Environmental disclosures by some of the biggest U.S. oil and gas companies contain “questionable claims” about climate risks and greenhouse-gas emissions, frustrating investors under pressure to divest from fossil fuels, Columbia University researchers found.
Emissions data reported by oil companies are “awash with unsubstantiated claims,” according to an analysis of 15 publicly traded oil companies and a dozen major oil investors in the U.S. by the university’s Center on Global Energy Policy.
Investors are demanding that oil and gas companies disclose more information about climate change and emission disclosures. There is increasing pressure for them to do so. While some large companies already disclose their greenhouse-gas emissions involuntarily, the lack of regulatory oversight and uniform reporting highlights the difficulties investors face when trying to compare inconsistent data between different firms.
For example, Columbia researchers found that shale gas producer EQT Corp. disclosed zero emissions from flaring, but defined flaring based on the American Exploration Petroleum Council’s definition, which includes only the flaring of wellhead gas at company-operated assets. EQT’s report omits gas flared from other sources downstream from the well and flaring from emergency incidents, the report published Tuesday said.
“The definition used is neither questionable, as it is an industry standard as noted, nor does it detract from or impact the data included in our ESG report, which shows that EQT has among the lowest methane intensities within the oil and gas space,’’ an EQT spokesperson said in response to the study.
Oil investors “noted with frustration the difficulty in trusting numbers self-reported by companies and rarely verified by independent third parties, even though the way U.S. oil and gas companies report emissions is in line with existing Environmental Protection Agency regulations,” according to Columbia researchers who interviewed investors representing major banks, insurers, asset managers and private equity funds.
Last month, the Securities and Exchange Commission issued new guidelines that require U.S. public companies to report on climate risk and reduce greenhouse gas emissions. The proposed rules will be in effect within the next few years if they are adopted.
“It is evident that a regulatory push is likewise necessary to incentivize all operators in the U.S. oil and gas sector to apply these innovations and better measure and reduce GHG emissions,” the researchers said. “Most operators are hesitant to embrace emissions-reduction efforts if they will increase operational costs—costs that may not always be recoverable.”
The researchers found that investors polled by them agreed with the conclusion of the research: oil companies need to reduce their emissions by eliminating routine flaring. The global oil and gas industry accounts for approximately 9% and, indirectly, 33% of greenhouse-gas emission when it produces its products.
Some investors even suggested that oil companies must report Scope 3 emissions. This refers to greenhouse gases emitted in the form of customers using petroleum products. However, other investors said companies should not take responsibility for those emissions, believing instead that it’s the role of end-users. Only five companies—Chevron Corp., Hess Corp., ConocoPhillips, EQT and Occidental Petroleum Corp.—reported Scope 3 emissions.
“Considering the robust demand for oil and gas, a case can be made that engagement with the sector can accomplish more to improve practices and meaningfully impact GHG emissions”—instead of divesting from fossil fuels, the researchers said.
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