Welcome to “Feet to the Fire: Big Oil and the Climate Crisis,” a biweekly newsletter in which we share our latest reporting on how the fossil fuel industry is driving climate change and influencing climate policy in five of the nation’s most important oil- and gas-producing states. In addition, we shine a spotlight on the financing of the fossil fuel industry, holding banks and other financial institutions accountable for their role and providing you with updates on their activities.
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A California County Wants to Make More Carbon, Providing a Lifeline to Oil and Gas Producers
Officials in California’s top oil-producing county have plans for an industrial park to produce renewable energy, with the goal of protecting jobs and tax revenue threatened by the decline of the oil and gas industry. Towards that goal, Kern County wants to use billions of dollars in federal tax credits to collect and bury carbon. But such carbon sequestration plans extend the life of fossil fuel producers that contribute to climate change — and produce more air pollution rather than sending clean power directly to consumers, says Stanford University engineering professor Mark Jacobson. He tells The Slick’s Aaron Cantú that Kern’s carbon park has “no purpose except to keep the oil and gas companies in business.”
Climate Agency Staff Barred From Contacting Former Agency Scientist Who Questioned Industry Claims
California’s air quality regulatory agency has been riven with tension in recent months, with staff barred from communicating with a former top agency scientist who criticized gas lobbyists and a director. The scientist, Jim Duffy, wrote that the California Air Resources Board and industry representatives have made misleading statements about subsidies for clean fuels. He has been a critic of subsidies that the state gives to dairies and gas companies for collecting methane from cow manure, claiming that the policy diverts money from cleaner alternatives such as electricity from solar energy, reports Cantú.
New Mexico Governor Pushes Long-Overdue Effort to Overhaul Oil and Gas Regulation
It’s been decades — during which time climate change has rapidly accelerated — since New Mexico’s bedrock law establishing the regulation of oil and gas production in the state has been updated. Officials acknowledge that the Oil and Gas Act is ill-equipped to oversee the current industry and ensure environmental protection. The updates being discussed include closing loopholes, updating fines and fees, and increasing well setbacks from homes and schools, among other measures, reports The Slick’s Jerry Redfern.
What Happened at COP28: The Good, the Bad, and the Ugly
Amid intense disagreement over whether to “phase out” fossil fuels, the annual United Nations climate summit in Dubai ended to mixed reviews. While the deal was hailed as historic for compelling countries to “transition away” from fuels, environmental groups were disappointed that the final agreement was vague and did not include several dozen island nations most impacted by climate change.
Among the positives, the conference ended with an agreement to phase down “unabated” coal power, phase out “inefficient” fossil fuel subsidies, and triple renewables capacity, said Kara Succoso Mangone, head of the Sustainable Finance Group at Goldman Sachs. She noted the bank’s establishment of a Climate Innovation and Development Fund with Bloomberg Philanthropies and the Asian Development Bank that will invest in seven low-carbon solution projects in India and Vietnam.
There was also discussion about the need for adaptation financing to help developing countries transition away from fossil fuels, yet a proposal to include a $400 billion annual financing target was ultimately dropped.
And the final text included several loopholes — asking for a “phasedown of unabated coal” to tackle coal emissions, for instance, involves a reliance on the use of carbon capture and storage, an untested technology whose effectiveness has been criticized by some experts. It also includes a recognition of the role of “transitional fuels,” widely seen as a reference to gas.
“This agreement contains major industry escape hatches for disastrous gas expansion, plastics proliferation and dangerous climate scams like carbon capture and storage,” Jean Su said in the Center for Biological Diversity press release. “Getting ‘fossil fuels’ into the final decision is a win in process, but not in the practical fight for survival of life on Earth.”
The nondefinitive language of the agreement, focusing on “phase down” rather than “phase out” of fossil fuels, had an immediate impact — the day after the conference ended, COP28 president Sultan Al Jaber announced that the Abu Dhabi National Oil Company would continue to invest in oil and gas production.
France’s Second Largest Bank to Stop Financing New Fossil Fuel Extraction Projects
There were some positive results of the COP28 agreement to reduce global consumption of fossil fuels, with several major banks taking steps to pull back from financing fossil fuel extraction. Credit Agricole, the second largest bank in France, said that it would no longer finance new fossil fuel extraction projects and would disclose its exposure to that industry. One of the bank’s major clients is French oil giant TotalEnergies. Credit Agricole said that by 2030 it would cut carbon emissions tied to its financing of the oil and gas sectors by 75% — far higher than its previous 30% reduction target. And Dutch banking giant ING announced this week that it will start phasing out the financing of upstream oil and gas activities by 2040 and aims to triple new financing for renewable energy by 2025.
Investors See Opportunity in COP28 Focus on Mitigation and Adaptation
COP28 signaled to the global market that the era of fossil fuels was nearing an end, but some investors seemed more eager to take advantage of the need for mitigation and adaptation — especially in industries such as steel production, cement production, transportation and energy, where it will be difficult to cut back on the use of fossil fuels — rather than get into renewable sources like solar and wind. They were eager to jump on new opportunities — especially in “scaling up technologies such as clean hydrogen, energy storage, carbon capture and storage, and direct air capture and storage, using government support (through policies such as the US Inflation Reduction Act) and blended finance,” according to a note from asset management firm Alliance Bernstein. Analysts at UBS echoed those sentiments, recommending an “all of the above” energy investment approach. “Beyond public markets, investors can tap into energy disruption opportunities in private markets, including in renewable infrastructure development, energy networks, storage, carbon capture, energy efficiency and circular economy solutions.”
Oil and Gas Analysts Bullish on 2024: More IPOs, More Investment Interest
In their forecasts for 2024, oil and gas analysts are optimistic about the industry’s growth. The pipeline of energy and energy-transition initial public offerings “is building at the healthiest rate we’ve seen in a few years,” Ryan Maierson, partner at Latham & Watkins, told Hart Energy. “Potential IPO candidates run the gamut from traditional upstream to oilfield service companies to renewable energy and distributed energy providers.”
In addition, analysts expect an uptick in oil and gas investment interest due to a 1940s-era federal law that is expected to exempt oil and gas funds from new Security and Exchange Commission rules and transparency requirements for private equity and hedge funds.
