WASHINGTON - Two years ago, a group of the world’s largest oil companies announced a major commitment to fight climate change, promising to reduce methane emissions from their operations by 20 percent within seven years.
But the Oil and Gas Climate Initiative, whose members include Exxon Mobil, Royal Dutch Shell and Occidental Petroleum, inserted a little-noticed footnote explaining that the commitment only extended to their “operated oil and gas assets.” That designation, in many cases, excluded more than half the companies’ oil and gas production, which comes from joint ventures in which their partners manage day-to-day operations, according to a new report by the Environmental Defense Fund.
That largely leaves national oil companies in the Middle East, Africa and Russia, with which American and European companies often partner, a license to pollute at will.
“They essentially created a loophole on methane targets,” said Ben Ratner, a senior director at EDF. “They are taking the profit from those joint ventures, but they’re ignoring the emissions.”
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The Oil and Gas Climate Initiative declined to comment. But the American Petroleum Institute, which represents all but one of the companies in the initiative, said western companies are limited in their ability to set standards for overseas partners, many of which are not subject to the same investor and political pressures as companies the United States and Europe.
“It’s a more significant challenge when you’re working in partnership,” said Aaron Padilla, API’s manager of climate policy. “You’re not able to be as ambitious as you can be on your own operations.”
The revelation about methane emissions comes as energy companies increase efforts to prove their clean energy bonafides and satisfy investors concerned about the survival of the industry in a low-carbon future. Governments worldwide are cracking down on greenhouse gas emissions.
Methane, which leaks from drilling equipment and pipelines, is of particular concern. The Environmental Protection Agency says the gas warms the planet at 25 times the rate of carbon dioxide over the first 100 years it’s in the atmosphere.
But as companies trumpet one climate change goal after another, determining which companies are taking the issue seriously has become difficult. For instance, industries tend to focus on emissions from their own factories and facilities while ignoring the environmental damage caused by their products, such as emissions from gasoline-burning cars, said Andrew Logan, oil and gas director at CERES, a nonprofit that advises on sustainable investing.
“Depending on the company, their total emissions might be eight times the size of their operational emissions,” he said. “There’s so much focus on the details of targets and how companies are going to meet them and too little on what these targets actually include.”
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Several organizations rate companies on their so-called Environment-Sustainability-Governance performance, but it’s not unusual for a company to do well in one rating and poorly in another, experts say. Whether investors care if companies are making significant progress in addressing climate change or merely ticking boxes remains unclear.
A report by Deutsche Bank last year found that companies receiving positive press about climate efforts outperformed their peers on the stock market. But news organizations are not necessarily vetting companies’ claims, let alone comparing the climate programs of different companies, potentially giving investors a rosier picture.
“It's difficult to say just what investors think about the issue of climate control itself, let alone whether they value transparency on it or not,” said Ehud Ronn, a finance professor at the University of Texas. “Ideally, we'd like to see whether investors penalize companies for investing too little, or too much, in climate mitigation efforts.”
For now, the financial sector is increasing its commitment to climate change - at least on its face.
When the Trump administration announced plans earlier this year to limit pension plans and 401K funds from applying sustainability goals in their decision making, financial firms including Fidelity Investments of Boston and BlackRock of New York spoke out in opposition.
More: Read the latest oil and gas news from HoustonChronicle.com
The New York bank JP Morgan announced this month it was realigning its investment strategy with the Paris agreement on climate change, with the goal of getting the companies in its investment portfolio to net-zero greenhouse gas emissions by 2050.
Such actions are getting the attention of publicly traded oil companies, eager to prove themselves serious about the issue at a time when the future of their industry is uncertain and investors are losing confidence in the sector.
Chevron, the U.S. oil major, has said it will include both its operated and non-operated production in its emissions targets — the only major oil company to do so, according to the Environmental Defense Fund.
BP announced last month it would use on-site measurements rather than estimates in its methane reporting. Sayma Robbie, a BP senior vice president, even wrote the foreword to Environmental Defense Fund, acknowledging that “non-operated joint ventures make up a significant portion of our production” and pledging that BP would pressure overseas partners to set targets for reducing methane emissions.
So far, the national oil companies to join the Oil and Gas Climate Initiative are Saudi Aramco, the China National Petroleum Corp. and Petrobras in Brazil.
james.osborne@chron.com
Twitter.com/@osborneja
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