Exxon: “None of our carbon reserves will be stranded.” Translation: All of our reserves will become emissions.

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 IrvingTexas, 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):

climate change pollution global warming CO2

CO2 via Shutterstock

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.)

Bottom line

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.

As I said before, they will stop when we force them to stop, and not before. Thanks, DeSmogBlog, for the report.

What counts as force? Stranding their assets, of course.

GP

Twitter: @Gaius_Publius
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Gaius Publius is a professional writer living on the West Coast of the United States. Click here for more. Follow him on Twitter @Gaius_Publius and Facebook.

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  • KG

    I think energy consumption per capita in Finland is among the highest of the IEA countries. But for its nuclear commitment it would likely exceed the US on per capita carbon burning. For worse or better most countries will not make a similar nuclear commitment. Still, the 80% carbon based energy in Finland permeates everything around you.

  • eggroll_jr

    I live in Finland, a country with a fairly advanced economy that embraces appropriate green technologies and policies to reduce carbon intensity. Thank you for your insights, however. I never knew “energy is everywhere and in everything including whatever you just eat.”

  • KG

    Ok, turn off the burners then look around you. Time for that buffalo skin tent in the woods I’m afraid. You signing up for that? Energy is everywhere and in everything including whatever you just eat. How about a focus on reality my friend. What is your plan for the carbon free utopia you seek?

  • eggroll_jr

    Um, less than 3% of oil and gas liquids go to making plastics, and less than 2% of natural gas production goes to making resins. About 0.5% of that is combusted to generate energy for the processes. The lion’s share of hydrocarbon use is in combustion processes that liberate carbon. Unless you purchase substantial amounts of underwear elastic, it’s probably better to focus on things like the fact that we are still burning about 1,000 barrels a second to sustain our lifestyle.

  • PolinaWellingsiso

    as Thelma explained I cannot
    believe that a stay at home mom can make $7420 in four weeks on the internet .
    more info here R­e­x­1­0­.­C­O­M­

  • KG

    Here’s a mental exercise for you. Look around. Start to subtract everything around you that you would not have without oil. Don’t forget the elastic in your underwear. If you complete the exercise properly you will now be standing buck naked in a forest looking for some berries to eat. Now, tell me again who is consuming all that oil?

  • Bill_Perdue

    Lots of retired unionists contribute. It’s not difficult. You can help collect donations and send them to unions or self organizing groups, join picket lines – whatever your activity level permits.

  • Indigo

    Union rules! I’m elderly and retired now but I was AFL-CIO-AFT my entire career. It’s good to know you’re on the front line organizing workers.

  • eggroll_jr

    ExxonMobil has an economy worth about the same as Norway. While 80% of global hydrocarbon ownership is in state hand, it is part of a small group of elite companies with enough clout to literally topple governments. The US military and state department, for example, work for EM, not vice versa. The key to this success is gaining legal rights to resource extraction. In third world countries, this is fairly straightforward. You just by off certain sets of ministries and officials, and let the resource theft commence! However, holding on to your rights may be dicey if the government changes from time to time, or worse, you get entirely new countries (e.g. South Sudan). Much better to have a political class accustomed to receiving tribute for favors such as the US or Australia. You have the cover of English land law and docile populations completely addicted to the product. Rex Tillerson is correct in EM’s favor to the extent that those rights are tied up in stable places. He is also correct even if EM loses its lease through nationalization or expropriation as has happened in Russia, because somebody will surely extract those hydrocarbons anyway.

    Of particular interest is coal, which has seen prices sliding to 4-years lows. Coal is something that should stay in the ground. Mother Nature has done a great job of sequestering carbon this way for 400 million years now, so why change? Nevertheless, Australia, which has been hit hardest by the coal price has come up, ta-dah, with a plan that looks an awful lot EM’s plan to exploit “seam gas” from coal deposits. The combustible carbon is coming out no matter what it seems.

  • Bill_Perdue

    Point out to me why you have such a positive attitude towards the wars, economic chaos, racism and etc of the Democrats and Republicans.

    As for the plans of sensible people start here: http://www.marxists.org/

  • cole3244

    we just disagree on the depth of the problem.

  • cole3244

    its patently ridiculous that you don’t realize it.

  • 4th Turning

    I guess I can be more cheerful living at 3,000′ like I do and not having
    to worry about high tides, clogged escapes routes, empty store shelves,
    etc. Point me to one of your earlier comments where you’ve worked out
    a feasible plan that will catalyze action all over the world…

    As if you needed anymore shit to anguish over:

    http://www.borderlandbeat.com/2013/12/michoacan-blood-avacados.html

  • Bill_Perdue

    A home run, GP.

  • Bill_Perdue

    That depends on whether or not you think elections matter in a banana republics. They don’t and haven’t since 1860.

    If you want to see real change you could join others helping to educate and organize unorganized workers in the fast food and big box (Wal-Mart) industries.

  • Indigo

    I’m sure she can redefine everything. But my point, to make like an owl, is . . . who?

  • Bill_Perdue

    You mistake realism for negativity. Wake up and smell the sellouts.

