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Canada’s Imperial Oil vows disclosure after parent Exxon shares new pollution data

Canada’s Imperial Oil says it will update its carbon pollution disclosure “in the coming months,” after parent company Exxon Mobil pulled back the curtain for the first time on emissions from the use of its own products.

Exxon bowed to investor pressure and released information this week showing the carbon pollution that is generated when its products are used, such as when the gasoline sold at company-affiliated gas stations is combusted inside people’s car engines.

This measurement of pollution, known by its technical term “Scope 3,” accounts for between 70 and 80% of life cycle emissions for most oil companies, according to the Pembina Institute.

Exxon’s Scope 3 emissions, the company admitted in its 2021 Energy and Carbon Summary, were equivalent to 730 megatonnes (Mt) of carbon dioxide in 2019. That puts Exxon, one of the largest oil and gas companies in the world, roughly on par with Canada’s entire emissions output of 729 Mt in 2018.

Financial experts have suggested for years that firms move towards disclosing these emissions. Canada’s federally appointed expert panel on sustainable finance, for example, recommended in June 2019 that corporations should begin preparing to “disclose, if appropriate, Scope 3 greenhouse gas emissions” and related risks. Two years before that, the Switzerland-based Financial Stability Board said the same thing.

“We need oil companies to phase out their fossil fuel production in line with what the climate science demands, and reporting Scope 3 emissions instead of ignoring them is a small step towards that,” said Oil Change International research analyst Bronwen Tucker.

Environmental groups, however, say the Canadian oil and gas sector is lagging when it comes to publicly disclosing this measurement of carbon pollution, at least to the fullest extent possible.

The Canadian Association of Petroleum Producers, the main industry group, did not respond to multiple requests for comment. The Canadian Fuels Association declined comment, while the Petroleum Services Association of Canada said it was not in a position to respond before publication.

In response to questions about whether the company would be making Scope 3 emissions data available to the Canadian public following its parent company’s move, Imperial Oil spokesperson Lisa Schmidt said: “We will provide an update on our emissions disclosure within our sustainability report in the coming months.”

Suncor, a large Canadian energy company, does disclose Scope 3 emissions, according to the Transition Pathway Initiative, which bills itself as a “corporate climate action benchmark” that assesses how companies are preparing for the low-carbon economy.

But Tucker argued that the Scope 3 data in the company’s Climate Risk and Resilience Report for 2020 represented an incomplete picture as it focused on its own refineries. A request for comment to Suncor was not returned before publication.

Imperial and other companies do publish what’s known as “Scope 1” and “Scope 2” emissions data, which refer to the carbon pollution from an energy company’s own operations, like crude oil production, as well as those emissions associated with the electricity that the company consumes.

In Canada, much of the attention on rising emissions from the oilpatch have been focused on these kinds of measurements. Greenhouse gas emissions from oil and gas production climbed 23% over the last roughly two decades, for example, largely due to increased production.

Oilpatch firms have also invested in technology that can decrease these kinds of emissions as well as their emissions intensity.

Cenovus Energy, another large Canadian company, said it currently reports Scope 1 and Scope 2 emissions in its Environmental, Social and Governance Report for 2019. Cenovus recently merged with oilpatch firm Husky Energy in a $6-billion deal.

“ESG (environmental, social and governance) leadership will remain core to the combined company,” said spokesperson Sonja Franklin.

“This includes ambitious ESG targets, robust management systems and transparent performance reporting. We will also maintain our ambition of achieving net-zero emissions by 2050.”

 


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Big oil takes a big hit

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Last week was brutal for global oil majors with leading operators such as Chevron, EXXON Mobil, as well as others, including Total, Shell and Husky, reporting huge second-quarter losses with slumping oil prices and demand declines due to COVID-19.  Reports suggest Chevron and EXXON’s poor numbers reflect the biggest losses in U.S.-based petroleum in the more than 160 years the U.S. has been selling oil products.

Chevronamid huge write-downs, announced it will cut 5% of its global output during this quarter and will hold off on plans to ramp up production at its Permian Basin shale holdings. The company announced July 31 that it had lost (US)$8.3 billion in the second quarter. This compares to the (US)$4.3 billion it took home in Q2 profits at this time last year.

Exxon too has announced its expansion plans are on hold after reporting it generated no operational cash flow in Q2. The company reported its (US)$1.1 billion losses in the quarter were the largest since its merger with Mobil in 1998.

