You’re leaving money on the table, and exposing your portfolio to severe risks that the company itself is underestimating. That’s according to a new report published by the Carbon Tracker Initiative, which finds that the stock’s recently sub-par performance can partially be explained by the company’s increasing dependence on tar sands.
Carbon Tracker says that Exxon is “significantly underestimating the risks to its business model from investments in higher cost, higher carbon reserves; increasing national and subnational climate regulation; competition from renewables; and demand stagnation.”
Back in March, Exxon responded to a shareholder resolution by Arjuna Capital and As You Sow, two shareholder advocacy organizations, regarding potential carbon asset risk. The original resolution had demanded greater transparency in how Exxon assesses the risks to its significant carbon-based assets in a future where low-carbon policies and changing market forces could strand these assets. Exxon responded with a 29-page report, “Energy and Carbon – Managing the Risks.”
The Carbon Tracker Initiative closely examined Exxon’s report and has now published a firm rebuttal.
On Friday May 30, just a few days before the U.S.Environmental Protection Agency announced details of its carbon rule proposal, the Obama Administration awarded offshore oil leases to ExxonMobil in an area of the Gulf of Mexico potentially containing over 172 million barrels of oil.
The U.S. Department of Interior's (DOI) Bureau of Ocean Energy Management (BOEM) proclaimed in a May 30 press release that the ExxonMobil offshore oil lease is part of “President Obama’s all-of-the-above energy strategy to continue to expand safe and responsible domestic energy production.”
It’s been over five weeks since ExxonMobil’s Pegasus pipeline burst beneath a Mayflower, Arkansas subdivision, spilling diluted bitumen born of tar sands throughout the neighborhood. Five weeks later, and still the air carries noxious fumes. Residents complain of headaches, nausea, and worse.
Meanwhile, these residents of Mayflower are getting mixed signals from various state agencies, as well as the EPA and ExxonMobil.
While Exxon, the EPA, the Arkansas Department of Environmental Quality (ADEQ), and the Arkansas Department of Health are assuring the community that the air is safe, Arkansas’s Attorney General Dustin McDaniel isn’t so sure.
“As we met with residents and groups that represent them, like Remember Mayflower, I heard time and time again about their health, especially the health of their children,” McDaniel said last week. “Many continue to suffer from headaches and nausea and air sampling continues to show that the carcinogen benzene remains in the air.”
A tax loophole exempting tar sands pipeline operators from paying an eight-cent tax per barrel of oil they transport in the US is costing the federal Oil Spill Liability Trust Fund millions of dollars every year. With expected increases in tar sands oil production over the next five years, this loophole may have deprived US citizens of $400-million dollars worth of critical oil-spill protection funds come 2017.
According to a report by the USNatural Resources Committee the federal government pays for immediate oil-spill response from the Liability Trust Fund which is supported by an excise tax on all crude oil and gas products in the US.
But in 2011 the Internal Revenue Service exempted tar sands oil from the tax, saying the substance did not fit the characterization of crude oil.
This exemption has come under scrutiny this week after Exxon Mobil's Pegasus pipeline ruptured in Mayflower, Arkansas, releasing 300,000 litres of tar sands oil and water into a residential neighbourhood and surrounding wetlands. Because the line carried tar sands-derived oil from Alberta, Exxon was exempt from paying into the spill liability fund for the corrosive fuel's potential cleanup.
ExxonMobil is getting defensive about its response plans for the tar sands pipeline spill in Arkansas. The companytook to Twitter this afternoon to respond to what it called “allegations” that Exxon isn't liable for the full costs of cleaning up their tar sands crude spill in Mayflower, Arkansas.
Here's the tweet from @exxonmobil sent in response to critics who pointed out that, because of a majorloophole that needs to be closed,bitumen is not considered crude oil, and therefore tar sands pipeline operators like Exxon aren't required to pay into the oil spill cleanup fund.
When oil and gas executives gathered in Pittsburgh, Pennsylvania to discuss the state of the industry shortly after Obama won re-election, they raised a recurring complaint.
“We now face four more years of regulatory uncertainty,” said Randy Alpert, an official with Consol energy told gathered shale gas executives.
Penny Seipel, Vice President of the Ohio Oil and Gas Association hit a similar note the very next day.
“Unfortunately, we have had quite a bit of uncertainty regarding our fiscal situation,” she said as she described proposed regulation and taxation of drilling companies in her state.
This uncertainty mantra has been trotted out by many industries facing potential oversight and is now being picked up by oil and gas: “We are not against regulation, we are against regulatory uncertainty,” the line goes. “We don’t care what the rules are,” companies say, “just tell us ahead of time and then we will follow them gladly.”
