Exxonomics

Guest Post by Willis Eschenbach

The British rag “The Guardian” gets astounding web traction. Here’s the headline and first part of a story that, despite only being posted yesterday, has already spawned ninety-five copies across the web:

Exxon knew of climate change in 1981, email says – but it funded deniers for 27 more years

A newly unearthed missive from Lenny Bernstein, a climate expert with the oil firm for 30 years, shows concerns over high presence of carbon dioxide in enormous gas field in south-east Asia factored into decision not to tap it

ExxonMobil, the world’s biggest oil company, knew as early as 1981 of climate change – seven years before it became a public issue, according to a newly discovered email from one of the firm’s own scientists. Despite this the firm spent millions over the next 27 years to promote climate denial.

The email from Exxon’s in-house climate expert provides evidence the company was aware of the connection between fossil fuels and climate change, and the potential for carbon-cutting regulations that could hurt its bottom line, over a generation ago – factoring that knowledge into its decision about an enormous gas field in south-east Asia. The field, off the coast of Indonesia, would have been the single largest source of global warming pollution at the time.

Now, with that as the lead-in, what would you say was the date of the “newly unearthed missive” that they are discussing? At first I naively figured it must be from 1981 … but then I thought “wait a minute, genius, wasn’t much email in 1981″ … so then I figured that perhaps it was from a 2003 internal Exxon email describing some in-house Exxon memo from the 1980s, or something like that.

However, with the Guardian, truth is always stranger than fiction, and rarely found within its pages. The “newly unearthed missive” was not from 1981, nor from 1989, nor 1999. It was not an Exxon document at all. Instead, it was an email written in 2014 to someone at Ohio University and publicly printed by the University with the author’s permission on the University website … hardly a “newly unearthed missive” under any rubric.

In fact, the “newly unearthed” email is an interesting insider’s view of Exxon, so I’m going to reproduce it here in full:

Corporations are interested in environmental impacts only to the extent that they affect profits, either current or future. They may take what appears to be altruistic positions to improve their public image, but the assumption underlying those actions is that they will increase future profits. ExxonMobil is an interesting case in point.

Exxon first got interested in climate change in 1981 because it was seeking to develop the Natuna gas field off Indonesia. This is an immense reserve of natural gas, but it is 70% CO2. That CO2 would have to be separated to make the natural gas usable. Natural gas often contains CO2 and the technology for removing CO2 is well known. In 1981 (and now) the usual practice was to vent the CO2 to the atmosphere. When I first learned about the project in 1989, the projections were that if Natuna were developed and its CO2 vented to the atmosphere, it would be the largest point source of CO2 in the world and account for about 1% of projected global CO2 emissions. I’m sure that it would still be the largest point source of CO2, but since CO2 emissions have grown faster than projected in 1989, it would probably account for a smaller fraction of global CO2 emissions.

The alternative to venting CO2 to the atmosphere is to inject it into ground. This technology was also well known, since the oil industry had been injecting limited quantities of CO2 to enhance oil recovery. There were many questions about whether the CO2 would remain in the ground, some of which have been answered by Statoil’s now almost 20 years of experience injecting CO2 in the North Sea. Statoil did this because the Norwegian government placed a tax on vented CO2. It was cheaper for Statoil to inject CO2 than pay the tax. Of course, Statoil has touted how much CO2 it has prevented from being emitted.

In the 1980s, Exxon needed to understand the potential for concerns about climate change to lead to regulation that would affect Natuna and other potential projects. They were well ahead of the rest of industry in this awareness. Other companies, such as Mobil, only became aware of the issue in 1988, when it first became a political issue. Natural resource companies – oil, coal, minerals – have to make investments that have lifetimes of 50-100 years. Whatever their public stance, internally they make very careful assessments of the potential for regulation, including the scientific basis for those regulations. Exxon NEVER denied the potential for humans to impact the climate system. It did question – legitimately, in my opinion – the validity of some of the science.

Political battles need to personify the enemy. This is why liberals spend so much time vilifying the Koch brothers – who are hardly the only big money supporters of conservative ideas. In climate change, the first villain was a man named Donald Pearlman, who was a lobbyist for Saudi Arabia and Kuwait. (In another life, he was instrumental in getting the U.S. Holocaust Museum funded and built.) Pearlman’s usefulness as a villain ended when he died of lung cancer – he was a heavy smoker to the end.

Then the villain was the Global Climate Coalition (GCC), a trade organization of energy producers and large energy users. I was involved in GCC for a while, unsuccessfully trying to get them to recognize scientific reality. (That effort got me on to the front page of the New York Times, but that’s another story.) Environmental group pressure was successful in putting GCC out of business, but they also lost their villain. They needed one which wouldn’t die and wouldn’t go out of business. Exxon, and after its merger with Mobil ExxonMobil, fit the bill, especially under its former CEO, Lee Raymond, who was vocally opposed to climate change regulation. ExxonMobil’s current CEO, Rex Tillerson, has taken a much softer line, but ExxonMobil has not lost its position as the personification of corporate, and especially climate change, evil. It is the only company mentioned in Alyssa’s e-mail, even though, in my opinion, it is far more ethical that many other large corporations.

