Citing differences over climate change, Royal Dutch Shell has pulled out of an industry trade group called the American Fuel and Petrochemical Manufacturers.
Shell said that it was at odds with the refining and petrochemical group on the Paris climate agreement, carbon pricing, fuel mandates and the reduction of methane emissions.
But Shell decided to keep its membership in the American Petroleum Institute, the U.S. Chamber of Commerce and seven other trade associations, despite what Shell called “some misalignment” between its views on climate policy and theirs. The company said it would try to change the positions of those groups.
Shell’s decision to break with one influential trade association while justifying its decision to stick with others comes as shareholders and activists have ramped up pressure on major energy companies to lay out their approach to tackling climate change.
Shell, in a review of its relationships with 19 trade groups, said it would link its executives’ pay to success in meeting the target of reducing the company’s carbon footprint by 2 to 3 percent over the next three years and by 20 percent by 2035. The linkage would affect up to 10 percent of the executive bonus pool, affecting about 150 people.
Critics said, however, that Shell was not backing up its public positions in private. According to a public docket, a Shell official attended a session API held with officials from the Environmental Protection Agency on Nov. 18 to discuss “fugitive emissions,” a reference to methane that leaks from natural gas operations. Shell attended another meeting with API and the EPA in March 2018.
Shell also met on its own with EPA officials Feb. 14 last year to discuss how the EPA could change emissions regulations if it were to integrate state standards, according to another EPA docket summarizing the meeting.
But a person who attended the meeting said that the state standards chosen would have to be at least as stringent as existing EPA rules and that Shell, which highlighted California’s rules, was not trying to weaken Obama-era regulations for limiting emissions.
“These companies either can be pushing the EPA in the Trump administration to keep Obama-era methane standards or they can be part of API. But they can’t do both,” said Amit Narang, regulatory policy advocate at Public Citizen’s Congress Watch.
Shell has been among the most outspoken oil companies about the need to combat climate change, even as it continues its search for oil and natural gas for future production.
The issue of methane emissions is particularly sensitive because the Trump administration has been trying to roll back regulations adopted under President Barack Obama to limit those emissions. Although they don’t last as long as carbon dioxide emissions, methane emissions are much more potent greenhouse gas, and small leaks can make natural gas almost as harmful to the climate as oil or coal.
Shell asserted that API’s position had “evolved.” In 2016, API opposed new regulations by the Obama EPA while Shell supported the standards. In 2017, the company said, both API and Shell supported reforming the 2016 regulations rather than scuttling them. Shell said it has worked with API on regulation “improvements.” API has favored voluntary action even though much of the gas industry still opposes regulations.
In September, however, the Trump administration proposed weakening standards for repairing methane leaks in drilling operations.
That drew unusually harsh words from the president of Shell’s U.S. operations. “We don’t make a habit of telling governments how to do their job, but I am breaking with that practice today and urging the Trump administration to continue to directly regulate methane" from onshore oil and gas wells, Gretchen Watkins said during IHS Markit’s CERAWeek energy conference in Houston in mid-March.
She urged the EPA “to put in a regulatory framework that will both regulate existing methane emissions but also future methane emissions.”
Shell said it used four markers in evaluating its trade group memberships: support for the Paris climate agreement, support for carbon taxes, policies encouraging low-carbon technologies and a continuing role for natural gas, which now makes up more than half of Shell’s business.
In its review of trade groups, Shell also noted that it did not give funds to defeat a ballot initiative in Washington state in the fall that would have put a $15-per-ton tax on carbon emissions. The Western States Petroleum Association, which includes Shell, strongly opposed the carbon tax, and other members of the group poured millions of dollars into the fight to defeat it.
But even though Shell has supported a nationwide carbon tax of $40 a ton, it did not support the Washington ballot measure, saying it was not the right mechanism. The position was intensely debated within Shell, sources said. Shell has chosen to remain in the WSPA.
Stephen Brown, an energy industry strategist, called Shell’s withdrawal from AFPM “ridiculously self-serving.” He said that the Shell “just needed someone to throw overboard as a sacrifice to the left-of-center investor activist crowd and AFPM was the easiest victim.”
AFPM has nearly 300 members. Its president Chet Thompson said in a statement that the association had sought to “reach consensus positions” but said “like any family, we aren’t always fully aligned on every policy.”
“The need for urgent action in response to climate change has become ever more obvious since the signing of the Paris Agreement in 2015,” wrote Shell chief executive Ben van Beurden, who said that the company was responding to institutional investors and nongovernmental organizations. “As a result, society’s expectations in this area have changed, and Shell’s views have also evolved.”
Stephanie Pfeifer, chief executive of the Institutional Investors Group on Climate Change, said Shell’s willingness to walk away from an industry group “is a key step forward” and urged other companies to follow suit. “This needs to become standard practice,” she said in a statement.
But not every nongovernmental organization was impressed. “It’s a sad day when quitting one of 19 trade groups opposing climate action counts as climate progress,” Richard Wiles, executive director of the Center for Climate Integrity, said. “This move by Shell is one step north of meaningless.”
Wiles said industry trade groups “have obstructed action on climate change for decades."