Big Oil laggard Exxon faces a new climate threat from Wall Street

SHAREShare Article via FacebookShare Article via TwitterShare Article via LinkedInShare Article via Email
KEY POINTS
  • Exxon Mobil has been a laggard in the oil and gas sector and has seen its market value decline by hundreds of billions of dollars.
  • Pension giant CalSTRS is supporting a new activist fund effort to replace Exxon board members.
  • Activists see this as a perfect time to seek short-term value creation in a better run company as well as more long-term support from investors if the company becomes clearer about its climate plan.

In this article

VIDEO05:41
CalSTRS’s Chris Ailman on calling for company overhaul at Exxon Mobil

Exxon Mobil is poised for a new role in a changing world it doesn’t want: target and test case for a new form of combined attack from activist hedge funds and long-term impact investors focused on sustainability and climate change. A newly formed activist investor group, Engine No. 1, announced plans on Monday to seek four board seats at the oil and gas giant, and underlying the effort are both short-term and long-term goals to change the way Exxon approaches the energy business at a time of rapid transition forced by fears about carbon emissions.

The activist firm — which includes founders from successful activist hedge funds including Partner Fund Management and JANA Partners — thinks the time is ripe for an overhaul of Exxon’s management. The market stats cited in its letter to Exxon’s board highlight a significant drop in operating performance and “dramatic” decline in Exxon’s stock value in recent years as many investors have lost faith in the company.

Source: Big Oil laggard Exxon faces a new climate threat from Wall Street

Ezra Klein | Texas Is a Rich State in a Rich Country, and Look What Happened – The New York Times

Opinion Columnist

Credit…Mark Felix/Agence France-Presse — Getty Images

“A few months back, because I really know how to live, I spent a night reading “The Green Swan: Central banking and financial stability in the age of climate change.” The report, released in January 2020 by the Bank for International Settlements, argued that central banks, concerned as they are with the stability of prices and financial systems, were negligent if they ignored climate change. The economies we know are inseparable from the long climatic peace in which they were built. But that peace is ending. There are no stable prices in a burning world.

This is one of those papers where the measured language preferred by technocrats strains against the horrors they are trying to describe. What emerges is almost an apocalyptic form of poetry. One line, in particular, has rung in my head for months. “Climate-related risks will remain largely unhedgeable as long as systemwide action is not undertaken.” If you know anything about financial regulators, you know the word “unhedgeable” is an alarm bell shrieking into the night. Financial systems are built to hedge risk. When a global risk is unhedgeable, the danger it poses is existential.

The point of the report is simply this: The world’s economic systems teeter atop “backward-looking risk assessment models that merely extrapolate historical trends.” But the future will not be like the past. Our models are degrading by the day, and we don’t understand — we don’t want to understand — how much in society could topple when they fail, and how much suffering that could bring. One place to start is by recognizing how fragile the basic infrastructure of civilization is even now, in this climate, in rich countries.

Which brings me to Texas. Two facts from that crisis have gotten less attention than they deserve. First, the cold in Texas was not a generational climatic disaster. The problem, as Roger Pielke Jr., an environmental analyst at the University of Colorado at Boulder, wrote in his newsletter, is that the Electric Reliability Council of Texas’ worst-case scenario planning used a 2011 cold snap that was a one-in-10-year weather event. It wasn’t even the worst cold Texas experienced in living memory: in 1989 temperatures and electricity generation (as a percentage of peak demand) dropped even further than they did in 2011. Texas hadn’t just failed to prepare for the far future. It failed to prepare for the recent past.

Second, it could have been so much worse. Bill Magness, the president and chief executive of ERCOT, said Texas was “seconds and minutes” from complete energy system collapse — the kind where the system needs to be rebuilt, not just rebooted. “If we had allowed a catastrophic blackout to happen, we wouldn’t be talking today about hopefully getting most customers their power back,” Mr. Magness said. “We’d be talking about how many months it might be before you get your power back.”

This was not the worst weather imaginable and this was not the worst outcome imaginable. Climate change promises far more violent events to come. But this is what it looks like when we face a rare-but-predictable stretch of extreme weather, in a rich state in a rich country. The result was nearly 80 deaths — and counting — including an 11-year-old boy found frozen in his bed. I can barely stand to write those words.” . . .

Thomas Friedman | Can You Believe This Is Happening in America? – The New York Times

” . . . What’s going on? Well, in the case of Texas and Mars, the basic answers are simple. Texas is the poster child for what happens when you turn everything into politics — including science, Mother Nature and energy — and try to maximize short-term profits over long-term resilience in an era of extreme weather. The Mars landing is the poster child for letting science guide us and inspire audacious goals and the long-term investments to achieve them.

