Guest essay by Eric Worrall
The U.S. Securities and Exchange Commission has ruled that Exxon must allow a shareholder vote, on whether Exxon should include information about specific risks posed by climate change in company reports. Exxon claims that the proposal is too vague to properly address.
The Securities and Exchange Commission has ruled Exxon Mobil must include a climate change resolution on its annual shareholder proxy, a defeat for the world’s largest publicly traded oil producer, which had argued it already provides adequate carbon disclosures.
In a Tuesday letter to Exxon XOM -0.43% seen by Reuters, the SEC said the oil producer cannot keep a proposal spearheaded by New York state’s comptroller from a full shareholder vote at the company’s annual meeting in May.
If approved, the proposal would force Exxon to outline specific risks that climate change or legislation designed to curb it could pose to its ability to operate profitably.
Exxon had argued that the proposal was vague and that it already publishes carbon-related information for shareholders, including a 2014 report on its website entitled, “Energy and Carbon – Managing the Risks.”
The SEC found those reports do not go far enough.
“It does not appear that Exxon Mobil’s public disclosures compare favorably with the guidelines of the proposal,” Justin Kisner, an attorney-adviser with the SEC, wrote to the oil producer.
Read more: http://fortune.com/2016/03/23/exxon-climate-change-vote/
The proposal;
Shareholders request that by 2017 ExxonMobil publish an annual assessment of long term portfolio impacts of public climate change policies, at reasonable cost and omitting proprietary information. The assessment can be incorporated into existing reporting and should analyze the impacts on ExxonMobil’s oil and gas reserves and resources under a scenario in which reduction in demand results from carbon restrictions and related rules or commitments adopted by governments consistent with the globally agreed upon 2 degree target. The reporting should assess the resilience of the company’s full portfolio of reserves and resources through 2040 and beyond and address the financial risks associated with such a scenario.
Read more: http://www.ceres.org/investor-network/resolutions/exxon-carbon-asset-risk-2016
I’ve got to say Exxon has a point. They are being asked to assess the impact of the legally non binding Paris agreement, and climate change, on their business, based on models which have so far failed to demonstrate predictive skill, and they are also being asked to speculate about what politicians might do in response to these hypothetical future changes.
How can speculation about future regulatory frameworks possibly be in any way meaningful? Nobody knows what the US government is likely to do next week, let alone 10 to 20 years from now. The next US President might rule Exxon’s business model is illegal – US Presidents these days seem able to rule by decree. Overnight Exxon’s value could drop to zero. On the other hand, the next President might open public lands to oil exploration, which might cause Exxon’s value to soar.
Either way, one thing is clear – America’s over mighty, interventionist government is doing untold damage to the stability of the American business environment.
Britain has paid a high price for such government meddling in energy markets. Britain tried to tilt their energy market in favour of renewables, but current generation renewables are not a viable replacement for fossil fuels. Britain still needs fossil fuel infrastructure investment. But as Energy Secretary Amber Rudd recently admitted, that We now have an electricity system where no form of power generation, not even gas-fired power stations, can be built without government intervention.
Despite a desperate need for new capacity, few private investors dare to put their money into British energy projects, because their investments might be rendered worthless at any time, at the stroke of a politician’s pen. Britain is on the brink of economically damaging power shortages – but hardly anyone is investing. The few Investors who are willing to risk investing in British energy markets demand iron clad guarantees of massive government support – support which in most cases the British government is unwilling or unable to provide, support which would have been completely unnecessary a decade ago.
If American politicians continue to pointlessly meddle with US energy markets, American markets will likely end up as dysfunctional as British energy markets.
Update: slight rewording of the first paragraph
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That pretty much sums up the task at hand for Exxon,Eric.
Since they can only speculate, I’d recommend putting in 2 X the ‘might, could, possibly, may’ as contained in the typical warmist study and follow each weasel word with,”Or ‘might not, could not, possibly not, may not,”liberally sprinkled with,”It all depends and nobody knows for sure.”
The SEC has not said they must publish this, only that they must allow a shareholder vote. If the shareholders don’t want it they wont have to do it.
If they do have to do it, this will surely provide amunition to those opposed to regulation. They will be able to point to the report and say “Look- this is how much damage implementing these policies will cause”.
Yes! If there was ever a time for “Fossil Fuel Interests” to state their position on government regulation, this is it.
Use facts to detail the undeniable adverse economic economic impact on their company (and thus shareholders) of proposed regulation and then quote Gina McCarthy’s recent statement (and the same statement of a year ago) at congressional hearings that the regulations would have NO measurable impact at all on the temperature (or CO2) but they would have the benefit of “demonstrating leadership”. (Gina wins the Don Quixote Award two years running!)
