Elizabeth Douglass writes about energy for InsideClimate News. She worked for more than two decades as a business writer at daily newspapers, including a ten-year stint at the Los Angeles Times, where she spent the last half of her tenure covering energy. Her stories followed developments in the oil market, alternative fuels, and renewable energy, and exposed long-running performance problems at California's San Onofre nuclear power plant. She also chronicled how a power company falsified data to win customer-funded performance bonuses and how oil refiners and others in California created one of the nation’s most profitable fuel markets.
While covering telecommunications, she was the first to report financial sleight-of-hand at fiber network company Global Crossing, and uncovered Pacific Bell's boiler room-style sale of add-on features. At the San Diego Union-Tribune, she co-wrote an investigative series on government contractor Science Applications International Corp. that was a finalist for the 1996 Gerald Loeb Award for Distinguished Business and Financial Journalism.
She holds bachelor's and master's degrees from Northwestern University's Medill School of Journalism.
You can reach her by email at firstname.lastname@example.org
Editor's note: This is the first of several articles on American oil companies and whether their track records on shareholder resolutions on climate change expose them to legal liabilities.
These stories also launch ICN's Climate Accountability Project, which investigates the people, companies and other groups most responsible for opposing or delaying action on climate change.
At ExxonMobil, the answer is still no.
Editor's note: This is the second of several articles on American oil companies and whether their track records on shareholder resolutions on climate change expose them to legal liabilities. Read the first story.
InsideClimate News reviewed 25 years' worth of shareholder proposals at the three largest U.S. oil companies—ExxonMobil, Chevron and ConocoPhillips—to see how they responded to investor concerns about climate change.
Sharp differences are emerging between U.S. oil majors and their European brethren on the issue of climate change, and Wednesday's shareholder meetings at ExxonMobil and Chevron underscored the divergence as they fought all climate-related shareholder proposals and came away largely victorious.
A $2 trillion group of investors will ask regulators on Friday to force oil and gas companies to provide more disclosures about climate-related risks to their businesses.
The request, backed by 62 institutional investors from the U.S. and Europe, is included in an April 17 letter to Mary Jo White, head of the Securities and Exchange Commission. The comptrollers for New York State and New York City submitted a similar letter to the commission. The letters are the latest sign of the growing concern from shareholders and others about how fossil fuel companies would fare in a world that’s shifting to low-carbon energy sources.
"We are concerned that oil and gas companies are not disclosing sufficient information about several converging factors that, together, will profoundly affect the economics of the industry," the investors wrote.
The group cited worries that carbon assets could become uneconomic—or stranded—if climate-related trends permanently undercut prices and demand for fossil fuels. Those fears are exacerbated by “excessive capital spending on high-cost, carbon intensive projects such as Arctic drilling, ultra deepwater drilling and Canadian oil sands projects," the investors wrote.
"We have found an absence of disclosure in SEC filings regarding these material risks," said the investor group, which was organized by the sustainability group Ceres.
On Thursday, shareholders of oil giant BP reinforced the importance of such disclosures by overwhelmingly approving a measure that requires the company to provide more robust yearly climate change-related information, including data about the viability of BP projects in a low-carbon economy.
The two-year anniversary of ExxonMobil's oil pipeline rupture in Arkansas is once again putting the spotlight on old pipe that can harbor cracks and other dangerous defects—and that's still in widespread use across the country.
Federal regulators have known for decades that vintage pipe carried extra risks. After a spate of new spills, however, they recently took the first step toward mandating more rigorous testing on pre-1970 pipe, including the kind that was a factor in causing ExxonMobil's oil spill in Mayflower, Ark.
The failed section of ExxonMobil's Pegasus line was manufactured in the 1940s using low-frequency electric resistance welding (LF-ERW), a process that was widely used from the 1930s into the 1960s. The technique was phased out by 1970 because it left flaws in the steel that could cause pipelines to split open along the lengthwise seams.
