Monday, October 29, 2018

Backed Into A Corner, Lady Fat chops Fails To Produce ‘Smoking Gun’ In #ExxonKnew Lawsuit

New York Attorney General Barbara Underwood

After it was “put up or shut up” time, the New York Attorney General’s office finally came forward with its #ExxonKnew lawsuit.

To say it was a dud would be an understatement.

New York Attorney General (AG) Barbara Underwood today filed a lawsuit against ExxonMobil alleging that the company deceived investors on the potential impact that yet-to-be-enacted climate change regulations could have on the company’s value.

The lawsuit comes more than three years after disgraced former New York AG Eric Schneiderman announced his investigation of ExxonMobil, and four years since the investigation itself began.

Since that time the New York AG has forced ExxonMobil to turn over millions of pages of documents as one conspiracy theory after another failed to withstand scrutiny.

Finally, Justice Barry R. Ostrager ordered the New York AG earlier this year to wrap up the endless investigation and decide whether to press charges. According to InsideClimate News, Ostrager stated:

‘“This cannot go on interminably,’ he said. The company has provided millions of pages of documents and answered questions over some three years of investigation, Ostrager said. ‘It’s not my place to tell you when an investigation ends, but it is my place to put an end date on the requests for information and the filing of a compliant.’”

Or as ExxonMobil’s lawyer bluntly put it, “They should put up or shut up.”

The lawyer representing the New York AG warned that they had “smoking gun” evidence. Backed into a corner, New York AG Barbara Underwood was forced to show her cards today or accept the embarrassment of publicly folding after committing countless resources to a baseless investigation.

Unfortunately for Underwood, it appears that her office was bluffing when they claimed to have a “smoking gun.” The arguments presented in the compliant today have already been scrutinized and soundly rejected.

The New York AG’s argument is premised on the claim that ExxonMobil misrepresented the potential cost of future climate change regulations – regulations which do not even currently exist – because they used a different internal assumption for a price on carbon than what it externally reported. According to a press release accompanying the complaint:

“The complaint further alleges that in various other aspects of its business – including evaluating the volume of its oil and gas reserves, determining whether to write down its major assets, and estimating demand for its products in the transportation sector – Exxon chose not to apply proxy costs in the manner it represented to investors. By applying a lower proxy cost or not applying any proxy cost at all, Exxon repeatedly and consistently underestimated the potential financial risk that increasing climate change regulation posed to its assets and value.”

However, ExxonMobil has already explained the alleged discrepancy in costs:

“…ExxonMobil considers two costs when assessing the potential impacts of climate policies on certain parts of the business. ‘Proxy Costs’ assess the potential impacts of a broad mosaic of climate policies and regulations on global demand for oil and gas. By contrast, ‘GHG Costs’ forecast the direct effect of actual and anticipated greenhouse gas (“GHG”) related regulations on specific ExxonMobil projects.”

In other words, where a cost on carbon has already been established, ExxonMobil uses the price that actually exists, rather than the proxy cost they use as a conservative stand-in.

The New York AG had specifically faulted ExxonMobil for using the existing carbon tax in Alberta instead of its proxy cost, and ExxonMobil pulled no punches in its response:

“Grasping for any justification to support its Motion, OAG faults Alberta Planners for applying carbon taxes imposed by law…But there is no basis in law, logic, or ExxonMobil’s public statements for Planners to have done otherwise. When an actual tax is known, it defies common sense to ignore that cost and replace it with one that is hypothetical.” (emphasis added)

ExxonMobil further explained that this information is available in a public document for investors to see: “Significantly, these exact terms appear and are described in Managing the Risks…”

A similar line of attack has also already been deployed in federal court in a class-action lawsuit brought by current and former company employees who accused ExxonMobil of not adequately disclosing climate risk. That case was ultimately dismissed. In that case, Judge Keith Ellison said:

“Plaintiffs allege that Exxon employed an inaccurate ‘price of carbon’ when evaluating the value of its reserves…In the Amended Complaint, Plaintiffs reproduce language from Exxon’s 2015 Corporate Citizenship Report, which explains that Exxon estimates a ‘proxy cost of carbon’ which ‘may approach $80 per ton by 2040.’

…Plaintiffs do not allege any facts to show why this particular price of carbon was a misrepresentation or did not account for the current or an anticipated regulatory landscape. Plaintiffs seem to believe that the estimated price of carbon was wrong, but they do not plausibly link inaccuracies about the price of carbon to the eventual write-down in reserves or stock price decline. Nor do they allege a regulatory landscape that would change the price of carbon.”

