This story was first published by Reveal, from The Center for Investigative Reporting.
Fossil fuel companies are among the biggest supporters of President Trump’s decision to pull out of the Paris climate accords, yet federal documents reveal that some companies have long been aware of the severe risks to their operations posed by a warming planet.
In filings with the Securities and Exchange Commission, several oil and pipeline companies acknowledge that climate change – which the fossil fuel industry has contributed to significantly – could undermine their bottom line and threaten their most valuable physical assets, including pipelines, oil storage “tank farms” and export terminals.
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“Climate change may adversely affect our facilities and our ongoing operations,” reported Phillips 66, in 2015 and 2016 annual risk assessments to the SEC. The threats, according to the company’s filings, “include rising sea levels at our coastal facilities, changing storm patterns and intensities, and changing temperature levels…
“As many of our facilities are located near coastal areas, rising sea levels may disrupt our ability to operate those facilities or transport crude oil and refined petroleum products,” the company states in its SEC 10-K filings. “Extended periods of such disruption could have an adverse effect on our results of operation. We could also incur substantial costs to protect or repair these facilities.”
Fossil fuels produced by oil and gas companies are by far the leading contributor of greenhouse gases that are warming the planet. More than 5,000 million metric tons of carbon dioxide were emitted in the United States from the combustion of fossil fuels in 2014, out of the total greenhouse gas national inventory of about 6,900 million metric tons.
Mandated by the SEC, the annual reports are intended to warn investors about all future risks to their assets and income.
“Some climatic models indicate that global warming is likely to result in rising sea levels, increased intensity of hurricanes and tropical storms, and increased frequency of extreme precipitation and flooding,” states the 2014 10-K filing from oil infrastructure giant Kinder Morgan, which owns or operates 84,000 miles of pipeline.
“We may experience increased insurance premiums and deductibles, or a decrease in available coverage, for our assets in areas subject to severe weather,” the company added. “To the extent these phenomena occur, they could damage our physical assets, especially operations located in low-lying areas near coasts and river banks, and facilities situated in hurricane-prone regions.”
Some companies edge close to climate denial in their filings, while hedging their bets.
“As a commercial enterprise, we are not in a position to validate or repudiate the existence of global warming or various aspects of the scientific debate,” declared Enterprise Products, the $52 billion pipeline and oil storage company, in its 2016 10-K filing. “However, if global warming is occurring, it could have an impact on our operations. For example, our facilities that are located in low lying areas such as the coastal regions of Louisiana and Texas may be at increased risk due to flooding, rising sea levels, or disruption of operations from more frequent and severe weather events.”
Yet companies that, even cautiously, acknowledge the potential threat of climate change stand in sharp contrast to the ongoing denial within the Trump administration and the president’s decision to quit the Paris accords.
Recently Trump has sent mixed signals on whether climate change is real and caused by human activity. But he has repeatedly called it a “hoax,” and reportedly cited inaccurate weather reports as reason to doubt climate science and to abandon the Paris deal. (This did not stop Trump’s business operation from explicitly citing global warming and sea level rise in a 2016 application to build a sea wall to protect Trump’s Irish golf course.)
Environmental Protection Agency director Scott Pruitt, whose close ties with energy companies have been widely reported, declared in March that he did “not agree” that human activity is “a primary contributor to the global warming that we see.” Last month Pruitt said that “human activity contributes to it in some manner.”
Thus it is striking to have oil companies’ carefully calibrated public statements on climate change come off as progressive when measured against the ongoing denial of the Trump administration.
Among the most visionary, by comparison, is Royal Dutch Shell, which acknowledges “the significance of climate change” and endorses various “pathways to decarbonisation.” Compare that to the Trump team, which appears rooted in the obfuscation and doubt generated for years by oil companies, including Exxon Mobil, and continues to be sown by the Koch brothers. One analysis of Koch family IRS Form 990 filings concluded that the Koch brothers have contributed at least $100 million “directly to 84 groups denying climate change science since 1997.”
