PROPOSAL 4: REPORT ON RISKS OF GULF COAST PETROCHEMICAL INVESTMENTS
As You Sow, on behalf of Amy Devine
and Douglas Triggs, owners of 27 shares of Phillips 66 common stock, and the Rita K. Devine Irrevocable Trust, owner of 20 shares of Phillips 66 common stock, notified us that they intend to submit the following proposal at this
years Annual Meeting. We will furnish the address of the proponents upon request. In accordance with federal securities regulations, we have included the text of the proposal and supporting statement exactly as submitted by the proponent. We
are not responsible for the content of the proposal or any inaccuracies it may contain.
As explained below, your Board recommends that you vote AGAINST this shareholder proposal.
RESOLVED: Shareholders request that Phillips 66, with board oversight, publish a
report, omitting proprietary information and prepared at reasonable cost, assessing the public health risks of expanding petrochemical operations and investments in areas increasingly prone to climate change-induced storms, flooding, and sea level
rise.
Supporting Statement: Investors request the company assess, among other
related issues at management and Board discretion: The adequacy of measures the company is employing to prevent public health impacts from associated chemical releases.
WHEREAS: Investors are concerned about the financial, health, environmental, and
reputational risks associated with operating and building-out new chemical plants and related infrastructure in Gulf Coast locations increasingly prone to catastrophic storms and flooding associated with
climate change. Chevron Phillips Chemical Company (CPChem), owned jointly by Phillips 66 and Chevron, is a major petrochemical producer in the Gulf Coast.
Petrochemical facilities like ethane crackers and polyethylene processing plants produce dangerous pollutants including benzene (a known carcinogen), Volatile Organic
Compounds, and sulfur dioxide. These operations can become inundated and pose severe chemical release risks during extreme weather events. Flooding from Hurricane Harvey in 2017 resulted in CPChem plant shut downs and the release of unpermitted,
unsafe levels of pollutants. Nearby Houston residents reported respiratory and skin problems following CPChems releases during Hurricane Harvey.
Growing
storms and the costs they bring our company are predicted to increase in frequency and intensity as global warming escalates. Recent reports show that greenhouse gas emissions throughout the petrochemical and plastic supply chain contribute
significantly to climate change, exacerbating the threat of physical risks such as storms. Flood-related damage is projected to be highest in Texas, where many of CPChems petrochemical plants are concentrated, and Houston alone has seen three 500-year floods in a three-year span. Phillips 66 cited Hurricane Harvey as a major reason for a $123 million decrease in pre-tax income from its chemicals segment in
2017.
Civil society groups have mobilized to oppose the expansion of petrochemical facilities in their communities due to concerns regarding direct health and
livelihood impacts from air and water pollutant releases. Such opposition threatens to jeopardize CPChems social license to operate in the region. Historically, releases from CPChems petrochemical operations have exceeded legal limits,
exposing the company to liability. As climate change intensifies flooding and storm strength, the potential for unplanned chemical releases grows.
In spite of
these risks, CPChem has accelerated its petrochemical activity in the Gulf Coast, investing heavily to expand in flood-prone areas of Texas. The company has generally disclosed that physical climate-related risks may impact its business and that it
has a risk management system to plan for resiliency. The impacts to CPChems operations from Hurricane Harvey, however, indicate the companys level of preparedness is insufficient. While the Company rapidly expands its petrochemical
assets in climate-impacted areas, investors seek improved disclosure to understand whether CPChem is adequately evaluating and mitigating public health risks associated with climate-related impacts and the dangerous chemicals it uses.
Board of Directors Response
YOUR
BOARD RECOMMENDS THAT YOU VOTE AGAINST THE PROPOSAL.
Chevron Phillips Chemical Company (CPChem), a joint venture in which Phillips 66 holds a
50% equity investment, maintains internal processes, procedures and policies relating to project development, health and safety, and risk management and mitigation. These practices are designed to ensure that any potential public health risk of
CPChems expansion of petrochemical operations and investments can be managed to safe and acceptable levels. CPChem publicly discloses information on its website about its performance and efforts in the following areas: health and safety,
resource efficiency, emissions, integrity and compliance, product responsibility, social enrichment and economic performance. Therefore, the report requested by the proponent is not necessary.
58 2020 PROXY STATEMENT