[Congressional Record Volume 164, Number 84 (Tuesday, May 22, 2018)]
[Senate]
[Pages S2839-S2841]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CLIMATE CHANGE
Mr. WHITEHOUSE. Mr. President, in this, my 20th speech about the
climate changes and ocean changes being driven by fossil fuels, I would
like to discuss America's largest oil company, ExxonMobil.
For decades, ExxonMobil did everything in its power to deceive the
American public about the existence and causes of climate change. I
believe that full transparency would show ExxonMobil and its agents
still obstructing efforts here in Washington to resolve the climate
crisis, but I want to focus on one particular audience I believe Exxon
has long misled--its shareholders. An Exxon CEO once went so far as to
cite a bogus scientists petition to his shareholders--yes, that
infamous ``petition'' cooked up by climate deniers that included
cartoon characters and Spice Girls among the scientists.
For decades, Exxon investors have filed resolutions at shareholder
meetings starting back as far as 1990 urging ExxonMobil to address
climate and sustainability issues. Exxon succeeded in quashing every
single one of them--quashing more than 40 shareholder resolutions in
total, year after year--until last year.
At last year's meeting, big institutional investors like BlackRock
threw their weight behind a resolution requiring Exxon to produce an
annual report explaining how it will be affected by climate change and
global efforts to protect us against climate change. Again, Exxon
fiercely opposed this resolution, but this time Exxon lost. The
resolution passed with 62 percent of the vote.
That gave Exxon some serious questions to answer: As the world
transitions to a low-carbon economy, how much oil and gas does Exxon
think we will need? How might declining demand for oil and gas affect
Exxon's operations and bottom line? Will it be economical to produce
all of the reserves currently listed on Exxon's books? Most
significantly, can we burn all Exxon's reserves and not damage the
planet?
Well, Exxon's inaugural climate risk report is out--I have been
through it--and it looks to me like they are still playing hide the
ball. It looks to me like a report that started with the conclusion
that Exxon can develop all its reserves and then back-calculated the
assumptions necessary to get to that conclusion. Let's have a look.
Scientists tell us that we must limit global warming to no more than
2 degrees Celsius if we are to avoid catastrophic changes to the planet
we inhabit. Many believe that to keep a margin of safety, we actually
need to target 1.5 degrees.
There is an article that just came out today headlined ``Limiting
warming to 1.5 degree C would save majority of global species from
climate change.'' To quote the article, it would ``avoid half the risks
associated with warming of 2 degrees C.'' So there is a big difference
of outcomes between 2 degrees Centigrade and 1.5 degrees Centigrade,
and it will affect innumerable species on our planet.
Well, in its report, Exxon doesn't address the 1.5 degrees scenario;
it goes with 2 degrees.
Exxon's report goes on to say that its roughly 20 billion oil-
equivalent barrels of reserves ``face little risk'' from efforts to
meet the 2 degrees scenario. Exxon also says it is ``confident'' about
roughly 71 billion not-yet-proven oil-equivalent barrels that it
reports to its shareholders as assets. It claims that no more than 5
percent of these unproven resources will be rendered uneconomical by
measures to protect us against climate change.
Exxon's report obviously gets to the result management wants: to tell
shareholders that basically all its listed assets are recoverable. But
look at the assumptions required to arrive at that conclusion beyond
the 2-degree assumption.
One assumption is huge amounts of carbon capture and sequestration,
what is called CCS. CCS is technology where carbon emissions are
contained at the site where the fossil fuel is burned and then captured
and buried far underground. This prospect exists but barely exists now.
Its future development is something that is projected by the
International Energy Agency.
This graphic shows the projection by the International Energy Agency
of the various elements that will reduce carbon pollution in the
future.
The top one is efficiency gains, burning less because of better
insulation and so forth, because motors become more efficient.
This green one is all the contribution to carbon reduction of
renewable energy.
[[Page S2840]]
This bottom, dark-blue segment is what the International Energy
Agency attributes to CCS, carbon capture and sequestration.
For its report, ExxonMobil assumed deployment of CCS technology as
much as five times greater by 2040--this year depicted right here--five
times greater than the IEA's projection. If you take IEA's CCS
projection and you quintuple it, you get carbon savings that exceed
everything IEA projects from efficiency and renewables combined. That
is quite an assumption. CCS is actually very expensive, and all it
produces is carbon reduction. You still have to run the fossil fuel-
burning powerplant to make the power, and then, on top of that, you add
the carbon capture and sequestration technology that can add $1 billion
to the price of the equipment.
So here is Lazard's comparison of various kinds of energy costs. This
bottom one is solar. Per megawatt hour, it runs $46 to $61--pretty
efficient. This is onshore wind--$32 to $62 per megawatt hour produced.
