BHP sells dirty oil and gas assets, but hold back the applause
When BHP announced that it sell your stake in its oil and gas business at Woodside Petroleum to form a merged oil and gas company, there has been good news. A big miner is finally taking climate change seriously.
But decisions to sell fossil fuel assets are not good news at all. BHP has not done the right thing in selling its oil and gas business for the simple reason that the climate is still not better off. BHP’s new oil and gas assets will continue to produce oil and gas – just with new shareholders.
Decisions to sell mines or create âdirtyâ parallel companies multiply as big polluters scramble to reduce their losses. One of Australia’s biggest polluters, AGL, announced in March the creation of a separate company for its emissions-intensive assets.
What BHP and other companies are doing is cashing in the profits from their failing assets, while washing their hands of the responsibility of doing something about their past and current contribution to climate change. Instead of selling those assets, companies should remove the assets and bear the costs.
Return the ball
BHP is one of the biggest emitter companies. In 2019, the emissions produced by BHP produced worldwide accounted for 567 million tonnes of carbon dioxide equivalent, or more than australia total domestic emissions in 2019.
Even the CEO of the mining company Glencore, Ivan Glasenberg, said in June of this year:
Getting rid of fossil fuel assets and making them someone else’s problem is not the solution and it will not reduce absolute emissions.
So what should fossil fuel producers do if they are really serious about their climate responsibilities? If they really want to move away from fossil fuels to help the climate, four things need to happen:
1. Make sure that the assets can no longer produce emissions
Fossil fuel producers should withdraw their mines or wells instead of selling them. This will inevitably involve giving up any remaining value of their assets (if it has not already returned to them through past profits).
A report commissioned by the oil industry’s leading body, the Australian Oil Production and Exploration Association (APPEA), found the cost of dismantling Australia’s 65 offshore oil rigs could reach A $ 60 billion over the next 30 years. This does not include onshore gas, Australia’s huge coal mines and export terminals.
The cost of dismantling Australia’s 65 offshore oil rigs could reach A $ 60 billion over the next 30 years. Shutterstock
2. Finance sanitation costs from general revenue
Fossil fuel companies would have to pay for the cost of restoring mined land, such as backfilling voids, replacing vegetation, repairing water sources, or preventing gas leaks from mines.
In BHP’s case, that would mean that its super profits from iron ore could be diverted to meet their climate and environmental debts. BHP has made a profit of more than 11 billion US dollars in the last year. Most of this spending is not going to repair climate damage such as bushfires and floods.
3. Establish a national inventory of liabilities
State and federal authorities should establish a central registry of environmental and climate damage caused by fossil fuel companies. This would mean that damage to waterways or soil contamination, as well as damage from climate change itself, could be calculated accurately.
Such an inventory is crucial in establishing what costs should be borne by fossil fuel companies, and will help establish the costs involved in mine clearance.
4. Establish an independent body to oversee the safety of old mine sites and wells.
Mine remediation is too important to be left to the companies themselves, which can sell or go bankrupt, let the taxpayers fix the problem. In cases where remediation is complex and dangerous, governments might consider taking over mines or wells to ensure that remediation has been carried out correctly.
For example, in 2019, the federal government took possession of the Northern Endeavor production vessel, which is an oil production vessel moored off Darwin. The vessel was used by the gas company Woodside, which then sold it to Northern Oil and Gas Australia, which then came out of Business. In this case, the government imposed a tax on the industry to pay the costs.
Risk of financial disruption
Environmental concerns aside, there are economic reasons for governments to take tighter control over fossil fuel assets.
The Bank for International Settlements published a report last year, arguing that central banks like the Reserve Bank of Australia should be ready to buy stranded assets from fossil fuel companies.
Duties to shareholders do not take precedence over duties to the rest of society so as not to seriously harm the climate. Shutterstock
Failure to do so, the report notes, will pose a real risk of triggering serious financial disruption. He warns against “extremely disruptive financial events that could be the source of the next systemic financial crisis.”
The Bank for International Settlements uses the analogy of the global financial crisis. Just as a mortgage failure led to a widespread financial crisis with impacts on the entire economy, the collapse in asset prices of the fossil fuel industries could trigger a similar effect.
Companies forced to sell their assets to governments at low prices will no doubt complain that they have other obligations, such as getting a loan. good return for shareholders. They will likely say that not selling to another company for a higher price will reduce dividends paid to investors.
Yes, companies may have an obligation to make a profit. But the duties to the shareholders do not automatically override the duties to the rest of the company so as not to seriously harm the company. weather.
Just as we don’t condone companies that sell dangerous drugs or faulty devices for the benefit of shareholders, neither should we allow them to harm the climate for these reasons.
Until governments step in to regulate the phase-out of Australia’s fossil fuel assets, the environment and the economy will be at risk.
BHP did not respond to The Conversation’s request for comment.