As Don K also noted, I would also present unequivocal data on how the EU’s regulations consistent with the Paris Agreements has made energy prices skyrocket (as promised by Obama), moved industry out of their respective countries and will lead to massive interruptions in power supply.
IIRC, President Obama’s plan says that energy prices will drop a bit. I did mention that the plan was poorly crafted, did I not?
Green idiots! They all divest themselves of oil stock and then they want shareholders to press the company for green concessions. Idiots.
Idiots are people who divest their pension funds of oil stock, giving no forethought about the future sustainability of their pension fund.
Opening USA public lands to exploration won’t cause ExxonMobil share price to soar. Simply put, the USA market has too many competitors, and oil and gas resources in such federal lands aren’t massive enough to bias the market in a meaningful fashion.
On the other hand, a USA president is extremely unlikely to declare EM’s business model illegal.
Share prices are more likely to move with oil price. Oil price will move up gradually as the world’s resources are depleted. The question in my mind is whether EM will be able to switch to something else as oil production reaches a plateau and then begins to decline, simply because there wont be anywhere left to find new oil reserves.
Well, we have had to deal with this scenario for a long time and the current problem is over-supply, not shortage. I recall way back in 1952 I was advised to stay away from the petroleum industry as it had only a fifty year proven reserve of crude. The fifty years is up.
Fernando: Gave this some thought while strolling through the snow in the woods across the street with the dog. I think probably the following points would/will be made:
1. The world economic situation has a far greater impact of Exxon profits and plans than climate change will.
2. Climate change might cause some modest drop in revenues from reduced space heating fuel sales due to shorter/milder winters. That’ll be offset by other uses of hydrocarbons.
3. Any drop in revenues from improved vehicle fuel efficiency, electric vehicles, etc will be more than offset by larger numbers of vehicles on the road in developing countries.
4. There may be some transient problems with drilling lease availability on government controlled lands in some parts of the world. It probably won’t be that big a deal.
5. Grandiose plans to cut carbon emissions such as Germanies Energiewende or President Obama’s energy plan are so poorly crafted and unrealistic in terms of the capabilities of renewables capabilities that they will fail in the industrialized countries and mostly will not be implemented in developing countries. That will create considerable turmoil but will have little real long term affect on Exxon.
6. Carbon taxes, if implemented, will fall mostly on coal. Exxon already projects that coal will have a decreasing share of US energy after 2025. Exxon does not plan to be much affected by any decline in coal.
They might or might not take a few shots at the quality of climate “science” and the ineptness of politicians in crafting climate policy. What they won’t do is say that they’ve known for decades that climate change will kill us all if we don’t act quickly.
Don, there’s nothing wrong with your comment. I live by the beach, haven’t seen snow this winter. I do run my heater a little bit at night.
My comment was simply intended to point out that EM’s share price isn’t that easy to move unless price perception is shifting.
As for JimB’s comment: I wasn’t discussing the oil industry in 1952. Today, I’m pointing out we no longer find enough oil to replace what we use, and that long term prospects for the OIL industry do look grim unless they find a way to switch to something else. And today’s prices are irrelevant. I’m discussing a long term trend. By 2040 we will definitely have confirmation as to whether the end of the age of oil is near.
This is an obvious proof of Brandolini’s Law
Thanks for that – I was trying to remember the term for it.
Brandolini’s Law: “The amount of energy needed to refute bullshit is an order of magnitude bigger than to produce it.”
Exxon is the new Keystone is the new Walmart. Targeting is what they do.
Exxon Mobile is not being asked to take a position on warming/climate change. They are being asked to assess the risks, environmental and regulatory, that could affect their future business. I would expect this to include assessments based on both skeptical and alarmist views. They need not express an opinion on which is most likely to occur, just explain the risks and potential impacts on their business.
Exxon Mobile should be able to avoid taking an “actionable” position.
This is easy.
“Shareholders request that by 2017 ExxonMobil publish an annual assessment of long term portfolio impacts of public climate change policies”
Zero.
“and should analyze the impacts on ExxonMobil’s oil and gas reserves and resources under a scenario in which reduction in demand results from carbon restrictions and related rules or commitments adopted by governments consistent with the globally agreed upon 2 degree target.”
Zero.
I can see scenarios in which EM reserves grow due to acquisitions. It has a much stronger financial position, therefore it should do better in a lousy market.
Have you ever seen the government admit the future cannot be known? Of course not. So why would the government be bothered by a claim that Exxon can’t know the future. Sure it can. The government knows and so should everyone else.