While demand and commodity prices have shown signs of recovery, they are not back to pre-pandemic levels, and financial results may continue to be depressed into the third quarter 2020,” Chevron offered in a statement.

Husky Energy is also reporting a large loss over the second quarter. Last week the Calgary-based major announced losses of $304 million. This contrasts with last year when the company reported profit of $370 million over the quarter. Behind the loss was the decline in crude pricing that fell from an average of $67.82 to $24.36 per barrel. Husky also suffered from an 8% decline in production as it tried to stem the damage from low oil prices.

France’s Total Energy joined the group with an $8 billion write-down of its assets of which many are in the oil sands region of Alberta. The company recently announced it would slice $5.5 billion in the value of its Fort Hills and Surmont Canadian oil sand projects.

Biggest Q2 losses were recorded by Royal Dutch Shell where losses were (US)$18.1 billion. Earnings were down 82%.

Massive losses aside, expectations are that the market is strengthening as the world seeks to normalize and move into new pandemic phases. Already companies, such as ConocoPhilips, have begun to reverse their Q2 curtailments and are ramping production upward across Canada and the U.S. markets.


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Exxon trial probes how oil giant accounts for climate change

New York’s attorney general is accusing Exxon Mobil of lying to investors about how profitable the company will remain as governments impose stricter regulations to combat global warming.

The lawsuit claims the Texas energy giant kept two sets of books – one accounting for climate change regulations and the other underestimating the costs – to make the company appear more valuable to investors.

Exxon denied the allegations, calling them politically motivated, and said the company looks forward to being exonerated in court.

At stake is how much value investors will still see in oil and gas companies once the impact of climate change – and the stepped-up efforts to curb it – become more apparent.

“If companies like Exxon accurately account for the necessary degree of regulation to prevent even more dangerous global warming from happening, it will make less and less sense to continue to invest in developing fossil fuel projects,” said Michael Burger, executive director of the Sabin Center for Climate Change Law at Columbia University.

While there are hundreds of lawsuits filed against companies about climate change, this is one of the first to go to trial, according to the Sabin Center.

At the heart of the case is a question about whether Exxon was downplaying the impact regulations may pose on its ability to make money in the future.

The complaint says that in order to account for future climate change regulations, Exxon told the public it was applying an estimated cost – or “proxy cost”- of carbon dioxide and other greenhouse gases to its investment decisions. It also said it would apply the proxy cost when it evaluates the value of its assets and estimates future demand for oil and gas.

But the complaint says that instead, Exxon applied lower or no proxy costs for years when making investment decisions or assessing its oil and gas reserves. As a result, the company may have been exposed to far greater risk from climate change regulations than investors were led to believe, the complaint said. An expert witness for the state estimated potential damages to shareholders of $476 million to $1.6 billion.

The state also claims Exxon inaccurately concluded that it faced little risk associated with a “two degrees scenario,” in which the consumption of fossil fuels was severely curtailed to limit global temperature increases to below two degrees Celsius compared to pre-industrial levels. The complaint says Exxon claimed its oil and gas reserves face little risk of becoming too expensive to operate and that the company would be able to profitably exploit those assets well into the future.

Exxon said that because there isn’t a uniform, globally accepted cost of carbon, the company uses two distinct metrics to account for the impact of existing and potential climate-related regulations. The first, a “proxy cost,” reflects climate policies that could reduce demand for oil and natural gas globally, Exxon said in an emailed statement. The other, a greenhouse gas cost, reflects actual costs that could be imposed on emissions of oil and gas projects as a result of a specific jurisdiction’s laws. Exxon takes into account both types of costs to make sound business decisions and meet its responsibilities to shareholders, the company said.

“The New York Attorney General’s case is misleading and deliberately misrepresents a process we use to ensure company investments take into account the impact of current and potential climate-related regulations,” the company said in a statement.

The New York Attorney General’s office declined to elaborate beyond the documents it filed for the case.

The securities fraud case does not accuse Exxon Mobil of playing a role in accelerating climate change but focuses on whether the company misled investors.

“The notion that the company can continue to pump oil and gas with abandon while the climate crisis causes ever greater human suffering and harm to communities across the globe is a destructive fantasy,” said Lee Wasserman, director of the Rockefeller Family Fund, which has funded research investigating what Exxon and other oil companies knew about climate science. “This case will focus on one element of Exxon’s alleged deception – whether the company misinformed investors about the risks climate change poses to the value of its oil and gas assets. If the state wins, Big Oil will be on notice that a business-as-usual approach to the extraction of fossil fuels is an increasingly fraught enterprise.”