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Last Updated: Thursday, 28 October, 2004, 11:46 GMT 12:46 UK
Can Shell placate environmental critics?

By Paul Mason
Business correspondent, Newsnight

Port Arthur is part of a coalition of "fenceline communities" demanding Shell curbs emissions
Residents of Port Arthur, Texas, claim the Shell-owned oil refinery bordering their town is damaging their environment and health.

With a major restructure underway after being caught mis-stating its oil reserves, how did a small US town's problems shoot to the top of Shell's corporate agenda?

Oil built Port Arthur.

It was the nearest port to the first Texan oil gusher in 1901. By 1903 Texaco had built its first refinery here.

And it is this refinery, branded Motiva and now owned 50-50 by Shell and the Saudi Government, that has borne the brunt of the community campaigns. Despite the fact there are five oil facilities in the town.

The Westside district of Port Arthur is surrounded on two sides by miles of distillation stacks and the oil terminal on the third.

How it got that way is a story of the Deep South: oil was powerful, Westside was black.


In 1911 the city ruled all its black residents should move into Westside. The law was overturned in 1915, but the segregation policy of the Deep South ensured Westside remained African-American until the early 1970s.

Port Arthur resident Hilton Kelley
Hilton Kelley claims Port Arthur has been "devastated by pollution"
"We had a great community one time," says Hilton Kelley "Sandwich shops, taxi stands, nightclubs - we had all these things. Now it's devastated by pollution.

"Many of the residents have died from cancer - kids have moved away - they no longer want to live here."

Hilton, together with 1,200 residents of Port Arthur, has launched a class action lawsuit against Shell, claiming breach of environmental human rights. So what are the facts?

When I arrived one thing was obvious - the smell. Added to the 90 degree heat and 80 per cent humidity, the sweet gasoline taste catches the back of your throat.

According to a study in the year 2000, Westside residents have levels of respiratory disease and immune-system problems way above those of a similar control group sited 60 miles away.

When a federal air quality van toured the area in January 2003, it found hot spots of cancer-causing and toxic chemicals.

But - and this is a big but - the 2003 study ruled out Motiva as the source, because of wind direction.

In addition, one of the most harmful chemicals identified- vinyl chloride - is not produced in the oil refinery business. Scientists called for a further study.

Economic impact

Linking specific health problems to pollution, and pollution to a specific refinery is difficult: but the economic impact of the way people feel about the pollution is obvious.

Downtown Port Arthur is a wasted landscape of smashed shops, derelict hotels, closed nightclubs - a virtual museum of the raucous decade that produced the town's most famous daughter, Janis Joplin.

Businesses have left the area, together with about 10 per cent of the town's population, since 1980.

Community groups and activists across the globe realise the multinational game is not just for corporations
Nathalie Walker, lawyer and campaign co-ordinator
But Port Arthur is part of a global coalition of what the industry calls "fenceline communities" that took centre-stage at Shell's AGM this year. Activists brought together by Friends of the Earth came to London from Louisiana, the Niger Delta, Sakhalin Island in east Russia, and Durban, South Africa.

The environmental complaints are, in some cases, decades old. It's the global coalition that's new - and its ability to get a hearing from the fund managers who hold millions of pounds worth of Shell shares.

"The bottom line is that community groups and activists across the globe realise the multinational game is not just for corporations," says Nathalie Walker, a Louisiana lawyer who helps co-ordinate the campaign.

"They are now going to get worldwide coalitions they have to answer to, " she says, "and its going to be better for everyone - no more piecemeal answers to problems."

Motiva's environmental manager, Rick Strouse, insists the company is doing all it can. They've just installed technology to control flaring at the plant that cost them $30m and reduced emissions by 90%.

He says he'd be happy to live and bring up kids alongside the plant and attributes some of the community worry to lack of knowledge about what exactly an oil refinery does.

With the court case still pending, Shell can't speak about the specifics of the case. It denies its emissions are causing ill health. It says the Motiva refinery is now in compliance with the USA's Clean Air Act.

So, in the bigger picture, the problem is one of trust.

Social responsibility

Houses and the refinery in Port Arthur
Can Shell win back the community's trust?
Shell's former chairman, Sir Philip Watts, pioneered a high profile policy to put the company at the forefront of the social responsibility and sustainable development movement.

But Sir Philip resigned in March after the company revealed it had seriously overstated its oil reserves. Shell was fined $120m.

Hilton is not slow to ask the question: "If they lied about the reserves, what else did they lie about?"

I came away from Port Arthur thinking that the question for Shell is how it got itself into trouble with a tiny and relatively powerless community - and how does it win back their trust?

When Shell bought the Motiva business, in 2001, it was a period of optimism and its strategy was expansion. Now - with its shares trailing behind others in the oil sector despite high oil prices - Shell is seen as a target for hostile takeover.

Meanwhile, the rules of the game in large corporations have changed. Scandal after scandal has redrawn the landscape - altering the balance of power between shareholders, managers and the wider society.

Shell's bosses have to face both forces at once. They know they have to move fast to keep ahead of the changing expectations society has of big business.

They question is, can they move fast enough?

Paul Mason's report was screened on Thursday, 28 October, 2004.

Newsnight is broadcast on BBC Two at 2230 BST every weeknight in the UK.

How a small US town's problems shot to the top of Shell's corporate agenda

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