scope of permissible advisory resolutions to those related to “an issue of material relevance to the company or the company's business as identified by the company” and that recruiting 100 individual shareholders in a company to support a resolution is by no means an easy or straightforward task. Both of these factors act as powerful barriers to the actualisation of any concern that such a mechanism could ‘open the floodgates’ to a large number of frivolous resolutions.

ACCR urges shareholders to vote for this proposal.

Resolution 2

Ordinary Resolution on Consent and Fracking

Shareholders request that the Board commission an independent review of the process undertaken by its predecessor(s) to obtain free, prior and informed consent (FPIC) from Aboriginal Native Title holders and claimants on whose lands our company intends to undertake hydraulic fracturing (Fracking) in the Beetaloo Sub-Basin (FPIC Review).

Shareholders request that the FPIC Review be summarised in a report to be made available on the company website by 30 June 2021 (Report). The Report should be prepared at reasonable cost and omit confidential information.

Supporting statement to Resolution 2

Background

This is the third consecutive year that ACCR and co-filing shareholders raise the concerns of affected Native Title holders and claimants for consideration at our company’s Annual General Meeting (AGM). Native Title holders affected by our company’s exploration permits expressed their concerns directly to our Chairman at the 2018^[4] and 2019^[5] AGMs. These concerns have persisted, despite our company’s assertions that it enjoys Native Title holders’ and claimants’ consent^[6]. Aboriginal communities in the Beetaloo Sub-Basin continue to resist our company’s planned hydraulic fracturing (Fracking) activities in the region.

Free, Prior and Informed Consent (FPIC) should be fundamental to the relationship between companies and First Nations peoples on whose land companies intend to operate. Shareholders need only look to Rio Tinto’s destruction of Juukan Gorge for iron ore mining to observe the serious consequences that can attach to failing to respect First Nations peoples’ human rights. Rio Tinto has been the subject of significant negative attention and sustained scrutiny from the public, media, the Australian Parliament, and its shareholders since the detonation of significant sites in May 2020, contrary to Native Title holders’ wishes^[7].

Our company has stated that “[its] activities will be guided by” the United Nations’ Guiding Principles on Business and Human Rights (UNGPs) as well as the UN Declaration on the Rights of Indigenous Peoples (UNDRIP)”^[8]. FPIC is central to the UNDRIP and is recognised in international law. Non-establishment of FPIC or any of its elements poses significant risks to our company. Human rights commitments must be matched with action, even, or perhaps especially, when that action is inconvenient.

We are concerned that our company’s commitments are not borne out in relation to our company's proposed Fracking activities on Aboriginal land in the Northern Territory, exposing our company to risk. In the present context, a cautious and diligent approach is warranted.

Concerns about Fracking in the Beetaloo Sub-Basin

We are concerned that our company continues to state that Native Title holders have consented to Facking activites on their land, in the face of persistent, consistent objections by affected Native Title holders and claimants.

Our company did not itself negotiate consent agreements with affected Native Title holders (Agreements) for the grant of the Permits that it now holds in the Beetaloo Sub-Basin (Permits). Rather, our company acquired its interest in the Permits (most likely negotiated in the early 2000s, and granted around 2005) from either or both of Sweetpea Pty Ltd and Falcon Oil & Gas Ltd.

The circumstances in which Sweetpea/Falcon obtained the Agreements carry risks that should have been the subject of careful due diligence before our company acquired its interest in the Permits. In particular, confirmation of Native Title holders’ and claimants’ informed consent under the Agreements to the range of Fracking and related activities now proposed by the company should have been, and should now be, a matter of the highest importance to our company.

A recent review of publicly available information about consent processes in the Northern Territory^[9], including the findings of the Hawke^[10] and Pepper^[11] inquiries, raises the concerning prospect that some if not all petroleum exploration permits in the NT that enable Fracking have been issued without FPIC.

Our request for an independent review is reasonable and proportionate to the risks at hand and the significant capital expenditure planned on Fracking activities in the Beetaloo Sub-Basin.

ACCR urges shareholders to vote in favour of this proposal, in order to protect our company’s reputation and economic interests.

Resolution 3

Ordinary resolution on lobbying and COVID-19 recovery

Shareholders request that the Board undertake, as soon as practicable, a review of advocacy activities undertaken by our company’s Industry Associations relating to economic stimulus measures in response to COVID-19.

Shareholders recommend that our company suspend, for a period deemed suitable by the Board, membership of Industry Associations where the review demonstrates, on balance, a record of advocacy inconsistent with the Paris Agreement’s goals^[12].

Nothing in this resolution should be read as limiting the Board’s discretion to take decisions in the best interests of our company.