In addition to being rejected in court, the U.S. Securities and Exchange Commission (SEC) has also investigated how ExxonMobil factors climate-change regulations into the calculations underlying the value of its assets.

After an extensive review, the SEC declined to take any enforcement action against the company.

Given the lack of a “smoking gun” in this case and the prior scrutiny of the New York AG’s claims, it is likely that this case will close with a similar conclusion.

It is increasingly clear that New York AG Underwood is only bringing this case to avoid admitting that the New York AG’s office oversaw a case that was a colossal waste of resources in order to harass a company for political purposes.


Trump administration approves first oil and gas drilling in Alaska's federal waters

The Interior Department on Wednesday approved what would be the first oil and gas production facility in federal waters off the coast of Alaska, part of the Trump administration’s effort to expand where the U.S. produces fossil fuels.

Energy company Hilcorp proposes to build a nine-acre artificial gravel island in shallow waters of the Beaufort Sea in the Arctic Ocean, calling it the Liberty Project. The project would be near four other oil and gas producing artificial islands in waters that the state controls.

"Responsibly developing our resources, in Alaska especially, will allow us to use our energy diplomatically to aid our allies and check our adversaries," Interior Secretary Ryan Zinke said. "That makes America stronger and more influential around the globe.”

Interior’s Bureau of Ocean Energy Management (BOEM) issued conditional approval for the project after evaluating the potential environmental impacts, and incorporating input from the public, and from North Slope communities and tribes. Hilcorp still must obtain other permits from local, state, and federal agencies before moving forward with construction, development, and production, according to Guy Hayes, a BOEM spokesman.

BOEM's approval comes after the Trump administration in January proposed a massive offshore oil and gas drilling plan to allow it in nearly all federal waters, including sales off the Alaska coast.

The plan has received bipartisan criticism, with almost all coastal governors expressing opposition to allowing drilling off their shores, especially in the Atlantic and Pacific Oceans — and new parts of the eastern Gulf of Mexico — for fear of spills and harm to tourism.

Zinke has since indicated he will likely scale back the plan when he finalizes it later this year.

But local politicians support drilling off Alaska’s coast. The state is heavily dependent on oil and gas revenue to support its budget.

Last year, Republicans in Congress, as part of their tax reform legislation, allowed for a long-sought onshore opportunity in Alaska, opening the Arctic National Wildlife Refuge to oil and natural gas drilling.

Republicans expect drilling in ANWR to raise $1 billion over a decade to help pay for tax reform. Democrats, however, contend that won’t happen in light of low oil prices and steep competition from natural gas, and worry drilling there would harm the ecosystem of what they describe as one of the wildest places left on earth.


Strange Agreements and Stranger Taxes: The United Nations' Climate Drama

When I first watched “Stranger Things” (a Netflix original) in 2016, I thought the story writer was really talented and the show lived up to its name. But a real-world storyline is even stranger: the climate policies recommended to us by the United Nations.

Despite its many scientific and structural failings, the United Nations Intergovernmental Panel on Climate Change (IPCC) is the world’s most influential, though not the most credible, source of policy on climate change. No other political or scientific body has the same reach.

For over two decades, this has enabled it to persuade governments around the world to implement global climate policies that are harmful to nearly everyone in the developing world.

I live in India. We in the developing world require massive amounts of reliable, affordable energy, especially electricity, for our power-hungry industries and cities. Without it, our economic engines will stall, causing a large-scale disruption of growth and development, trapping billions in poverty and pushing hundreds of millions back into it.

The United Nations’ numerous proposals to reduce the use of all carbon dioxide emitting energy sources never boded well for the development plans of developing countries.

The call to reduce emissions appeared strange to many economists and industry analysts, as all are aware of the fact that fossil fuels were responsible for the majority of the development in the West. It makes sense that they should be also for the rest.

This is why developing countries introduced the concept of “climate justice” on the heels of the 2015 Paris climate change conference. They reasoned that it is unfair to rob developing countries from rightfully accessing fossil fuels — their major energy source. Nearly 73% of all electricity consumed by three billion people (in India and China) came from coal (2015).

To appease these top carbon dioxide emitters, the United Nations created a Green Climate Fund through which the developed world would fund the developing nations’ transition from fossil fuels to the less-reliable, more expensive renewable energy sources.

The biggest source of funds was scheduled to come from the United States, which rightly pulled out of the Paris agreement in 2017. No one in out of the UN knows who will make up for this lost source of funding.

Facing pressure from all quarters, the UN decided to take the “strangeness factor” to the next level. This past week, it came up with a new report calling for harsher punishments for those who emit carbon dioxide.

The demand? A very high carbon tax to encourage emission reduction. This is strange for several reasons.

