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Nearly all Chevron shareholders pushed the company to verify the
reliability of its methane emissions disclosures, but a majority
backed away from a resolution to report on the impact of a net-zero
carbon scenario on its financial well-being.
The methane disclosure measure, which received 98% of
the votes at the 25 May annual shareholder meeting, was offered by
Mercy Investor Services and backed by Chevron's board in a proxy statement issued on 7
April.
Shareholders asked Chevron to prepare a report that summarizes
the results of any efforts to directly measure methane emissions
and whether those differ from the company's own estimates. This
report also would "assess the degree to which any differences would
alter estimates of the company's Scope 1 emissions."
Scope 1 refers to direct releases from production activity.
Chevron has set a 2028 target for reducing its methane emissions
intensity by 53% compared with 2016 levels to 2 kilograms of CO2
equivalent per barrel of oil equivalent (kg CO2e/boe). It also has
set a 66% reduction target for flaring GHG intensity to 3 kg
CO2e/boe.
At the meeting, CEO Michael Wirth said Chevron is working toward
achieving updated targets for reducing the carbon intensity of its
operations. "We intend to be a leader in carbon-efficient
production of traditional energy while building new energy
businesses, where we have competitive advantages," he added in a 26
May statement.
Flaring, upstream operations targeted
According to the company's most recent data, Chevron almost
reached its 2028 target for methane in 2021 with an intensity of
2.1 kg CO2e/boe, compared with 3.3 kg CO2e/boe in 2017.
Chevron still has a ways to go to meet its goal for flaring
intensity, which in 2021 stood at 4.3 kg CO2e/boe.
The data also shows that the vast majority of Chevron's methane
emissions arise from its upstream operations.
Getting a handle on methane is important because its global
warming impact is about 80-84 times greater than that of CO2 for
the first 20 years it is in the atmosphere, according to climate
scientists.
Andrew Logan, senior director of oil and gas at Ceres, a network
of sustainability-minded investors, said the Chevron vote on
methane disclosures sent a "crystal clear statement" on the
benefits of aggressive action to measure and reduce methane
emissions, not just for the climate, but also for the bottom lines
of companies and investors.
Improving methane measurements
Going forward, Logan said, what is "even more critical will be
how Chevron follows through on the proposal's request that the
company significantly improve its approach to methane measurement,
given that science suggests that the industry's current approach
underestimates methane emissions by 60% or more."
A report published in June 2021 by the Clean Air Task Force and Ceres
found wide discrepancies in the methane intensity and total methane
emissions of individual operators in the US, based on their
mandated reporting to the Environmental Protection Agency (EPA).
"Among the 20 largest hydrocarbon producers, the highest methane
intensity is 34 times greater than the lowest, and the highest
greenhouse gas intensity is 24 times greater than the lowest," the
report stated.
Ceres, including their member Mercy Investor Services, wants
Chevron to sign up to the Oil and Gas Methane Partnership 2.0 (OGMP
2.0), a successor to an initiative launched in 2014 by the UN
Environment Programme (UNEP) and the Climate and Clean Air
Coalition (CCAC). In 2020, the UNEP and the CCAC joined the
Environmental Defense Fund, the European Commission, and 62 oil and
natural gas companies to launch OGMP 2.0 and its updated reporting
framework, which commits companies to the highest standards of
reporting and measuring methane emissions.
Climate Action 100+, an investor-driven initiative on climate,
flagged
both the methane resolution, and one ExxonMobil shareholders
adopted as sending a "powerful signal" to the companies to act.
ExxonMobil shareholders agreed by a slim majority of
52% to assess the impact of a net-zero scenario envisioned by the
International Energy Agency on the company's fossil fuel
assets.
However, only 39% of Chevron shareholders were in favor of the
net-zero resolution and it did not enjoy the backing of its board
either.
Methane emissions—which are a particular concern of US policy efforts—accounted
for 10.9%, or 688.474 million mt of CO2 equivalent (CO2e) of the US
GHG inventory in 2020, according to the EPA's most recent data.
The EPA said the oil and gas industry in the US is the largest
industrial source of methane emissions, emitting more methane than
the overall GHG emissions from 164 countries combined. At last
November's UN COP26 climate conference in Glasgow, Scotland, the
EPA proposed a rule that seeks to
limit, plug, and repair methane emissions from extracting,
processing, and production of oil and gas from new and modified
operations.
President Joe Biden has set a goal for the US to reduce its
methane emissions by 30% from 2020 to 2030, as one of the sponsors
of the Global Methane Pledge announced
in September.
Posted 26 May 2022 by Amena Saiyid, Senior Climate and Energy Research Analyst
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
