Welcome to “Feet to the Fire: Big Oil and the Climate Crisis,” a biweekly newsletter in which we’ll share our latest reporting on how the fossil fuel industry is driving climate change and influencing climate policy in five of the nation’s most important oil-and-gas-producing states. In addition, we’ll shine a spotlight on the financing of the fossil fuel industry, holding banks and other financial institutions accountable for their role and providing you with updates on their activities. We will also bring you the latest from our climate and media columnist, acclaimed environmental writer Mark Schapiro.
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As the global climate crisis intensifies this summer — marked by more severe storm systems, dangerous wildfires and the world’s oceans hitting record-high surface temperatures — national and local leaders have largely yet to take action on the scale needed to counter the worst impacts of climate change. The political power of the fossil fuel industry coupled with the refusal by many elected officials to act has put the U.S. on track to fall far short of its commitments to curb greenhouse gas emissions.
Yet the urgency of the situation is prompting citizens and lawmakers in some states to propose inventive solutions that, while not designed to directly cut fossil fuel production, would challenge the status quo of business as usual. Four of the country’s five top oil-producing states are in the West, where water supplies hit historic lows in 2022 due to global warming. The Slick’s Colorado reporter, Jennifer Oldham, reports that as the population in the region continues to grow, further reducing water supplies, lawmakers from Colorado to New Mexico to Texas have passed legislation to require groups of policymakers and regulators to figure out how to reuse and recycle contaminated water left over from fracking activity.
“How much louder do we have to yell? Legal action is our last recourse. It’s time to demand accountability.”~ Zephyr Jaramillo, campaign organizer, YUCCA
Another negative impact of fracking — and more than a century’s worth of oil and gas production — is the abandoned well crisis. In Pennsylvania there are an estimated 300,000 to 500,000 old wells scattered across the state that have been abandoned by oil and gas producers, posing risks of explosion to surrounding communities and leaking methane and toxins into the air and nearby waterways. One of the few ways to safely plug the wells is to require well operators to put up a bond to cover the cost of plugging — but the current bonds, ranging between $2,500 and $10,000, are inadequate, since plugging can run more than $100,000. Last year, oil-friendly lawmakers made a deal with Pennsylvania’s then-governor that kneecapped regulators’ ability to address the crisis and potentially raise bonding rates. But a group of Democratic lawmakers introduced a bill in May to reset environmental law and restore the authority of regulators to raise bonding amounts, reports Audrey Carleton, The Slick’s Pennsylvania reporter.
And in some cases, citizens frustrated with the scale of environmental problems in their state are taking their complaints right to the top. In New Mexico, a group of 15 plaintiffs has sued the state, including its governor, Legislature and environmental regulatory agencies, for not fulfilling their constitutional duty to protect the environment, natural resources and citizens’ health from pollution due to oil and gas production. The novel legal strategy is a pivot from the usual tactic of suing oil and gas production companies for violating environmental laws, reports Jerry Redfern, The Slick’s New Mexico reporter — and could force elected officials to increase oilfield enforcement in the second-largest oil-producing state in the country.
“How much louder do we have to yell?” Zephyr Jaramillo, campaign organizer with youth-based climate group YUCCA and a co-plaintiff in the case, tells Redfern. “Legal action is our last recourse. It’s time to demand accountability.”
There is no more brazen example of complicity in the face of pending disaster than the banking industry’s ongoing funding of fossil fuel production, which continues to increase despite the declarations from the world’s biggest banks that they support the transition to a green economy in the coming decades. Such financing is increasingly difficult to track due to the lack of transparency in the sector and the complexity of the transactions.
When smoke from Canadian wildfires that experts say are partially due to dryer conditions brought about by climate change blanketed the Northeast last week, among the buildings impacted was Citigroup’s headquarters in NYC. That struck some climate activists as symbolic, considering that the bank is the second-biggest financier of fossil fuel projects in the world. Since the Paris climate accord, it has pumped $333 billion into the sector, according to the Banking on Climate Chaos report.
The latest bank to come into the crosshairs of climate activists is South Africa’s Standard Bank, the country’s largest, which is acting as a financial adviser to developers from France’s TotalEnergies and China’s National Offshore Oil Corporation for the proposed East African Crude Oil Pipeline and multiple LNG projects in Mozambique. On June 12, hundreds of activists marched on the bank’s offices in Johannesburg to urge its leadership to redirect its resources to renewables to increase the region’s access to clean energy.
