The Big Picture


As the world grapples with the unprecedented disruptions caused by the COVID-19 pandemic, the climate crisis continues to devastate lives and livelihoods. Cyclone Amphan wreaked havoc in India and Bangladesh last week, and coastal communities are bracing for the Atlantic hurricane season which is again expected to set records. Confronting these catastrophes during a global pandemic entails an uncharted suite of risks and consequences.

At the same time, people around the globe are creating inspiring initiatives, giving shape and colour to the world that is possible as we recover through this global health emergency. In Canada, a Just Recovery For All movement has grown out of collaboration between hundreds of organizations working to define a better future. Among other critical principles, the movement calls for “a just transition away from fossil fuels that creates decent work and leaves no one behind.”

These messages are critical as governments begin to unveil trillions of dollars in recovery support and stimulus. Now is the time to break old habits – such as the USD 77 Billion in public money that the G20 is still spending annually to finance oil, gas, and coal projects, and the massive private sector financing for fossil fuels. It’s time to begin the managed decline of extraction and just transition that will protect communities and the climate as we all aim to #RecoverBetter.

–The OilWire Team

The Data


A new report released this week by Oil Change International and Friends of the Earth U.S. shows G20 countries have yet to reduce their public finance for fossil fuels, funnelling at least USD 77 billion a year to oil, gas, and coal projects since signing the Paris Agreement. That’s three times greater than annual G20 finance to clean energy.

The following figure from the report shows the top 12 G20 countries by annual fossil fuel finance, with the vast majority going towards oil and gas. As G20 governments prepare historic levels of public finance for COVID-19 stimulus, a commitment to phase out fossil fuel finance must underpin a just recovery. Read more from AFP and on OCI’s blog.

Top 12 G20 countries’ fossil fuel public finance, total and per capita, annual average, 2016-2018*

Source: Still Digging: G20 Governments Continue to Finance the Climate Crisis, Oil Change International and Friends of the Earth U.S., May 2020.

What We’re Tracking


Relief and recovery: Bailouts for people or polluters?

Experts call on IEA to put a 1.5°C scenario at heart of COVID-19 recovery report
Today nearly 70 investors, scientists, and energy experts sent a letter urging International Energy Agency (IEA) head Dr. Fatih Birol to “[rise] to the challenge of guiding robust recovery pathways aligned with 1.5ºC.” The IEA, set to release a June special report on sustainable COVID-19 recovery, has faced growing pressure to align its influential energy analysis with the full ambition of the Paris goals. The letter, reported in Bloomberg, Reuters, and Business Green, underlines that, “Effective stimulus measures will ensure that new clean energy replaces fossil fuels, rather than adding to them […] Bold, not incremental, action is required to transform energy systems at the scale and pace required.”

A Just Recovery for All in Canada means a Just Transition off fossil fuels
More than 150 civil society groups in Canada, including labor, health, Indigenous, and climate groups, are uniting behind six principles for a #JustRecoveryForAll, including prioritizing the needs of workers and communities through “a just transition away from fossil fuels” and upholding Indigenous Rights.

This call to put people first contrasts with recent actions and statements from Canadian government officials. Earlier in May, Export Development Canada announced it will lend up to CAD 500 million to TC Energy to help the company construct the Coastal GasLink pipeline, a project that violates Indigenous sovereignty. Last week, Alberta’s energy minister declared, “Now is a great time to be building a pipeline,” celebrating the fact that the pandemic and limits on public gatherings were disrupting protests against the TransMountain tar sands expansion project, which First Nations are also resisting.

Argentina’s ‘barril criollo’ is another step away from economic diversification
On May 20, the Argentine government signed a decree fixing the price of a barrel of oil in the country at USD 45. This local price, known as “barril criollo,” is a rescue measure designed to bail out provinces that heavily depend on oil royalties, such as Neuquén in the heart of the Vaca Muerta fracking project. In this post (in Spanish), Observatorio Petrolero Sur writes that this type of “dependency spiral” impedes the deep economic diversification that must go hand in hand with a clean energy transition.

Does the EU’s ‘green’ recovery plan fit that bill?
European Commission President Ursula von der Leyen rolled out a proposed EUR 750 billion recovery fund this week, including the quadrupling of an EU just transition fund and a “do no harm” test that would “in principle” exclude fossil fuels. However, the details are murkier. Climate Action Network Europe points out that, “The proposal still allows for money to be spent on supporting fossil fuels” via the EU’s existing Coronavirus Response Investment Initiative. There are no green conditions on state aid provided at the national level, which amounts to EUR 2 trillion to date. Eight European countries have been lobbying to include fossil gas projects in recovery funding.