As for shareholders and environmental claims, if this is important to shareholders, it seems that many of them need stocks to drop as a tax write-off since if Exxon says fossil fuels harm the environment, stocks will fall. Is this some kind of trading scheme the SEC created so George Soros can buy low on oil stocks like he did on coal?
This might be a great opportunity to bog down the SEC with a lot of congressional hearings and a lot of reports entered into the congressional record – getting down on paper that 1. models don’t model or predict well; 2. the science is not settled, and therefore 3. requiring regulation is not appropriate at this time.
Then, this is in-black-and-white fodder for a lawsuit. Otherwise, yes, they pave the way for their own demise.
This resolution, or rather the background necessary to produce a meaningful risk evaluation, would be very valuable fodder for any foreign power interested in destroying the company. It would basically paint a path to the disruption of the profitability of the company, giving enemies targeted points to work on to render the company unviable.
Given the public security aspects of the energy sector, I would be surprised if they are literally forced to show the targets that would bring down the oil sector in Western countries. I wonder if they thought this through.
Multiple universities in Canada (including Queens and Waterloo U) have been targeted by foreign agitator organisations calling for the total divestment from all ‘fossil fuel’ investments, and to pass along (require) that detachment to any company they do invest in.
This tactic, supported financially by, for example, 350.org, intends to make it impossible to invest in oil company shares. They are literally calling for an end to the oil industry. “Leave it in the ground.” It will be helpful for them in their cause if they could be provided an annual roadmap to the major political and policy vulnerabilities that will speed their conclusion – the destruction of the fuel supply.
The vote will fail. They will not have to write this drivel.
Exxon should delay until Trump is elected and this B.S. will go away.
A major slice of “renewables” consists of biomass (though not shown in those Guardian and HuffPo illustrations of wind turbines and solar panels under sunny skies with fluffy white clouds). Would be a pity not to get a risk evaluation from Big Incinerator.
And we totally need to get Saudi Aramco, Gazprom, National Iranian (all bigger than Exxon) to do a climate change resolution thingy. Those outfits are real sweeties and I’m sure they’re itching to help.
I think this disclosure is simple and easy. Exxon merely has to disclose that without its products, hundreds of millions, if not billions, of people will not be able to control the climate of their homes, therefore condemning those people to misery from the cold, and quite possibly condemning millions to death. That’s just looking at fuel for electricity generating plants and heating fuel. If we look at the diesel and gasoline Exxon produces, without it, hundreds of millions, if not billions, would starve. Even given that fossil fuels do raise the earth’s temperature a fraction of a degree Celsius, that appears to be a good trade off.
Wow, if the SEC is buying into climastrology then the disease is worse than we thought.
I think Exxon should forego the vote and go ahead and disclose the dangers of climate policy on their business. I’ll help them out by completing this years impact statement:
2016 business impact from public climate policy: None, the expense was passed on to the consumer, have a nice day.
If I were Exxon I would want to know why we were being singled out. Why isn’t every company expected to do the same thing?
Well, that’s the plan, innit…
You’ll know it’s bad when this requirement is applied to all food labeling along with the latest GMO requirements. Try fitting all of that on a snack food label.
The SEC is “supposed” to be an independent agency outside of presidential whim. So who in the organization is a cheat?
This is how they apply the regulatory screws.
Exxon should ask the SEC to provide a validated model that will enable the company to generate the required wide ranging report. No valid model supplied, no report.
Exxon should pack up and move to China then watch the wailing.
It is to bad that outfits like Exxon would grow big ones and call BS and expose the corrupted climate science.
This is the ultimate result of a childish corporate witch-hunt, wherein big government goes after big oil…..all over a supposed “Climate change denial” that happened in the early 1980’s….during which GLOBAL COOLING was this big scare. The supposed denial happened during a time when the term “climate change” had not yet been invented, and there was no IPCC or UNFCCC in place discussing such topics….nor trying to force policy changes in response. Yet somehow Exxon is responsible for “denial” of a topic that wasn’t even in vogue at the time. Pretty slick equivocation, if you ask me.
What if Exxon held the Great Debate? Experts from all over the world beamed everywhere discussing the actual role of CO2 and how its’ PPM control/modify our climate. On the one side–all the kooks who think that the end of the world is nigh, scientists whose careers depend on more funding and of course government officials who need more carbon taxes to play with. On the other side–the research, history and scientific reality that is practiced by “skeptics”! Obviously shareholders would enjoy seeing how their company has wanted to bring the real truth forward ignoring any consensus that isn’t part of science.
It would be interesting to see how many experts would accept an invitation to have others query their work/beliefs.
This is the kind of harassment you might expect to see in some third world Marxist backwater. Not the united states.