Supporting statement to Resolution 3

Shareholders affirm our company’s commitment to the goals of the Paris Agreement and welcome its commitment to net zero emissions in the electricity sector by 2050^[13]. However, all sectors need to reach net zero emissions by 2050, not just electricity. In recent years, national policy to reduce emissions in Australia has stalled or regressed. Our company’s lobbying on climate and energy policy continues to have a far greater impact on our national emissions trajectory than any reduction in emissions our company can achieve on its own.

The COVID-19 pandemic has had an unprecedented impact on the global economy. We recognise and commend efforts by our company’s management to deal responsibly with this complex situation. In contrast, the advocacy by two of our company’s industry associations, in particular, in response to the COVID-19 crisis, has been predatory. The Australian Petroleum Production and Exploration Association (APPEA) and the Queensland Resources Council (QRC) have sought to weaken regulation and further entrench fossil fuels in economic recovery agendas.

Predatory advocacy

In response to the COVID-19 pandemic, APPEA and the QRC have actively sought policy which is fundamentally inconsistent with the goals of the Paris Agreement, including demands for government subsidies and fast-tracked approvals for new fossil fuel developments, and aggressive deregulation.

• APPEA published a report in May that called for government support to develop “uneconomic or stranded” gas resources in order to extend the economic life of existing gas infrastructure^[14]. APPEA has repeatedly called for further oil and gas exploration^[15], welcomed government subsidies^[16], lobbied for weaker environmental regulation^[17], criticised the reservation of gas for domestic use^[18] and is currently running extensive pro-gas advertising in the Northern Territory ahead of its general election on 22 August^[19].
• The QRC published a report in August 2020 calling for government support of $500 million for new gas pipeline infrastructure, incentives for further coal and gas exploration, amnesties from changes to royalties and taxes, and significant deregulation of the resources industry^[20]. The QRC has also welcomed government subsidies of $125 million for fossil fuel exploration^[21] and land releases for gas exploration^[22], and called for the fast-tracking of coal mine approvals^[23].

Policy impacts

Advocacy by our industry associations has produced real world results, as was their intent. The Australian federal government is now actively pursuing a “gas-fired recovery”^[24] from the economic impact of the COVID-19 pandemic, including subsidies for new gas infrastructure, fast-tracking of project approvals, potential underwriting of new developments and aggressive deregulation^[25]. It has announced that 15 major projects will have their environmental assessments fast-tracked, including two major gas projects: Burrup Hub and the Narrabri gas project^[26]. Government advisers have also earmarked multiple new gas pipelines for taxpayer support^[27].

Our company is currently conducting an exploration program in the Beetaloo Basin^[28] in the Northern Territory. As a direct result of lobbying by our company and APPEA, the Australian federal government has included a “Beetaloo Basin Development Strategy” in its “Fair Deal on Energy” policy^[29]. The Australian federal government will provide $8.4 million “to accelerate the development of the Beetaloo Basin in the Northern Territory”^[30], and subsidies for a pipeline connecting the Beetaloo Basin to Australia’s east coast gas network have also been proposed^[31].

The Queensland government is attempting to maximise the role of the Queensland resources sector in the recovery from COVID-19^[32], having already delivered on a number of the industry’s key demands, including tax and regulatory relief^[33], and releasing more land for gas exploration^[34].

Several of our company’s industry associations also attempted to use the 10-yearly review of Australia’s Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) to argue that weaker environmental laws were necessary for economic recovery. APPEA, the Business Council of Australia (BCA) and the QRC have argued that the EPBC Act should not consider greenhouse gas (GHG) emissions in new project assessments^[35].

Insufficient governance arrangements

Our company’s 2019 review of industry associations^[36] found that APPEA “lacks details around its climate change policy principles”, and found in relation to the QRC a “lack of details around [its] position on energy and climate change”. Our company’s commitment to advocating within both of those organisations on “the need to support national targets based on climate science that are aligned to the Paris Agreement goals”^[37] has seen no improvement, and this lack of governance has had material negative consequences in relation to our company’s stated interest in policy aligned with the Paris Agreement.

If Australia is to meet its Nationally Determined Commitment (NDC) under the Paris Agreement, it cannot materially increase fossil fuel production. According to Climate Analytics, Australian government and industry plans for growth in fossil fuel production (as at July 2019) were not consistent with the global energy transition required to meet the Paris Agreement goals^[38]. This situation has been further exacerbated during COVID-19 by our company's industry associations.

Global leaders have a once in a generation opportunity to accelerate decarbonisation through wide-ranging economic policy commensurate with the seriousness of current crises. If our company is unwilling or unable to ensure that its industry associations support that transition, then shareholders recommend that membership of those groups is suspended.

ACCR urges shareholders to vote for this proposal.