The Mars mind-set used to be more our norm. The Texas mind-set has replaced it in way too many cases. Going forward, if we want more Mars landings and fewer Texas collapses — what’s happening to people there is truly heartbreaking — we need to take a cold, hard look at what produced each.

The essence of Texas thinking was expressed by Gov. Greg Abbott in the first big interview he gave to explain why the state’s electricity grid failed during a record freeze. He told Fox News’s Sean Hannity: “This shows how the Green New Deal would be a deadly deal for the United States of America. … Our wind and our solar got shut down, and they were collectively more than 10 percent of our power grid, and that thrust Texas into a situation where it was lacking power on a statewide basis. … It just shows that fossil fuel is necessary.”

The combined dishonesty and boneheadedness of those few sentences was breathtaking. The truth? Texas radically deregulated its energy market in ways that encouraged every producer to generate the most energy at the least cost with the least resilience — and to ignore the long-term trend toward more extreme weather.” . . . .

Paul Krugman | Et Tu, Ted? Why Deregulation Failed – The New York Times

Opinion Columnist

Credit…Justin Sullivan/Getty Images

“Nobody is ever fully prepared for natural disaster. When hurricanes, blizzards or tsunamis strike they always reveal weaknesses — failure to plan, failure to invest in precautions.

The disaster in Texas, however, was different. The collapse of the Texas power grid didn’t just reveal a few shortcomings. It showed that the entire philosophy behind the state’s energy policy is wrong. And it also showed that the state is run by people who will resort to blatant lies rather than admit their mistakes.

Texas isn’t the only state with a largely deregulated electricity market. It has, however, pushed deregulation further than anyone else. There is an upper limit on wholesale electricity prices, but it’s stratospherically high. And there is essentially no prudential regulation — no requirements that utilities maintain reserve capacity or invest in things like insulation to limit the effects of extreme weather.

The theory was that no such regulation was necessary, because the magic of the market would take care of everything. After all, a surge in demand or a disruption of supply — both of which happened in the deep freeze — will lead to high prices, and hence to big profits for any power supplier that manages to keep operating. So there should be incentives to invest in robust systems, precisely to take advantage of events like those Texas just experienced.” . . .

” . . . The disaster in Texas, however, was different. The collapse of the Texas power grid didn’t just reveal a few shortcomings. It showed that the entire philosophy behind the state’s energy policy is wrong. And it also showed that the state is run by people who will resort to blatant lies rather than admit their mistakes.

Texas isn’t the only state with a largely deregulated electricity market. It has, however, pushed deregulation further than anyone else. There is an upper limit on wholesale electricity prices, but it’s stratospherically high. And there is essentially no prudential regulation — no requirements that utilities maintain reserve capacity or invest in things like insulation to limit the effects of extreme weather.” . . .

What Caused the Blackouts in Texas? – The New York Times

“The outages and the cold weather touched off an avalanche of failures, but there had been warnings long before last week’s storm.

After a heavy snowstorm in February 2011 caused statewide rolling blackouts and left millions of Texans in the dark, federal authorities warned the state that its power infrastructure had inadequate “winterization” protection. But 10 years later, pipelines remained inadequately insulated and heaters that might have kept instruments from freezing were never installed.

During heat waves, when demand has soared during several recent summers, the system in Texas has also strained to keep up, raising questions about lack of reserve capacity on the unregulated grid.

And aside from the weather, there have been periodic signs that the system can run into trouble delivering sufficient energy, in some cases because of equipment failures, in others because of what critics called an attempt to drive up prices, according to Mr. Hirs of the University of Houston, as well as several energy consultants.

Another potential safeguard might have been far stronger connections to the two interstate power-sharing networks, East and West, that allow states to link their electrical grids and obtain power from thousands of miles away when needed to hold down costs and offset their own shortfalls.

But Texas, reluctant to submit to the federal regulation that is part of the regional power grids, made decisions as far back as the early 20th century to become the only state in the continental United States to operate its own grid — a plan that leaves it able to borrow only from a few close neighbors.

The border city of El Paso survived the freeze much better than Dallas or Houston because it was not part of the Texas grid but connected to the much larger grid covering many Western states.” . . .

Richard Parker | Texas Could Have Kept the Lights On – The New York Times

“. . .  A cold, sharp dagger has slashed through Texas, America’s largest and proudest producer of fossil fuels, while stranding millions without heat or light. The frigid disaster has also laid bare the fallacy, still prominent in the Lone Star State, that oil and gas are more important than impending climate catastrophe, embarrassing a political class that just weeks ago pledged to defend the oil and gas industry — its own Alamo — from the Biden administration.

The fallacy is hard to unwind even as people are dying. But some Texans are also furious about how their state’s ruinous laissez-faire governance led to a cascade of human-caused disasters of epic proportions. Indeed, this was no act of God.