Firstly, human use of fossil fuels is not the only source of carbon dioxide emissions. The majority comes from natural sources. To blame undesirable climate change, if any, solely on anthropogenic sources is biased and unrealistic.

Secondly, almost all major developing countries and even top developed countries like Germany and Canada have failed to meet their promised emission reduction targets.

Nations are unlikely to pay high carbon taxes to an international institution like the UN, which doesn’t even have proper compliance and co-operation from its so-called leaders. The absence of the world’s biggest economic powerhouse, the U.S., is another major excuse that will be used by developing countries not to pay the proposed taxes.

Moreover, both India and China have continued to defy their promises to reduce emissions. They, along with Russia, Australia, and the U.S., have been involved in increased coal production, use, and export in 2018.

Others, like Germany and Japan, continue to depend on coal because of their aversion to nuclear energy. Japan, especially, had a massive overhaul of its energy sector following the Fukushima incident. It has shifted its dependence from nuclear to coal.

With all the top emitters refusing to comply, the UN’s flagship Paris agreement and the newly announced taxes are just imaginary, make-shift policies that appear good only on paper. And maybe even not that. At an estimated cost of $70 trillion to $140 trillion by the end of the century, the Paris agreement would prevent at most an inconsequential 0.17˚C of warming.

The reality is that climate change is not catastrophic. National leaders know this, even if they’re too timid to say it aloud. We need some with the courage to shout out, “The emperor has no clothes!”


Kids’ Climate Change Lawsuit Vacated Following SCOTUS’ Decision To Halt Case

A judge in Oregon is vacating a climate lawsuit several young people leveled against the Trump administration following the Supreme Court’s decision to stay the case.

U.S. Judge Ann Aiken of Oregon canceled all “schedules and deadlines” plaintiffs in the case made prior to SCOTUS’s decision, according to the court docket associated with the case.

The court will etch out a scheduling conference if the stay is lifted, noted Aiken, who was nominated by former President Bill Clinton in 1997.

The Trump administration repeatedly asked both SCOTUS and the 9th Circuit Court of Appeals to stop the trial through a writ of mandamus, a rarely used judicial tool allowing a higher court to overrule a lower court before a verdict is made.

Supreme Court Justice John Roberts granted mandamus after the 9th Circuit twice turned down the writ.

The 21 plaintiffs, all between the ages of 11 and 22, are arguing that federal officials violated their due process rights by allowing the fossil fuel industry to release greenhouse gas emissions, despite knowing for years that such emissions can cause climate change.

The plaintiffs are seeking a court order requiring the federal government to implement an “enforceable national remedial plan” phasing out carbon emissions in an effort to stabilize the climate and protect the environment.

Their case — Juliana v. the United States — has survived several attempts by the government to torpedo the case after it was originally filed in 2015.


No end in sight to electricity Australian consumers paying for poor policy

We were staying in a Queensland country town a few weeks ago. I got talking to the owner of the local bakery. He was looking at his latest ­financial statement that the ­accountant had sent through. And there it was in black and white. His annual power bill last financial year was $114,000. It had been a tad over $30,000 two years before.

He employs 30 people, some on a part-time basis. Business seemed to be brisk but it’s hard to put up the price of pies and buns too much without demand dropping.

It’s easy to concentrate on the impact of rising electricity prices on households. And let’s be clear on that score. In real terms, the ­average retail price of electricity over the 10 years ending in 2017-18 rose by 51 per cent and the average retail bill rose by 35 per cent (people have used less electricity, in part because of the higher prices).

But for many small and med­ium-sized businesses, the increase in their electricity bills has been higher again. Many are exposed to the full variations in wholesale ­prices, which have risen from less than $40 a megawatt hour to more than $100/MWh before settling around the $70 to $80/MWh mark. This threatens the viability of a number of businesses.

It’s hardly surprising the federal government has decided to focus on getting electricity bills down. Let’s be clear about reduced emissions and the commitment the government has made to the Paris climate agreement — the target in respect of electricity will be met by the early 2020s. Every participant in the industry ­acknowledges this.

It’s one of the reasons why the emissions reduction target that was part and parcel of the now ­defunct national energy guarantee was superfluous. Note also there was considerable manipulation going on of the precise details of this target to suit the activist ambitions of those promoting the NEG. The only part of the NEG now worth saving relates to the ­reliability obligation, which is ­likely to become binding much sooner than generally expected.

For those who complain about a decade of energy policy paralysis, the truth is there has been a constant and active government policy position over that time. Renewable energy sources have been massively promoted, favoured and subsidised.