This is natural gas; it runs from $48 to $78. Then you add on $25, more
or less, per megawatt hour for carbon capture and sequestration, and
now you have a very expensive product--about $100 per megawatt hour
compared to $46 to $61, for instance, for solar.
If that is the case, it is a little surprising because you would
think that renewables would do better than CCS because they come out
far more cheaply. So how do you get to an assumption of a world in
which CCS outcompetes renewables? It seems improbable, given the
pricing, that CCS will roar ahead of renewables, let alone ahead of
renewables and efficiency combined. If that were true, what a booming
market CCS would be to invest in.
So let's test Exxon's CCS assumption against Exxon's own investment
behavior. If Exxon truly saw carbon capture and sequestration as the
magic bullet to allow it to produce all its oil and gas reserves, you
would expect that it would put its money where its mouth is, but Exxon
barely even mentions CCS in its 2017 10-K filing for investors. There
is one tiny mention right here under its ``Risk Factors'' section. Risk
factors.
If you look at Exxon's announced investments in the United States
this year--$50 billion worth--it makes no mention of any new
investments in carbon capture and sequestration. If Exxon really
believed that CCS was going to boom like that, bigger than renewables,
why not invest more? My hypothesis is that they don't believe that,
that this was just an assumption backed into this report to make it
look as if Exxon was going to be able to protect and use all of its
reserves to get to the foreordained conclusion.
Exxon's report omits another fact about CCS: that this developing
technology will likely see most use with gas-fired powerplants, as my
previous graphic showed. It likely cannot be used to capture Exxon's
products' emissions in the transportation and chemical sectors. Power
generation accounts for only about one-seventh of total demand for oil
and gas, and that share is predicted to fall. Even if it doesn't fall,
that still leaves six-sevenths where it is hard to see a carbon capture
and sequestration offset. Exxon's report does not describe where
exactly this massive deployment of carbon capture and sequestration
will take place, but I can assure you it will not be on auto tailpipes.
Let's move on from CCS.
A second odd assumption in Exxon's report is the growth rate Exxon
predicts for renewable energy. Exxon claims that renewables will grow
only by 4.5 percent annually through 2040. Well, the IEA, the
International Energy Agency, reports that in 2017--the year we just
went through--renewable energy actually grew by 6.3 percent. Well, 6.3
percent is the actual, and they assume it will grow only at 4.5
percent. And that 6.3 percent occurred with massive global subsidies
still giving huge advantages to fossil fuel. If you go down the street
to Exxon's rival BP, BP predicts that renewables growth will average
6.5 percent annually through 2040.
Exxon claims--although we who live here know it is not true--to
support a price on carbon that would obviously lower fossil fuel's huge
subsidy advantage, that would give renewables a fairer shot, and that
would presumably accelerate renewables growth above the 2017 rate of
6.3 percent.
Is Exxon's low-growth assumption realistic for renewable energy?
Well, new solar and wind energy products are already becoming more
economical than existing coal plants, as we just saw in Colorado. New
solar and wind projects now compete on price with new natural gas
plants, as a recent auction in Arizona showed. The cost trajectory for
renewables continues steeply downward.
This downward curve is the cost of centralized solar power, like
those big arrays of mirrors that focus solar on a generator. This
steeply downward curve is the downward curve of photovoltaic, the types
of arrays that go out on their own in fields or on rooftops. This is
the downward curve of offshore wind energy, and this is the downward
curve of onshore wind energy. All of these renewable sources are on a
steep downward trajectory. So why would growth slow?
Here, again, Exxon made an assumption that does not seem plausible,
but the assumption does help it arrive at its desired conclusion that
it can develop essentially all its assets.
Here is a third questionable Exxon assumption. Exxon predicts that
the market for electric cars and trucks will grow slowly, if at all.
Exxon assumes that by 2040 only 160 million out of roughly 2 billion
cars--just 8 percent of the automobile fleet--will be electric
vehicles. By contrast, the IEA predicts that roughly twice that many
cars will be electric by 2040. Most other projections I have seen are
even more bullish for electric vehicles, like this one from Bloomberg,
which predicts well over 400 million electric vehicles by 2040. Indeed,
just the new sales in these 4 years exceed the entire market prediction
of electric vehicles for ExxonMobil.
Stanford economist Tony Seba studies economic disruptions. He is fond
of showing two photos of Fifth Avenue in New York City. In this photo,
taken in 1900, you see the parade of traffic on Fifth Avenue. If you
look, you will see that every single one of those vehicles is pulled by
a horse, except one. There is one vehicle right here with an engine in
it. It is 1900, and the entire street is filled with horse-drawn
carriages, with just one vehicle in that street scene.
Cut forward to 1913, and Fifth Avenue is again filled with vehicles,
only this time it is hard to find a horse. There is a vehicle right
here that looks as though it is a carriage, and there may be a horse
behind this vehicle. But other than that, all of the vehicles that you
see are gasoline powered.