Last week, 29 million Texans learned that the weather would turn unseasonably cold. It would be no ordinary blue norther: As the planet warms, so does the Arctic, disrupting the jet stream, which usually keeps the polar vortex of frigid air in place there. Now there is an emerging, if not unanimous, view among climatologists that the vortex is wobbling and dipping south, paralyzing Madrid, freezing the American Midwest and blanketing the Sierra Nevada, all since the start of this year.

Yet the folks over at the Texas power grid appear to have been caught flat-footed by spiking demand in energy to keep houses warm and phones charged. In general, there’s a storage problem in Texas when it comes to natural gas. Utility companies often don’t bother to buy gas reserves: It’s easier, cheaper and more profitable to tap the gas in the field with a pipeline — usually.

But the moment to invest in resilience has passed. The spot price in early February was under $3 per million British thermal units; this week those spot prices have soared to all-time highs. After a cold snap in 2011, the power companies were supposed to better winterize their plants. Ten years later, they hadn’t done it. It’s hard to believe they couldn’t afford it: Oncor, the giant power utility serving Dallas, reported $651 million in net income in 2019.” . . .

Texas Fracking Billionaires Drew Covid-19 Aid While Investing in Rivals – WSJ

“WASHINGTON—As the coronavirus pandemic and low oil prices walloped U.S. frackers this spring, Texas billionaires Dan and Farris Wilks got a $35 million relief loan to help one of their fracking companies stay afloat. At the same time, they were on a buying spree in the country’s oil patch.

Since spring, businesses controlled by the Wilks brothers have hunted for deals among fracking firms going through bankruptcy and taken or increased stakes in at least six other companies, corporate filings show. But when it looked like the oil-and-gas industry would be shut out of a key pandemic lending program, they and others in the industry turned their attention to Washington, making an appeal for help in meetings with home-state senator Ted Cruz.

The twin dynamics of acquisitions and government rescue show how the economic tumult caused by the pandemic has reshaped the landscape for a key U.S. industry. One result: The Wilkses have expanded their presence in a still-youthful industry where they first invested in 2002, soon to become billionaires as fracking flourished.

But the industry was already under pressure from international competition and a sagging oil price by the time the pandemic hit, and its mounting woes prompted the Wilkses and others to turn to allies in Washington, including Mr. Cruz. The Republican senator helped convince the Trump administration and the Federal Reserve to change the rules for pandemic loans to ensure oil and gas firms could participate.

Soon after the U.S. government changed the rules of its lending program in April, a Wilks family company, ProFrac Holdings LLC, applied for and received a $35 million loan, federal records show. ProFrac, a supplier of pumping equipment and services, is just one slice of the sprawling portfolio of fracking businesses that the Wilks family owns in part or outright across the American West and Canada.

Source: Texas Fracking Billionaires Drew Covid-19 Aid While Investing in Rivals – WSJ

Opinion | Not Just Another Pipeline – By Louise Erdrich – The New York Times

Ms. Erdrich, a member of the Turtle Mountain Band of Chippewa, is a novelist and poet based in Minnesota. Her most recent book is “The Night Watchman.”

Credit…Alex Kormann/Star Tribune, via Associated Press

“PALISADE, Minn. — My daughter and I are walking along the fast-flowing stream of pure darkness that is the young Mississippi River. We are two hours north of Minneapolis, in Palisade, Minn., where people are gathering to oppose the Line 3 pipeline. Patches of snow crunch on pads of russet leaves as we near the zhaabondawaan, a sacred lodge along the river’s banks. It is here that Enbridge is due to horizontally drill a new pipeline crossing beneath the river. We enter the lodge. The peace, the sweetness, the clarity of the water is hard to bear. The brush and trees hardly muffle the roar of earth-moving and tree-felling equipment across the road. The pipeline is almost at the river.

Last month, Minnesota Gov. Tim Walz’s administration signed off on final water permits for Enbridge to complete an expansion of its Line 3 pipeline. After the final section is built in Minnesota, the pipeline will pump oil sands and other forms of crude oil from Hardisty, Alberta, to Superior, Wis., cutting through Indigenous treaty lands along the way. Lawsuits — including one by the White Earth and Red Lake nations and several environmental organizations, and another by the Mille Lacs Nation — are pending. But construction has already started.

This has been a brutal year for Indigenous people, who have suffered nearly double the Covid-19 mortality rate of white Americans. We have lost many of our elders, our language keepers. Covid has also struck an inordinate number of our vibrant young. Nevertheless, tribal people worked hard on the elections. The Native vote became a force that helped carry several key areas of the country and our state. On the heels of those victories, the granting of final permits to construct Enbridge’s Line 3, which will cross Anishinaabe treaty lands, was a breathtaking betrayal. The Land of 10,000 Lakes is already suffering from climate change. Yet Minnesota’s pollution control and public utility agencies refused to take the future of our lakes into account, or to consider treaty rights, in granting permits.