Australian COVID-19 taskforce proposes ‘silly’ fossil gas support scheme
A taskforce advising Australia’s government on COVID-19 recovery has developed a proposal that experts say “doesn’t make sense”: taxpayer underwriting of a massive expansion of fossil gas production and pipelines. The manufacturing taskforce, led by a Dow Chemical executive and Saudi Aramco board member, did not consider renewable alternatives or the climate crisis. “Investing recovery funds in virtually any other industry would be likely to create more jobs,” said Richie Merzian, Australia Institute climate and energy program director.

Big Oil reaps ‘stealth’ bailout from U.S. recovery measures
As of the last OilWire edition, U.S. oil and gas companies had already received billions in bailout funds as well as royalty relief through COVID-19 lobbying. This month details emerged on stealthier bailout measures benefiting Big Oil.

Analysis by Rainforest Action Network finds that at least 90 fossil fuel companies, including ExxonMobil, Chevron, and Koch Industries and ten out of the top 40 fracking companies, are poised to benefit from the U.S. Federal Reserve’s USD 750 billion bond buyback programme.

An obscure tax provision in the March stimulus bill disproportionately benefits oil companies – at least 37 have claimed close to USD 2 billion in tax rebates already, including one in bankruptcy proceedings. Diamond Offshore asked permission from a bankruptcy court to dole out up to USD 9.7 million in cash incentives to senior executives, the same amount it received as a rebate from U.S. taxpayers.

Perspectives on the COVID-19 and oil market crises

Bill McKibben asks: Are we past the peak of Big Oil’s power? 
In this piece for The New Yorker, Bill McKibben postulates that the power of the fossil fuel industry may have finally passed its “zenith.” While there’s no doubt it retains a “legacy grip on politics,” its clout is weakening along with its economic prospects. The key question before us now is: What will it take to ensure the fossil fuel industry’s speedy descent?

Deep Dive: 5 reasons governments must act now to phase out oil and gas production
This in-depth post from Oil Change International’s Kelly Trout unpacks five reasons governments must manage the phase-out of oil and gas as part of a just recovery from the COVID-19 crisis. While the oil industry is experiencing financial pain in the short term, only government action can guarantee that carbon stays in the ground at the scale that’s needed to limit warming to 1.5°C, and guarantee a just and equitable transition.

Former U.S. Fed governor: Fossil fuel bailouts are ‘a risky investment in the past’
In the New York Times, Sarah Bloom Raskin, a former governor of the U.S. Federal Reserve, argues that the Fed is “ignoring clear warning signs about the economic repercussions of the impending climate crisis” by extending COVID-19 lending programs to oil and gas companies. The Fed is sending a false price signal to investors and forestalling “the inevitable decline of an industry that can no longer sustain itself.”

Fossil fuels already get billions in bailouts – they’re called subsidies
In Truthout, Jamie Henn unpacks the “extravagant government support” oil and gas companies have enjoyed for over a century. Rather than bailouts, a “real plan for the oil and gas sector would involve immediately halting industry expansion and gradually winding down production,” in line with a 1.5-degree warming limit and with a just transition for workers and local communities.

The Permian Climate Bomb – still a major global warming threat
In this piece for Earth Island Journal, Earthworks director Jennifer Krill reviews why a return to the aggressive pre-Covid industrial expansion of oil and gas extraction in the Permian Shale Basin of west Texas and southeast New Mexico would “mean climate disaster for the whole world.” Despite the crash in oil markets, big oil and gas companies like Exxon are poised to double down on extraction in the Permian, making it imperative that we “seize this moment to stop any further expansion of oil and gas development.” For example, as Krill writes in another Earth Island piece, the government could bail out workers – not oil companies – by earmarking federal funds to states to clean up and plug abandoned and orphaned wells.

It’s time for a fossil fuel non-proliferation treaty
“History teaches us rapid, dramatic transformation is possible when a handful of countries committed to high ambition decide to lead,” writes Tzeporah Berman in a Thompson Reuters op-ed. Instead of going back to “normal,” it’s time now for governments to agree to a global framework for an equitable wind down of fossil fuels.

Trends in the Right Direction

Especially now, we all need some good news. Here are some key signs of progress.