In just 13 years, the automotive world, the travel world changed,
illustrating Dr. Seba's point that major economic disruptions can take
place in remarkably little time. Think cell phone and landline, if you
want a modern example.
There is a lot of evidence that electric vehicles present just this
sort of economic and technological disruption. Governments in major
auto markets like France and the United Kingdom have announced the end
of internal combustion vehicle sales by 2040. China, the world's
largest car market, recently announced that by 2025, 20 percent of new
cars sold there must run on alternative fuels, and it is on its way to
an eventual total ban of the sale of gasoline- and diesel-powered cars.
Japan, the world's fourth largest car market, now has more electric
charging stations than gas stations. India, the fifth largest car
market, has announced that by 2030, all new cars sold there must be
electric or hybrid. Electric cars are cheaper to build, to operate, and
to repair, and they can provide supercar performance in everyday
vehicles.
Moving on from regular automobiles and into the commercial fleet,
Exxon makes the further assumption that no commercial transportation--
no buses, no trucks--will be electrified by 2040. Never mind that
electric buses are already in use in China, Germany, France, the United
States, and many other countries. Rhode Island's public transit agency
is going out to bid for electric buses right now. An American
manufacturer asserts that once electric buses get 10 percent market
share, complete transition to electric becomes inevitable. Just last
year, the city of Shenzhen in China replaced its entire fleet of more
than 16,000 buses with electric ones. Almost 20 percent of buses across
China are already electric.
[[Page S2841]]
There are now almost 400,000 electric buses on the road worldwide.
Tesla recently announced plans to produce 100,000 electric trucks per
year by 2023.
Well, maybe everyone else is wrong and Exxon is right, but it sure
looks as though Exxon investors aren't getting the complete story from
this report. It looks as though they are getting the assumptions that
produce the answer that Exxon wants. Cars and commercial transportation
account for more than 50 percent of the demand for oil and gas, so if
Exxon fudged this assumption, that has big consequences for the
conclusion Exxon reaches that all will be well with its reserves.
Stack up all those assumptions--that 2 degrees is the right climate
threshold, that CCS will boom and even impact gasoline markets, that
renewable energy growth will slow rather than accelerate, and that
electric vehicles will be a bust. It takes all of those assumptions
piled together to get to Exxon's desired result. It looks and smells
bogus. If you don't believe me, let me leave you with one last chart.
Rystad Energy is an international energy consulting firm widely used
and respected in the energy industry. 2C Energy is an American firm
looking at how oil companies' resources and reserves fare as we face
climate risks. Rystad and 2C worked together to develop this carbon
consumption budget for various oil and gas and energy companies using,
by the way, the more generous 2-degrees scenario for global warming. So
we will spot them the 2 degrees, but it would obviously be different if
it were only 1.5.
This is ExxonMobil right here. The study shows that ExxonMobil, in
their best case scenario--this upper scenario--is able to extract and
burn only 82 percent of its oil and gas assets. The other 18 percent
would be left unused or stranded--stranded assets.
But wait. If you look at this scenario where methane leakage is
allowed to continue from oil and gas drilling, which, by the way, is
exactly what Exxon and others are encouraging Scott Pruitt to allow and
where CCS technology is not significantly deployed, then this scenario
here leaves 39 percent of Exxon's assets stranded. That is 39 percent
of all assets stranded versus what Exxon claims, which is that 5
percent of unproven resources might be. By the way, again, that 39
percent stranding is based on 2 degrees of warming, not the more
prudent 1.5 degrees, which would require less development of those
resources.
Well, Exxon's 2018 shareholder meeting comes up next week, and the
investors who did such a great job with last year's climate resolution
should take a look at this report and not be satisfied. There are some
questions that need to be answered. Even a former senior Exxon
executive has criticized Exxon's climate risk report as flawed and
insufficiently detailed. In an op-ed for CNBC, the former executive,
Bill Hafker, writes that ``oil and gas companies must take Paris
climate targets seriously'' and says that investors should be
dissatisfied with Exxon's climate risk report because it doesn't do
this.
If Exxon, in fact, started with the answer it wanted and worked
backward to plug in whatever array of unlikely assumptions would get
them that foreordained answer, well, then BlackRock and other
institutional investors who forced this report should demand that Exxon
do better.
Earlier this year, BlackRock's CEO Larry Fink wrote to the CEOs of
the companies in which BlackRock invests. He urged them to ``serve a
social purpose.'' He urged them to ``make a positive contribution to
society.'' Well, where the underlying issue is as vital as the
stability of our climate and oceans and where the company involved is
as immense as ExxonMobil, cooking the numbers not only harms investors,
it is a full-on hazard to human society.
I yield the floor.
____________________