This is not just another pipeline. It is a tar sands climate bomb; if completed, it will facilitate the production of crude oil for decades to come. Tar sands are among the most carbon-intensive fuels on the planet. The state’s environmental impact assessment of the project found the pipeline’s carbon output could be 193 million tons per year. That’s the equivalent of 50 coal-fired power plants or 38 million vehicles on our roads, according to Jim Doyle, a physicist at Macalester College who helped write a report from the climate action organization MN350 about the pipeline. He observed that the pipeline’s greenhouse gas emissions are greater than the yearly output of the entire state. If the pipeline is built, Minnesotans could turn off everything in the state, stop traveling and still not come close to meeting the state’s emission reduction goals. The impact assessment also states that the potential social cost of this pipeline is $287 billion over 30 years.

Opinion | New York State’s Divestment Threat Is a Victory for Climate Activists – By Bill McKibben – The New York Times

Mr. McKibben is a founder of the climate advocacy group 350.org and a leader of fossil fuel divestment efforts.

Credit…Brandon Thibodeaux for The New York Times

“New York State’s comptroller, Thomas DiNapoli, announced on Wednesday that the state would begin divesting its $226 billion employee pension fund from gas and oil companies if they can’t come up with a legitimate business plan within four years that is aligned with the goals of the Paris climate accord. Those investments have historically added up to roughly $12 billion.

The entire portfolio will be decarbonized over the next two decades. “Achieving net-zero carbon emissions by 2040 will put the fund in a strong position for the future mapped out in the Paris Agreement,” he said in a statement.” . . .

Thank you Bill McKibbon.

Here is denier comment, followed by my response to it:

Jonathan Katz
St. Louis56m ago

It may be a victory for climate activists, but it’s a defeat for humanity. Fossil fuels are the reason we aren’t living like medieval peasants in cold smoky (burning biofuels) huts. Climate change is real, and anthropogenic, but it isn’t hurting us. Net, it is probably beneficial, extending growing seasons, making it easier and cheaper to keep warm in the winter, enriching the atmosphere with CO_2 that plants need, and increasing rainfall in arid regions. I am a professor of Physics, and understand much more about greenhouse gases than Mr. McKibben. I am interested in the welfare of humanity, not in McKibben’s mystical pre-industrial Eden.

3 Replies7 Recommend

 
David Lindsay Jr.
Hamden, CT | Pending Approval
@Jonathan Katz You start off so well, I didn’t expect you to argue that we are not being hurt. Have you spoken to anyone from the Gilbert Islands in the South Pacific. One Virginia think tank that does work for the Pentagon reported in the last year or two, that Iran will probably run out of water in the next 50 years. About 3 years ago, Johannesburg, South Africa almost ran out of water completely. The UN High Commission on Refugees estimates that we have 30 million climate change refugees now, and several hundred million in a a the next 30 years. (We do need to refresh or check these numbers, but they are staggering.) God bless you Sir, but beware of Dante’s inferno. 7.7 billion people now on the planet, Scientists are saying we are the meteor causing the 6th extinction of species, going on now.
David Lindsay Jr. is the author of “The Tay Son Rebellion” and blogs at InconvenientNews.net.

Opinion | Trump Lost. Bolsonaro Can’t Get Over It. – By Vanessa Barbara – The New York Times

By 

Contributing Opinion Writer

President Jair Bolsonaro of Brazil is clearly not ready to mourn the departure of his American counterpart.
Credit…Adriano Machado/Reuters

SÃO PAULO, Brazil — My country’s president, Jair Bolsonaro, has still not recognized Joe Biden as the winner of America’s presidential election.

In his silence, he stands alongside other world leaders such as President Vladimir Putin of Russia, President Andrés Manuel López Obrador of Mexico, Prime Minister Janez Jansa of Slovenia and North Korea’s leader, Kim Jong-un. “I’m holding back a little more,” Mr. Bolsonaro said recently, adding that there was “a lot of fraud” in the election.

It’s an understandable response, as he seems to have a problem accepting facts. Just think about it: This is a guy who still claims hydroxychloroquine is the cure for Covid-19. He maintains that the pandemic is overblown. He asserts that his government has simply eradicated corruption and that Brazil never had a military dictatorship. He says that the Amazon is not burning at all.

But there’s more to the refusal than Mr. Bolsonaro’s now commonplace bizarreness. As one of President Trump’s fiercest allies on the global stage, Mr. Bolsonaro is clearly not ready to mourn the departure of his fellow leader. He’s in denial.