  • Bill_Perdue

    Do you mean the right wing religious loon, HRH HRC? http://www.motherjones.com/politics/2007/09/hillarys-prayer-hillary-clintons-religion-and-politics

    Or do you mean the right wing union buster who was trained by Wal-Mart? http://www.huffingtonpost.com/tag/hillary-clinton-wal-mart/

    Or the warmonger and liar?
    https://www.youtube.com/watch?v=DkS9y5t0tR0

  • emjayay

    I’m sorry, but that’s entirely patently ridiculous.

  • emjayay

    About fifteen years ago I remember some Republican in Congress wanting to sell off all the national parks, and others chiming in with completely absurdities about the parks. Someone (George Will) wrote a column about how if we just don’t sell them to Disney, at least they could run on all volunteers, etc. The Republican party is indeed the Big Tent Party. The let in all the random nutjobs that have always been around. Most of them organized into the Tea Party first of course.

  • 4th Turning

    You are so-o-o negative. Treat yourself to a cinnamon bun and coffee while they last.

  • Bill_Perdue

    The hope and change euphoria of 2008 is down the toilet. There it joins promises to end the wars, pass ENDA, give us decent health care, re-regulate predatory lenders, banksters and economic looters and the promise to aid, instead of bust, unions. Also in the toilet are the Bill of Rights and the environment. They’re all lost causes sinking ever deeper in the sewer of Democrats and Republican politics.

  • 4th Turning

    In a rational world, no one would need to march. In a rational world, policymakers would have heeded scientists when they first sounded the alarm 25 years ago. But in this world, reason, having won the argument, has so far lost the fight. The fossil-fuel industry, by virtue of being perhaps the richest enterprise in human history, has been able to delay effective action, almost to the point where it’s too late.

    The point is, sometimes you can grab the zeitgeist by the scruff of the neck and shake it a little. At the moment, the overwhelming sense around the world is nothing will happen in time. That’s on the verge of becoming a self-fulfilling prophecy – indeed, as I’ve written in these pages, it’s very clear that the fossil-fuel industry has five times as much carbon in its reserves as it would take to break the planet. On current trajectories, the industry will burn it, and governments will make only small whimpering noises about changing the speed at which it happens. A loud movement – one that gives our “leaders” permission to actually lead, and then scares them into doing so – is the only hope of upending that prophecy.

    Read more: http://www.rollingstone.com/politics/news/a-call-to-arms-an-invitation-to-demand-action-on-climate-change-20140521#ixzz33nSZKPWN
    Follow us: @rollingstone on Twitter | RollingStone on Facebook

  • 4th Turning

    Obama and climate change: the real story
    We do, though; we face a crisis as great as any president has ever encountered. Here’s how his paragraph looks so far: Since he took office, summer sea ice in the Arctic has mostly disappeared, and at the South Pole, scientists in May made clear that the process of massive melt is now fully under way, with 10 feet of sea-level rise in the offing. Scientists have discovered the depth of changes in ocean chemistry: that seawater is 30 percent more acidic than just four decades ago, and it’s already causing trouble for creatures at the bottom of the marine food chain. America has weathered the hottest year in its history, 2012, which saw a drought so deep that the corn harvest largely failed. At the moment, one of the biggest states in Obama’s union, California, is caught in a drought deeper than any time since Europeans arrived. Hell, a few blocks south of the U.N. buildings, Hurricane Sandy turned the Lower East Side of New York into a branch of the East River. And that’s just the United States. The world’s scientists earlier this spring issued a 32-volume report explaining exactly how much worse it’s going to get, which is, to summarize, a lot worse even than they’d thought before. It’s not that the scientists are alarmists – it’s that the science is alarming.
    Read more: http://www.rollingstone.com/politics/news/a-call-to-arms-an-invitation-to-demand-action-on-climate-change-20140521#ixzz33nQxyfaL
    Follow us: @rollingstone on Twitter | RollingStone on Facebook

  • Monte Logan

    I’ve tried convincing my peers to not take that cynical attitude that will cause them to do nothing. I’ll just do my best to try and exercise the powers I have but at the same time, try and get myself in a well off enough financial state that I can move out of this country and take whoever I need to with me

  • Indigo

    HRCPOTUS2016?

  • Indigo

    I don’t know that it’s the “vast majority of dems” but I can agree that Obama has not moved in an enlightened direction on this issue.

  • cole3244

    good post now put your head back in the sand where it belongs.

  • WarrenHart

    Yeah, Republicans would be so much better drilling in all the national parks and wildlife reserves and all.

  • AndyinChicago

    In terms of the environment, I don’t think Obama has been a very good president. His response to a number of blatant problems with the oil industry has been to expand oil production. And for his first couple years, he constantly touted the false hope of a dream called “Clean Coal” which never has and never will exist.

  • Dave of the Jungle

    All three branches of government continue to move in the direction of allowing more control and influence by corporations and wealthy donors. It doesn’t look hopeful.

  • cole3244

    obama and the vast majority of dems are part of the problem not part of the solution.

    obama is only concerned about his own legacy not americas.

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