Having spent twenty years working for Exxon and ten working for Mobil, I know that much of that ethical behavior comes from a business calculation that it is cheaper in the long run to be ethical than unethical. Safety is the clearest example of this. ExxonMobil knows all too well the cost of poor safety practices. The Exxon Valdez is the most public, but far from the only, example of the high cost of unsafe operations. The value of good environmental practices are more subtle, but a facility that does a good job of controlling emission and waste is a well run facility, that is probably maximizing profit. All major companies will tell you that they are trying to minimize their internal CO2 emissions. Mostly, they are doing this by improving energy efficiency and reducing cost. The same is true for internal recycling, again a practice most companies follow. Its just good engineering.

I could go on, but this e-mail is long enough. SOURCE

Let me draw your attention to a few points.

The first is that for a company like Exxon, all decisions are made with respect to the “bottom line” of the balance sheet, which shows whether the company is gaining or losing economic ground. However, as the author points out, this is often also the most ethical decision. In the author’s example, an emphasis on safety is both the ethical choice and the best choice for the bottom line. Note how the author describes how that plays out for natural resource companies (emphasis mine)

In the 1980s, Exxon needed to understand the potential for concerns about climate change to lead to regulation that would affect Natuna and other potential projects. They were well ahead of the rest of industry in this awareness. Other companies, such as Mobil, only became aware of the issue in 1988, when it first became a political issue. Natural resource companies – oil, coal, minerals – have to make investments that have lifetimes of 50-100 years. Whatever their public stance, internally they make very careful assessments of the potential for regulation, including the scientific basis for those regulations. Exxon NEVER denied the potential for humans to impact the climate system. It did question – legitimately, in my opinion – the validity of some of the science.

Not exactly the slant the Guardian put on it … next, the author details the attempts of the alarmists to find one single evil company to personify the evil supporters of skeptical climate science, and closes that section by saying (emphasis mine):

Exxon, and after its merger with Mobil ExxonMobil, fit the bill, especially under its former CEO, Lee Raymond, who was vocally opposed to climate change regulation. ExxonMobil’s current CEO, Rex Tillerson, has taken a much softer line, but ExxonMobil has not lost its position as the personification of corporate, and especially climate change, evil. It is the only company mentioned in Alyssa’s e-mail, even though, in my opinion, it is far more ethical than many other large corporations.

Of course, the Guardian carefully avoided giving either a quote of this interesting section, or for that matter even a link to the location of the original publication of the email …

The author of the email was Lenny Bernstein, a PhD in Chemical Engineering who was also a Coordinating Lead Author of Chapter 7 (Industry) of the Mitigation section of the IPCC AR4. However, I would not describe him as an alarmist, as he was also involved with the George C. Marshall Institute’s production entitled “Climate Science and Policy: Making the Connection”. I can find no details of his work for Exxon, but I doubt greatly that he was Exxon’s “in-house climate expert” as is claimed by the Guardian. Although he discusses Exxon’s position in 1981 about climate change involving the Natuna Gas Field, he says he himself didn’t become aware of it until 1989.

After working for the petroleum industry, he had a short-lived environmental consulting business from 2005 to 2008 called L S Bernstein & Associates LLC., and an extensive involvement with the IPCC. Prior to leaving the petroleum industry, however, I don’t find anything at all by Dr. Bernstein involving the climate.

Finally, both the Guardian article and the email strongly imply that Exxon decided not to develop Natuna because of Exxon’s concerns about climate change. However, to the contrary, Exxon did try to develop Natuna, starting in 1980. In the event, the economic and political situations both mitigated against development, and climate was a minor concern. Exxon sunk $400 million into the field and got nothing out of it. Big oil is a big money gamble, and sometimes it involves big losses like Natuna. From Offshore Technology.com  (emphasis mine):

Natuna Gas Field

Natuna gas field is in the Greater Sarawak Basin about 1,100km (700 miles) north of Jakarta and 225km (140 miles) northeast of the Natuna Islands, Indonesia’s northernmost territory in the South China sea.

Discovered in 1970 by Italy’s Agip, the field is the biggest in Southeast Asia with an estimated 46 trillion cubic feet (tcf) of recoverable reserves, but has been developed only recently.

A 1980, 50-50 venture in Natuna D-Alpha area, East Natuna, between Pertamina (Indonesia’s state-owned petroleum company) and Exxon Mobil Corp of the US, didn’t result in production. The 71% CO2 content made gas extraction from the huge 1.3-trillion-cubic-metre area expensive, and development difficult. Despite Exxon’s $400m and Pertamina’s $60m investments, the Indonesian Government terminated its contract with Exxon in 2007 leaving Pertamina in charge.

East Natuna has been little explored over the last 15 years, mainly due to political disruption, its remoteness, and because discoveries such as Exxon’s have proved uneconomic to develop. Reservoirs in the region are in the Middle to Late Miocene reefs, underlain and overlain by deltaic sediments.

Note the lack of any comment about climate concerns in the reasons for not developing the field.

Anyhow, that’s my effort towards promoting a more balanced view and discussion of the issues.

Rain here today in July, unheard of and most welcome. I’d say it must be global warming but everyone knows that global warming only causes bad things …

w.

The Usual Request: If you disagree with someone please have the courtesy to quote the exact words that you disagree with, so we can all understand just what you are objecting to.