The pipeline project would generate 418 million tons of emissions over 25 years, threaten biodiverse wildlife areas and potentially pollute the Lake Victoria basin, which provides water to 40 million people. But the bank’s chairman, Nonkululeko Nyembezi, was unmoved, vowing that the bank will continue to fund oil and gas projects, saying that it sees gas as a transition fuel. Some international banks, including Japan’s Mitsubishi UFJ Financial Group, have responded to the pressure by pulling their financing of the project.
With demand rising in the wake of Russia’s invasion of Ukraine, 60 of the world’s biggest banks provided $13 billion in financing to coal producers in 2022.
One energy source that is definitely not seen as a transition fuel is coal, though it continues to attract financing. Less than two years ago, at a U.N. summit in Glasgow, the world’s leaders seemed committed to ditching coal, promising to stop building coal-fired power plants while banks pledged to stop financing mines. Eighteen months later, “the world’s dirtiest fuel is still smoking,” reports the Economist. With demand rising in the wake of Russia’s invasion of Ukraine, 60 of the world’s biggest banks provided $13 billion in financing to coal producers in 2022. As a result, though coal production needs to drop by two-thirds in this decade to ensure that the world’s temperature doesn’t increase by more than 1.5° C, production is projected to fall by less than a fifth. Part of the problem is that some of these bank pledges don’t take effect until later this decade and other promises cover only new mines.
Though some global banks such as BP are pulling back on previous pledges to ramp down financing of oil and gas projects, BNP Paribas is taking a few steps forward. The French bank recently announced that it will stop arranging bond deals if the issuer plans to use the money to finance new fossil fuel exploration and production. Though it’s still being sued by environmental groups for not living up to previous pledges, BNP now has the highest ratio among banks of green to fossil fuel financing, according to BloombergNEF — becoming the biggest provider of bonds and loans for green projects in the world.
The bank is taking a new approach to incentivizing better behavior — rather than gain influence by owning equity in an energy company, it’s basically using an implicit threat that unless a company changes its ways, the bank will deny that firm credit. “How effective this will be remains to be seen, but it has the potential to become another string to the bow of financials hoping to facilitate the transition without simply enacting divestment policies,” notes Bloomberg.
As the climate crisis deepens, banks face rising pressure to join international agreements to curb their financing of fossil fuel production and are increasingly being held accountable for previous pledges. And the focus on financing is steadily expanding to include the role of government-owned financial vehicles and multilateral development banks.
The Biden administration recently came under fire from environmentalists after it was revealed that the U.S. government’s International Development Finance Corp. (IDFC) is offering financial aid to Poland to help it secure LNG supplies. The $500 million will go to Poland’s PKN Orlen as a guarantee for payments it owes to Goldman Sachs’ European arm for hedging activities around the future supply of LNG.
The top 20 fossil fuel producers in the Asia-Pacific region generate an average of 96% of their revenue directly from oil and gas production.
That decision was condemned by environmental groups because it flies in the face of U.S. commitments to stop funding such projects — for example, the Group of Seven nations last year promised to “end new direct public support for the international unabated fossil fuel energy sector by the end of 2022.” The IDFC claims that the deal will actually help reduce Poland’s carbon footprint by getting it to use more LNG rather than coal and to reduce its reliance on Russian natural gas. “This is enabling gas exports,” Jake Schmidt, senior strategic director at the Natural Resources Defense Council, told Bloomberg. “And it’s a failure of U.S. leadership to lead with a clean energy agenda.”
Elsewhere in the world, multilateral development banks face increasing pressure to stop funding fossil fuel developments. Australia’s role was highlighted in the recent Hidden Cash for Fossils report due to its shareholdings in three international banks — the World Bank, the Asian Development Bank and the Asian Infrastructure Investment Bank — which collectively pumped almost $33 billion into fossil fuel projects from 2016 to 2021. The groups behind the report, Jubilee Australia and ActionAid, are pushing more than 30 countries, including the U.S. and U.K., to adhere to an agreement they signed to stop funding such production.
The impact of such agreements can be powerful. Oil and gas companies in the Asia-Pacific region are so dependent on fossil fuel revenue and lacking in clean energy development that they’re finding it more difficult to get financing from a banking sector that has pledged to meet net-zero commitments. The top 20 producers in the region generate an average of 96% of their revenue directly from oil and gas production, and “many still adopt a wait-and-see approach to new energy investments, lagging global peers,” writes Christina Ng, author of a new report by the Institute for Energy Economics & Financial Analysis (IEEFA). More banks in the region have joined the Glasgow Financial Alliance for Net Zero (GFANZ), which was formed during the U.N. Climate Change Conference in 2021, and is committed to less funding of fossil fuel operations, including no new direct investments in upstream production. Among the companies on the report’s shortlist of six that will be challenged in coming years by banks becoming more climate conscious are Australian gas giants Santos and Woodside Energy.
