Investors are not getting a clear, consistent picture of material risk from oil and gas companies, and may be exposing themselves to climate change-related risk, as fossil fuel production moves into more technologically demanding spaces, a Ceres report says.
The report, “Sustainable Extraction? An Analysis of SEC Disclosure by Major Oil & Gas Companies on Climate Risk and Deepwater Drilling Risk,” tracks SEC-mandated disclosure on climate and production risks by 10 of the largest publicly-owned oil and gas companies.
The SEC filings evaluated in the report were from Apache, BP, Chevron, ConocoPhillips, ENI, ExxonMobil, Marathon, Shell, Suncor and Total.
Ceres said that no company surveyed provided high-quality reporting of the wide-ranging risks they face from deepwater drilling or climate change, or how they’re managing these risks.
The report finds that BP, ENI and Suncor provided relatively better climate risk disclosure than others in the report while Apache, Marathon and ExxonMobil had the weakest disclosure. Out of an aggregate 60 separate climate disclosure scores, only five were good, while 34 (57 percent) were either poor or not disclosed.
On deepwater drilling risk disclosure BP and Total provided relatively better disclosure, while Suncor’s disclosure was the lowest in quality. The report notes that BP’s improved deepwater disclosure came after the 2010 Deepwater Horizon spill in the Gulf of Mexico.
In March, BP announced that it has reached a $7.8 billion settlement proposal with the individual and business plaintiffs represented by the Plaintiffs’ Steering Committee (PSC), to resolve economic loss and medical claims stemming from the Deepwater Horizon accident and oil spill. The company also reported at that time that its income statement had incurred a loss totaling $37.2 billion from the spill.
As early as 2007, investors asked the SEC to improve climate reporting in a petition developed with Ceres and the Environmental Defense Fund. The resulting SEC guidance in 2010 requiring corporate disclosure of material climate risks, Ceres said.
The report notes that the SEC’s guidance for disclosure does not yet require complete assessment of companies’ climate or deepwater drilling performance or risks, and suggests that transparency on disclosure still has a long way to go.
Yet the industry pursues a new and more risk-laden energy future with the search for fossil fuels opening into areas once beyond technology’s reach. As well, climate change risks, including climate-driven physical impacts and regulations to control carbon emissions, also create financial exposure for oil and gas companies. Specifically, the report cited risks associated with hydraulic fracturing for natural gas including proliferating emissions of the greenhouse gas methane from wellheads across the US.
Methane (CH4), according to the EPA, is 23 times more potent as a greenhouse gas than carbon dioxide over a 100-year period.
Meanwhile, oil sands production is increasing in Canada. This is one of the most carbon-intensive forms of oil on a lifecycle basis, making it especially vulnerable to a policy for a low-carbon fuel standard, the report said.
Ceres said that companies should improve their deepwater drilling risk disclosure, particularly of environmental, health and safety (EHS) performance data, investment in spill prevention and response, spill contingency plans, contractor selection and oversight, and governance and management systems.