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Chevron shareholders push for accountability on methane reductions

26 May 2022 Amena Saiyid

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.


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