Oil Climate Disclosures Riddled With ‘Questionable Claims,’ Study Finds

Environmental disclosures by some of the biggest U.S. oil and gas companies contain “questionable claims” about climate risks and greenhouse-gas emissions, frustrating investors under pressure to divest from fossil fuels, Columbia University researchers found.

Emissions data reported by oil companies are “awash with unsubstantiated claims,” according to an analysis of 15 publicly traded oil companies and a dozen major oil investors in the U.S. by the university’s Center on Global Energy Policy.

Facing mounting pressure to divest from oil and gas, investors are increasingly demanding more standardized and robust climate and emissions disclosures from the industry. Some of the largest firms are already voluntarily divulging their greenhouse-gas emissions, but the lack of government regulation and unified reporting underscores the challenges investors face when comparing inconsistent data across companies.

For example, Columbia researchers found that shale gas producer EQT Corp. disclosed zero emissions from flaring, but defined flaring based on the American Exploration Petroleum Council’s definition, which includes only the flaring of wellhead gas at company-operated assets. EQT’s report omits gas flared from other sources downstream from the well and flaring from emergency incidents, the report published Tuesday said.

“The definition used is neither questionable, as it is an industry standard as noted, nor does it detract from or impact the data included in our ESG report, which shows that EQT has among the lowest methane intensities within the oil and gas space,’’ an EQT spokesperson said in response to the study.

Oil investors “noted with frustration the difficulty in trusting numbers self-reported by companies and rarely verified by independent third parties, even though the way U.S. oil and gas companies report emissions is in line with existing Environmental Protection Agency regulations,” according to Columbia researchers who interviewed investors representing major banks, insurers, asset managers and private equity funds.

The Securities and Exchange Commission last month put forth new guidelines that would mandate U.S. publicly traded companies report climate risks and greenhouse-gas emissions from operations. If adopted, the proposed rules are expected to come into effect in the coming years.

“It is evident that a regulatory push is likewise necessary to incentivize all operators in the U.S. oil and gas sector to apply these innovations and better measure and reduce GHG emissions,” the researchers said. “Most operators are hesitant to embrace emissions-reduction efforts if they will increase operational costs—costs that may not always be recoverable.”

Although they expressed divergent views on the future of fossil fuels, investors surveyed by the researchers agreed that oil companies should reduce emissions from their operations by eliminating routine flaring. The oil and gas sector accounts for 9% of global greenhouse-gas emissions, and indirectly another 33% when its products are consumed.

Some investors went even farther, saying oil companies should report so-called Scope 3 emissions, or those greenhouse gasses emitted by customers of petroleum products. However, other investors said companies should not take responsibility for those emissions, believing instead that it’s the role of end-users. Only five companies—Chevron Corp., Hess Corp., ConocoPhillips, EQT and Occidental Petroleum Corp.—reported Scope 3 emissions.

“Considering the robust demand for oil and gas, a case can be made that engagement with the sector can accomplish more to improve practices and meaningfully impact GHG emissions”—instead of divesting from fossil fuels, the researchers said.