The renewable energy target, which remains in force until 2030, has spun off subsidies to renewable energy generators to the tune of about $80/MWh (the value has been higher in the past) through large-scale generation certificates. The value of these LGCs is expected to drop but not for several years.

In addition, there have been the interventions of reverse auctions run by state governments and the ACT that provide guaranteed cash flow for renewable energy projects. There are also the rules in the National Energy Market that give preferential dispatch to renewable energy generators. And there are the mountains of subsidies available through bodies such as the Clean Energy Finance Corporation and the Australian Renewable Energy Agency.

Estimates put the value of the subsidies paid to the renewable ­energy sector at between $2 billion and $3bn a year, paid by consumers and taxpayers. That’s not policy paralysis; that’s policy promotion of a particular sector. If we ignore the decimation of the business models of dispatchable power generators and the much higher electricity prices we have had to pay, arguably the policy has worked. It is estimated that $2bn was invested last year in renewable energy generation — a record amount. And this year the boom has been even bigger.

The Clean Energy Regulator has released information that 34 renewable energy power stations with a combined capacity of 667MW were accredited last month, which was the largest single month of solar and wind ­capacity since April 2001. Nearly 2800MW has been accredited so far this year, compared with the previous annual record set last year of 1088MW.

The CER also notes about 1600MW of rooftop solar will be installed this year — the six panels every minute scenario mentioned by Audrey Zibelman of the Australian Energy Market Operator — which is up 44 per cent on last year. There are now more than three million small-scale installations. Note there are also about 40,000 commercial solar systems.

Now, if renewable energy could provide reliable electricity at ­affordable prices, these trends would be great. But even on the most optimistic estimates of the boosters of renewable energy, wind can produce at most 50 per cent of the time and solar at 30 per cent. This produces a very large shortfall that has to be covered by firming capacity. Batteries and pumped hydro don’t come close to filling the gap and are unlikely to do so for many years.

And here’s another thing that needs to be considered when ­observing the boom in renewable energy investment: 10 coal-fired power stations with a total ­capacity of more than 5000MW have left the grid since 2012. None of these stations has been replaced.

What is beginning to emerge is a crisis affecting the grid that makes up the National Electricity Market, which covers South Australia, Victoria, NSW, Queensland, Tasmania and the ACT. This is being recognised by AEMO, which worries about the reliability of the grid in general and the possible shortfall of power in South Australia and Victoria at certain times during the coming summer.

The NEM electricity grid has always been long and skinny. It is now longer and skinnier, with far too much unreliable renewable energy and far too little firming ­capacity. This is the principal reason why federal Energy Minister Angus Taylor is so focused on getting more firming capacity into the system to back up the runaway ­investment in renewable energy.

It is also why he has decided to take a resolute line with the large “gentailers” — think AGL, Origin and Energy Australia — whose ­behaviour has contributed to the growing fragility of the system as well as to rising prices. The companies are quite capable of manipulating the market while promising to invest in firming ­capacity but never quite following through with their plans.

Of course, in a normal competitive market government should always refrain from intervening to force down prices. But the electricity market is not a normal market. Apart from the fact electricity is an essential service, the high ­degree of market concentration almost certainly means prices are higher than they should be. The egregious behaviour of the retail divisions of the gentailers, by dudding loyal customers in particular, indicates they cannot be trusted. Just ignore their howls of complaints about the downsides of regulation. By setting a reference price for standing offers, this will force down prices more generally, and the companies know it.

By bringing more dispatchable power into the system as quickly as possible — another focus of Taylor — wholesale prices will hopefully fall, bringing further price relief for customers. The truth is the gentailers have been feasting on high wholesale prices. Surely no one will complain if the government offers the same cost of capital to new dispatchable power plants that is available to ­intermittent ­renewable energy plants?

With all this new renewable ­energy coming into the market, there is a real question mark over the commercial viability of some of the projects. When the wind is blowing and the sun is shining, wholesale prices can be driven to low levels. Clearly, the backers of these projects are basically betting on the election of a Labor government to impose a higher emissions reduction target and a reinstituted RET. In this scenario, we would expect electricity prices to resume their upward trajectory.

The NEM is in disarray, but let’s not kid ourselves that this is because of policy paralysis. This is because of incredibly poor policy where the consequences in terms of price and reliability were completely foreseeable. The challenge for the federal government is how to pull us back from this abyss.




Preserving the graphics:  Most graphics on this site are hotlinked from elsewhere.  But hotlinked graphics sometimes have only a short life -- as little as a week in some cases.  After that they no longer come up.  From January 2011 on, therefore, I have posted a monthly copy of everything on this blog to a separate site where I can host text and graphics together -- which should make the graphics available even if they are no longer coming up on this site.  See  here or here


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