I want to bring together two reports that shows (a) what the energy industry itself sees as the prospect for a carbon-free future; and (b) how the Obama administration is working to enable that future, even as it releases its “Clean Power Plan” via EPA regulations.
Let’s first consider ExxonMobil.
Who is ExxonMobil?
ExxonMobil is one of the largest corporations in the world, with one of the largest inventories of mineral “assets” in the form of underground “hydrocarbons” — various forms of oil and methane (“natural gas”).
Exxon Mobil Corp., or ExxonMobil, is an American multinational oil and gas corporation headquartered in Irving, Texas, United States. It is a direct descendant of John D. Rockefeller‘s Standard Oil company, and was formed on November 30, 1999, by the merger of Exxon and Mobil (formerly Standard Oil of New Jersey and Standard Oil of New York). It is affiliated with Imperial Oil which operates in Canada.
The world’s third largest company by revenue, ExxonMobil is also the second largest publicly traded company by market capitalization. The company was ranked No. 5 globally in Forbes Global 2000 list in 2013. ExxonMobil’s reserves were 72 billion BOE (barrels of oil equivalent) at the end of 2007 … When ranked by oil and gas reserves, it is 14th in the world—with less than 1 percent of the total …
The price of a barrel of oil has been hovering around $100 lately, putting the value of 72 billion BOE at, roughly, $7 trillion. The problem — how to turn those in-the-ground reserves into CO2 (sorry, money)?
After all, with all the climate change concern, isn’t Exxon concerned that its $7 trillion (ish) in assets will have to be left in the ground, “stranded” as the financial types say? Exxon doesn’t think so.
2014 Exxon report: None of our hydrocarbon reserves are now or will become “stranded.”
According to this report, released by Exxon in 2014 (at the request of nervous shareholders, by the way), “ExxonMobil takes the risk of climate change seriously” (pdf; page 7).
It also thinks that none of its in-the-ground hydrocarbon reserves — oil, tar, methane, whatever — will become “stranded,” meaning “unmonetizable” (page 1; my emphasis):
ExxonMobil makes long-term investment decisions based in part on our rigorous, comprehensive annual analysis of the global outlook for energy, an analysis that has repeatedly proven to be consistent with the International Energy Agency World Energy Outlook, the U.S. Energy Information Administration Annual Energy Outlook, and other reputable, independent sources. For several years, our Outlook for Energy has explicitly accounted for the prospect of policies regulating greenhouse gas emissions (GHG). This factor, among many others, has informed investments decisions that have led ExxonMobil to become the leading producer of cleaner-burning natural gas in the United States, for example.
Based on this analysis, we are confident that none of our hydrocarbon reserves are now or will become “stranded.” We believe producing these assets is essential to meeting growing energy demand worldwide, and in preventing consumers – especially those in the least developed and most vulnerable economies – from themselves becoming stranded in the global pursuit of higher living standards and greater economic opportunity.
Let’s ignore the PR pitch in the last part of that quote — it continues through the rest of the piece, if you care to read it all, and it’s fluff, PR.
But I do take the managers of the world’s third largest corporation serious. You don’t get to be a gargantuan oil company by being bad at risk analysis. So note this, from the quote above:
For several years, our Outlook for Energy has explicitly accounted for the prospect of policies regulating greenhouse gas emissions (GHG). This factor, among many others, has informed investments decisions …
They may not take the risk to the planet seriously, but they take the risk to their assets very seriously, and they have concluded that
none of our hydrocarbon reserves are now or will become “stranded.”
I think they think they’re right; and I think they know something we should know. Which leads us to the political process.
Days before Obama announced CO2 rule, Exxon was awarded Gulf of Mexico Oil leases
In an under-the-radar move, the Obama administration used the Friday night news dump — the one prior to his big EPA announcement — to reveal that it had awarded ExxonMobil a huge pile of future carbon emissions (sorry, money; sorry, offshore oil and gas leases).
From the valuable Steve Horn at DeSmogBlog (a go-to blog for this kind of information):
On Friday May 30, just a few days before the U.S. Environmental Protection Agency announced details of its carbon rule proposal, the Obama Administration awarded offshore oil leases to ExxonMobil in an area of the Gulf of Mexico potentially containing over 172 million barrels of oil.
The U.S. Department of Interior‘s (DOI) Bureau of Ocean Energy Management (BOEM) proclaimed in a May 30 press release that the ExxonMobil offshore oil lease is part of “President Obama’s all-of-the-above energy strategy to continue to expand safe and responsible domestic energy production.”
Secretary of Interior Sally Jewell formerly worked as a petroleum engineer for Mobil, purchased as a wholly-owned subsidiary by Exxon in 1998.
Dubbed a “Private Empire” by investigative reporter Steve Coll, ExxonMobil will now have access to oil and gas in the Alaminos Canyon Area, located 170 miles east of Port Isabel, Texas. Port Isabel borders spring break and tourist hot spot South Padre Island.
Exxon paid “over $21.3 million” for the leases, which I’d call a drop in the bucket, relative to the value of the asset. 172 million barrels at $100/barrel is … $17,200 million, or $17.2 billion, less cost to produce. If they spend half that $17 billion to “exploit” (monetize) it — an absurdly large amount — they still make 400% profit.
There’s more in Horn’s report, including maps showing the extent to which new exploitation agreements between Mexico and the U.S. have opened the Gulf for … well, lots of exploitation. But for now, let’s us put two and two together.
Exxon knows the political process won’t interfere with sales of carbon reserves
If I’m ExxonMobil CEO Rex Tillerson, I know (a) I’m sitting on a gold mine, if I can only sell what it contains. And (b) that no one in the current U.S. government will stop me — not the Department of Interior (run by an ex–oil industry engineer), not Obama, not even the EPA, author of the suspiciously named “Clean Power Plan” (a name that almost screams “methane PR firm–approved”).
How do I, Tillerson and Exxon, know this? Because Obama is giving me even more carbon to drill and sell, at “it’s a gift” prices, and he’s hiding the gift in a weekend news release just four days before he positions himself as a “leader” in the climate change battle.
What should I believe — the gift or the big-deal public announcement? (Hint: Believe the gift; you can actually cash it.)
Exxon is reassuring its shareholders that the atmosphere of the future will contain all the carbon that Exxon currently owns, and Obama is helping them believe it by handing them more.
Do I blame Obama especially? No and Yes. No, I don’t think he’s acting differently than any other president has acted. Which is very badly, at least in this respect.
But Yes, he’s especially to blame, more than any of the others. After all, he’s the only president who ever made a major legacy move based on the quality of his climate conscience. In some ways, that’s especially cynical.
What counts as force? Stranding their assets, of course.
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