Spain to join group of first movers off oil and gas
The Spanish government has drafted a new climate law that is a welcome example of how countries can plan a fossil-free recovery, though not yet in line with the cuts required to meet the Paris goals. Under the proposed law, Spain would address both the demand for (by promoting electric vehicles, establishing alternative fuel targets for the air transport) and supply of fossil fuels. By banning new licenses for fossil fuel exploration and extraction, banning fracking, and mandating that public institutions divest from fossil fuel activities, the law would move Spain into the top of the pack of “first mover” countries and financial institutions ending their support to fossil fuel production, writes Romain Ioualalen on OCI’s blog.

New York State denies gas pipeline, citing new climate law
In the United States, Governor Cuomo’s administration denied a permit for a fossil gas pipeline to Long Island and New York City this month, citing the state’s sweeping climate law. In the letter communicating its ruling, the state administration said: “the continued long-term use of fossil fuels is inconsistent with the State’s laws and objectives and with the actions necessary to prevent the most severe impacts from climate change.”

Ruling to vacate crucial Keystone XL permit upheld – again 
Twice this month, U.S. courts upheld an April ruling that vacated a key water crossing permit used for the Keystone XL tar sands pipeline, as well as other oil and gas pipelines nationwide. With the lower court ruling left in place, construction of Keystone XL and other major pipelines through rivers, streams, and wetlands will remain on hold as an appeal is heard in federal court.

Campaign News

Voices from the frontlines: Indigenous communities in Ecuador sue over major oil spill
Amazon Frontlines shares three audio stories from Ecuador, where Indigenous and rural communities are fighting for clean water and health protections in the wake of a major oil pipeline spill last month. Listen and share their stories, and support their lawsuit against the Ecuadorian government.

Spot the difference: Big Oil execs or the IEA?
The International Energy Agency (IEA) is out in front with its rhetoric on the need for a clean energy recovery, but at the same time, the IEA is continuing to provide cover for Big Oil and Gas. Some of the things they say sound exactly like industry talking points, not the independent expert advice governments and investors need now. Take this short quiz from Oil Change International. See if you can tell the IEA and Big Oil apart, and then share it on!

J.P. Morgan demotes former Exxon CEO as climate pressure mounts
After a campaign launched on Earth Day, J.P. Morgan declined to reelect Lee Raymond as lead “independent” director, citing his ties to fossil fuels and climate denial. A few weeks later, at the bank’s annual meeting, 49.6% of shareholders supported a resolution that would require JPMorgan Chase to produce a plan to align its business with the goals of the Paris Agreement. The company is facing mounting public pressure as the world’s largest banker for fossil fuels.

Activists condemn BlackRock’s ‘hot air’ on climate during annual meeting 
In New York City, San Francisco, Brussels, and London protesters held socially distant rallies to condemn BlackRock’s failure to “live up to its rhetoric” on the climate crisis on the day of its annual meeting last week. Frontline leaders, elected officials, and activists discussed solutions to BlackRock’s big climate and human rights problems during a People’s Assembly the day before. While U.S. and European central banks give BlackRock reins over COVID-19 purchase programs, the company remains the world’s largest investor in fossil fuels.

Community opposition to massive Permian crude export terminal grows
Along the Gulf Coast of Texas, Enterprise and Enbridge are pushing ahead with their proposed Sea Port Oil Terminal (SPOT), despite the downturn in oil markets. If built, the facility would enable the export of up to 2 million barrels of Permian crude per day on the biggest oil tankers on earth: Very Large Crude Carriers. Earthworks, Sierra Club, Earthjustice, OCI, Carrizo-Comecrude Tribe of Texas, and a growing group of Surfside Beach residents have been mobilizing and organizing a legal response to the proposed project. The Permian Basin remains the largest oil expansion project in the world.

Industry News

After ‘Totally insincere’ net-zero pledge, Total doubles down on Mozambique LNG
Just two weeks after French oil major Total unveiled a “totally insincere” net-zero pledge, the company announced it had secured finance commitments worth USD 15 billion to move forward with its LNG export project in Mozambique. The project, expected to cost USD 23 billion in total, reportedly has commitments from 20 banks, including U.S. and Japanese export credit agencies (ECAs). The new report Still Digging shows that ECAs are the worst offenders among G20 public finance institutions in supporting fossil fuel expansion. Last month, Total’s project site in Mozambique was the epicenter of a COVID-19 outbreak in the country.