The green-sounding rhetoric of some oil companies may be largely for public consumption: Despite their soothing words on climate, investigations show Big Oil continues to fund climate deniers, including key members of Congress. Exxon records from 2015 show continuing contributions to climate skeptics, including the American Legislative Exchange Council. Records from the Center for Responsive Politics also show energy companies were major donors to Pruitt during his campaign for Oklahoma’s Attorney General.
Oil and pipeline companies, in their public statements, annual reports and websites do not reveal the same kinds of concerns about the dangers of climate change as they declare in their SEC filings. But some do acknowledge the need to cut emissions.
“Phillips 66 is investing in its future by conducting research to manage water consumption, reduce greenhouse gas emissions and provide technology to change the future of power generation,” states a “stakeholder” letter from Chairman and CEO Greg Garland, posted on the company’s website. The letter also calls for additional fossil fuel energy to “allow… people to go further, reach higher, and live, better safer lives.”
Kinder Morgan says that “addressing climate change is a global priority,” adding it “is proud to be part of the solution toward reducing emissions of carbon dioxide” – by building natural gas pipelines.
Some companies’ concerns about the threat of climate change to profits date back several years in their SEC filings.
“Although our business operations are designed and operated to accommodate expected climatic conditions,” states a 2012 SEC risk assessment by ConocoPhillips, “to the extent there are significant changes in the Earth’s climate, such as more severe or frequent weather conditions in the markets we serve or the areas where our assets reside, we could incur increased expenses, our operations could be materially impacted, and demand for our products could fall.”
Other companies focus almost entirely on the risk that climate regulatory measures may pose to corporate profits. Chevron, in its 2016 SEC filing, underscores the “increasing attention to climate change risks” that “has resulted in an increased possibility of governmental investigations and, potentially, private litigation against the company.” Chevron makes only passing reference to “potential ranges of physical risks such as storm severity and frequency, sea level rise…”
Exxon Mobil, despite its public endorsement of the Paris climate accords, refers only briefly to the “risks” and “engineering uncertainties” of climate change. Instead the company’s latest SEC filing emphasizes the risk to its bottom line posed by the “potential impact of climate related policies.”
Future risk assessment may be more explicit, however: This month, Exxon Mobil shareholders, in a rebuke to management, overwhelmingly approved increasingly transparent company statements on climate change.
Also, in December, a powerful group of bankers and regulators commissioned by the Group of 20 called on corporations to disclose the risks of rising seas and other climatic changes. The task force issued voluntary guidelines for “consistent climate-related financial disclosures that would be useful to investors, lenders, and insurance underwriters in understanding material risks.”
Environmentalists criticize oil companies that take a public stance doubting climate change, but then file reports for investors that warn them of the dangers.
“Apparently the only people that oil companies don't get to lie to are their investors,” said the environmental writer and climate change activist Bill McKibben, a founder of 350.org. “But the rest of the world? Absolutely.”
Some oil companies, however, are clearly more willing to publicly confront the reality of climate change. Royal Dutch Shell, the relative climate progressive among oil companies, is sounding warnings that citizen concerns over the environment could impose limits on fossil fuel growth. “There are people who believe it will grow forever, but I don't subscribe to that,” Shell chairman Ben van Beurden said at an energy forum in Houston this March. “Social acceptance is just disappearing. Trust has been eroded to the point that it is becoming a serious issue for our long-term future.”
The company’s 2014 annual report echoes its chairman’s concerns. “[C]ontinued and increased attention to climate change, including activities by non-governmental and political organisations, as well as more interest by the broader public, is likely to lead to additional regulations designed to reduce greenhouse gas emissions,” the company stated in its 2014 annual report. “If we are unable to find economically viable, as well as publicly acceptable, solutions that reduce our CO2 emissions for new and existing projects or products, we may experience additional costs, delayed projects, reduced production and reduced demand for hydrocarbons.”
By that point, the companies’ dark vision of rising seas engulfing their coastal pipelines, refineries, and export terminals may be closer to reality.