It's been two years since a broken 1940s ExxonMobil pipeline flooded an Arkansas neighborhood with Canada's heaviest oil, and the ripple effects of the spill have made it to Washington D.C., where regulators are poised to end decades of complacency by addressing the dangers of older pipelines across the country.
For the first time, the Pipeline and Hazardous Materials Safety Administration (PHMSA) is floating what could become a new regulation to address problematic vintage pipe and other obvious risks that were factors in the rupture of ExxonMobil’s Pegasus pipeline in Mayflower, Ark.
"The Pegasus spill seemed to be a tipping point," said Carl Weimer, executive director of the Pipeline Safety Trust, a nonprofit watchdog group. "PHMSA is now telling pipeline companies, 'here's what you should think about if you have older pipelines, and when you should replace them,'—and you never would have heard that coming out of their mouths before Mayflower."
The effort by PHMSA is in the early stages, and there's no guarantee that it will result in new mandatory measures for pipeline owners. But if the rule takes effect, about 95 percent of all hazardous liquid pipelines would be subject to stricter safety verification because of their age, location or other factors, according to PHMSA. Separately, new guidelines just for pre-1970 pipelines could affect more than half of the nation's 484,000 miles of pipelines carrying natural gas and hazardous liquids such as oil and gasoline.
The ExxonMobil line was made from pipe that was manufactured nearly 70 years ago and widely known to be prone to dangerous cracking along its lengthwise seams. The line had split open or leaked nearly a dozen times during the oil company's own testing a few years before the spill. Despite those factors, ExxonMobil gave little weight to the threat of cracks or seam failure in its testing, spill prevention and maintenance plans for the Pegasus, according to PHMSA.
Government officials last week blocked a groundbreaking shareholder proposal on climate change from going to a vote at ExxonMobil. The move has confounded proponents, because the decision came just five days after the same agency cleared a similar resolution for Chevron's shareholder ballot.
"I'm completely baffled, frankly," said Natasha Lamb, director of equity research and shareholder engagement at wealth manager Arjuna Capital, lead sponsor of the ExxonMobil resolution. "The proposals are virtually identical."
The Chevron and Exxon rulings came from two different attorney-advisers at the Securities and Exchange Commission. The agency provides guidance to public companies that seek to exclude shareholder resolutions from the annual ballots distributed each year to vote on board directors, among other things.
Both of the resolutions at issue cite the threat from climate change as a reason to rein in spending on risky exploration projects in ultra-deep water, the Arctic and Canada's oil sands. They argue that those projects at Exxon and Chevron are chasing reserves that might become unsellable—or stranded—in a carbon-constrained world and in low-oil-price scenarios. The resolutions say the prudent course is for the companies to return that cash to shareholders instead, via dividends (Chevron) or a combination of dividends and share buybacks (Exxon).
U.S. oil and energy companies are facing a barrage of climate-related shareholder proposals this year, many of them demanding action or disclosures on low-carbon strategies, political spending and lobbying, greenhouse gas emissions, and climate-change risks.
Other resolutions address hot-button energy issues such as the dangers of transporting crude oil in mile-long trains, concerns over hydraulic fracturing, and returning money to shareholders instead of spending it on expensive new oil projects.
The flood of environmental and social-issues resolutions is part of a trend. Over the past five years, more than 180 of those kinds of shareholder resolutions have gone to a vote at energy companies—far more than for any other industry, according to Heidi Welsh, executive director of the Sustainable Investments Institute. At corporate annual meetings, shareholders can propose advisory resolutions calling on management to adopt or change a wide range of policies.
Without management support, almost all of these resolutions are soundly voted down, but proposals that gather more than a few percentage points of support often get management's attention. The recent rush of energy company resolutions has won more than 25 percent of shareholder votes on average, an unusually high level of backing, Welsh said. She is co-author of the newly released 2015 Proxy Preview, a yearly report that includes tallies and analysis of a wide range of socially responsible shareholder proposals.