Oil company rhetoric clashes with reality during annual meeting season
While oil majors continue to roll out new “net-zero” pledges and climate aims, in reality no oil company has committed to stop expanding fossil fuel extraction. Despite the pandemic, investors and climate activists kept up pressure on oil majors during this year’s annual meeting season:

  • Just ahead of ExxonMobil’s shareholder meeting, 160 climate, human rights, faith, and Indigenous groups released the new Finance Climate Challenge. It establishes that coal, oil, and gas companies should be eligible for investment only if they commit to stop expansion and tender a plan for phase-out.
  • During Shell’s annual meeting, activists chanted “Shell must fall” outside the company’s headquarters and demanded an end to new fossil fuel investment.
  • Chevron shareholders defied company guidance and approved a resolution that requires the company to issue a report detailing how its lobbying activities align or not with the Paris Agreement.
  • Total faced its first ever climate resolution vote today, calling on the company to set absolute emissions reduction targets that are actually aligned with the Paris goals. According to ShareAction, the 16.8% support for “France’s first climate resolution constitutes a significant revolt against the company,” given Total’s attempt to counter and confuse the issue with its own weak pledge.
  • The Transitions Pathway Initiative released a report critiquing the climate commitments of Europe’s six largest oil and gas companies, concluding they fall far short of meeting the Paris Agreement goals.

Chevron plans to lay off 10 to 15% of its workforce: Chevron announced this week that it may lay off 6,000 workers out of 45,000 total non-gas station employees to cut company costs. This comes after Chevron shareholders voted to increase pay for CEO Mike Wirth, whose total 2019 compensation was USD 33 million.

Oil exploration comes to a halt in Angola: Reuters reports that international oil companies have stopped new drilling activity in Angola in response to dropping demand and low oil prices, focusing instead on existing production. Angola, Africa’s second-largest producer, had been trying to attract new investment and move towards partially privatizing the state oil company Sonangol.

Somalia says it will move ahead with offshore licensing round: The Somali government says it will open up seven offshore oil blocks for bidding starting this August, after having agreed to an initial “road map” towards development with a Shell and ExxonMobil joint venture.

Resources


Quantitative easing and climate: The ECB’s dirty secret
A new report from Reclaim Finance shows that the European Central Bank’s corporate asset purchases (part of the measures for economic recovery from COVID-19) heavily support the fossil fuel sector.

WATCH: COVID-19, climate justice, fossil fuels & energy access in Africa
This month Oil Watch Africa and Oil Change Africa hosted two conversations about the triple crises of global pandemic, economic turmoil, and climate change – and the implications for efforts to phase out fossil fuels and expand clean energy access in Africa. Catch up on Part I of the webinar here (focused on fossil fuels) and Part II here (focused on energy access).

Four of five oil supermajors pay investor dividends even as operations losses mount
A briefing note released this week by the Institute for Energy Economics and Financial Analysis finds that the five oil and gas supermajors collectively paid out USD 18.5 billion in dividends and buybacks during the first quarter of 2020, while generating only USD 8.6 billion in free cash flows. Chevron, ExxonMobil, Total, and BP spent more on dividends and buybacks than they generated from core business operations.

Fractracker maps the growth of water consumption per fracking well in PA
Unconventional gas wells in the U.S. state of Pennsylvania were always resource-intensive. But this GIF shows that the amount of water used per well has grown significantly in recent years – from an average of 5.8 million gallons per well in 2013 to more than 14.3 million gallons per well by 2019, an increase of 145%. This is a glimpse into the unsustainable resource demands of this industry and the decreasing energy returned on investment.

Who Benefits? An investigation of foreign ownership in the oil sands
A report released by Stand.earth, Environmental Defence, and Équiterre finds that more than 70 percent of Canadian oil sands production is owned by investors and shareholders outside of Canada.

How Big Oil is cashing in on U.S. COVID relief
A report released this month by Friends of the Earth U.S. reviews over 130 U.S. lobbying filings from the first quarter of 2020, revealing how oil companies are using the COVID-19 crisis to lobby heavily for tax cuts, royalty relief, and stimulus aid.

Study: Green stimulus can repair global economy and climate
A new Oxford University study has confirmed that stimulus packages targeted at environmental and renewable energy projects can address both economic and climate crises. Sustainable projects create more jobs, deliver higher short-term returns to governments, and lead to increased long-term cost savings. For example, clean energy infrastructure generates twice as many jobs as fossil fuel projects for the same government expenditure.

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