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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Environmentalists Divided Over Pennsylvania Governor’s Deal With a Natural Gas Giant
Pennsylvania Gov. Josh Shapiro’s long-promised environmental agenda is finally getting results, though not without some tough questions. Environmentalists are split over a new deal struck by Shapiro with natural gas producer CNX Resources. While some have applauded the effort to move forward amid a legislative deadlock on climate action, those on the front lines fear the agreement amounts to little more than a PR stunt since it allows the industry to regulate itself.
As part of the deal, the company volunteered to extend no-drill safety zones between new wells and homes from the legal minimum of 500 feet to 600 feet, and to 2,500 feet for schools and hospitals, and to monitor and publish data on harmful pollutants near its facilities, among other measures, reports The Slick’s Audrey Carleton.
Texas Sees ‘Bonanza’ in the Carbon Storage Market
Taking advantage of new federal tax credits, Texas is chasing a “bonanza” in the carbon storage market. Such enhanced oil recovery — injecting liquefied carbon gas and other fluids underground to repressurize aging wells — has long been common in the state. The new federal incentives prioritize carbon capture, use and storage. Oil producers in the state claim that hydrocarbons produced using the recovery technique are net zero, since the carbon is ostensibly trapped in the ground and cancels out emissions created from burning the fuels.
Environmental advocates say the motivation of politicians who want to make Texas the “global leader in carbon capture and sequestration” is less about reducing global warming and more about “harnessing federal incentives to drive a boom in industrial growth,” reports The Slick’s Elliott Woods.
China Fails on Pledge to Fund Green Energy Projects
Last week, China and the U.S. agreed to “sufficiently accelerate renewable energy deployment” in their economies through 2030 to speed up “the substitution for coal, oil and gas.
Yet China has still not followed through on its 2021 pledge to drive more funding into green and low-carbon energy projects — with its wealthy development banks providing no new loans in the green energy sector in 2001 and 2022, according to Boston University researchers. From 2000 to 2022, the China Development Bank and Export-Import Bank of China provided 331 loans worth $225 billion for energy projects around the world, the majority of it going to coal, oil and gas.
S&P: Upstream Energy Producers Won’t Have a Problem Borrowing Money Despite Net Zero Pledges by Banks
Although many U.S. and European banks have set targets to reduce emissions by energy producers in their lending portfolios, that shouldn’t impact the ability of these upstream borrowers to get loans, says Standard & Poor’s in a new report.
There are several reasons for that: Companies that haven’t reduced emissions can benefit from the progress made by larger oil and gas companies that dominate banks’ lending portfolios; and banks are relying on targets based on emissions intensity — allowing for an increase in emissions if companies are improving their efficiency and banks’ emissions targets cover their lending and investment activities but not their advisory and underwriting services. In addition, the report details alternative funding sources for fossil fuel producers — the nontraditional asset-backed securitization market and the private credit market.
This S&P chart illustrates the expected capital expenditures in the exploration and production sector through 2027, showing an overall increase, especially in LNG and pipelines.
JPMorgan Chase Raises Concerns With New Method for Calculating Environmental Impact of Financing
JPMorgan made headlines last week by announcing it would start including low-carbon power in how it calculates the eventual environmental impact of its energy financing.
But this new strategy could also enable them to claim progress on emissions reductions without actually making a change to their oil and gas financing since it combines money for lower-carbon projects with financing to fossil fuels, according to environmental groups.
“In addition to the concerning new approach to oil and gas emissions reduction targets, the new reports do not disclose a credible transition plan for how the firm will manage its portfolio to exit, reduce exposure to, or otherwise hold accountable companies that fail to decarbonize in line with those goals,” said the Sierra Club in a statement.
Beyond Oil: Domestic LNG Market Is Expected to Explode Soon
The domestic liquid natural gas market is booming, with North American export capacity expected to grow by 113% by the end of 2027, according to the U.S. Energy Information Administration.
That increase is principally due to the U.S. adding to its existing capacity and Mexico and Canada launching their first LNG export facilities.
Banks May Be Lending Less to Big Oil, but It’s Still Helping Them Raise Money Through Bonds
Amid overall strength in the bond market, fossil fuel companies have raised $34 billion via bonds so far in 2023. BlackRock, Invesco and Vanguard are among the finance giants backing the biggest fossil fuel bonds this year, according to research by Reclaim Finance.
The group identified key banks involved in structuring the five biggest bond deals of the year — including BNP Paribas’ involvement in the bonds issued by Greensaif Pipelines (linked to Saudi Aramco) and BP; Citi’s involvement in the Greensaif Pipelines, ConocoPhillips and BP bonds; and JP Morgan’s involvement in Greensaif Pipelines, BP, ConocoPhillips and Duke Energy.
“As banks increasingly restrict project level finance to fossil fuel development, Reclaim Finance warns the bond market has become a safe haven for easy access to fossil fuel finance,” the company reported.