This well-worn trope gives the impression that drillers do not view regulators as adversaries. All they’re asking for is common-sense fairness. Who could be against someone asking to know what the rules are? Predictability is a reasonable request.
It's a shrewd position for the shale industry. But it’s also deeply misleading and worth flagging now since it is likely to get amplified in coming months as more attention turns to whether federal officials should step up their oversight of oil and gas drilling.
Note: This post is part of an ongoing series about North American pipelines. For an introduction and links to the wide-ranging coverage–from safety to legal issues to the business and economics to vulnerabilities–see this regularly-updated intro post.
On Monday, the House passed a bill that would force the Obama administration to make a final decision on TransCanada’s controversial Keystone XL pipeline by November 1. The Keystone XL project (which regular DeSmogBlog readers should be familiar with) would funnel tar sands oil from Alberta’s massive reserves down to Gulf Coast refineries in Texas.
This isn’t the place to discuss in too much depth the various and plentiful problems with Alberta tar sands itself – from extraction to transportation to refining to combustion, it’s the dirtiest oil on the planet. From a climate perspective, the Alberta tar sands contain enough carbon to lock the planet into climate chaos. In the words of NASA climatologist Jim Hansen, “if the tar sands are thrown into the mix it is essentially game over.”
But since this is a post about pipelines, I’m going to focus on how tar sands pipelines are different than those that carry conventional crude, how they’re much more prone to leaks and spills, and how those spills are particularly bad for the environment.
As we’ve reported over and over again, the popular and successful Regional Greenhouse Gas Initiative (RGGI) and other regional climate agreements are under attack from polluters. Today, a bombshell report by Bloomberg News makes it undeniably clear who is leading the attack, and paints an ugly picture of collusion, influence, and state legislators deep in the pocket of the fossil fuel industry.
The report shines a light on the American Legislative Exchange Council (ALEC), which serves as a drafting board for industry-friendly state legislation and then subsequently as a sort of mixer for corporations and state politicians who are willing to accept financial favors to bring these copy-and-paste laws back to their home states.
The opportunity for corporations to become co-authors of state laws legally through ALEC covers a wide range of issues from energy to taxes to agriculture. The price for participation is an ALEC membership fee of as much as $25,000 – and the few extra thousands to join one of the group’s legislative-writing task forces. Once the “model legislation” is complete, it’s up to ALEC’s legislator members to shepherd it into law.
Fitzpatrick calls out Exxon Mobil and Koch Industries as two companies whose handwriting (forget fingerprints) are all over the template legislation that forces states out of their regional climate agreements.
A new poll suggests that Pennsylvanians are supportive of unconventional gas drilling in their state. Not because it is safe, but because they are convinced the economic benefits outweigh the risks to public health, water supplies and the environment. This kind of reasoning indicates that gas industry rhetoric is having an impact: advertise the benefits, downplay the risks, convince people that you know what you’re doing and there’s nothing to worry about.
And this is just what the industry has done.
According to the Pittsburgh Tribune-Review, Pennsylvanians are a receptive audience to the extensive public relations campaigns waged by gas interests to confuse the public on the contentious issue of unconventional gas drilling. Between Exxon Mobil’s commercials, Chesapeake Energy’s first-person testimonials from “true Pennsylvanians,” and the Pennsylvania Independent Oil and Gas Association’s billboards lining the highway, industry is leaving no public opinion stone unturned.
Republican Representative David McKinley from West Virginia has proposed a bill that would prohibit the Environmental Protection Agency (EPA) from regulating toxic coal ash. The EPA has not yet made a decision on whether or not to classify coal ash as toxic, but reports show that the substance poses significant risks to human health.
McKinley is the sponsor of HR 1391, formally known as Recycling Coal Combustion Residuals Accessibility Act of 2011, a bill that would strip the EPA of their ability to exempt toxic coal ash from the EPA’s “Subtitle C” classification. Subtitle C lays out the guidelines that the agency follows in order to regulate toxic substances from “the cradle to the grave,” meaning that they provide oversight throughout the cycle of any form of hazardous waste. It also gives the agency the authority to conduct periodic inspections of plants producing hazardous wastes, as well as providing states and cities with training programs in how to manage these wastes.
Democracy is utterly dependent upon an electorate that is accurately informed. In promoting climate change denial (and often denying their responsibility for doing so) industry has done more than endanger the environment. It has undermined democracy.
There is a vast difference between putting forth a point of view, honestly held, and intentionally sowing the seeds of confusion. Free speech does not include the right to deceive. Deception is not a point of view. And the right to disagree does not include a right to intentionally subvert the public awareness.