California's largest oil well owner could be spared from having its wells closed

Welcome to Under pressure: The oil companies and the climate crisis”, a newsletter where we share our latest reports on how the fossil fuel industry is driving climate change and influencing climate policy in five of the country's top oil and gas producing states. In addition, we shed light on fossil fuel industry financing, hold banks and other financial institutions accountable for their role, and inform you about their activities.

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California's largest oil well owner could be spared from having its wells closed

A new California law requiring oil companies to cover the cost of plugging oil wells before buying them is in danger of failing on its first review, Capital & Main's Aaron Cantu reports. Gov. Gavin Newsom signed the rule last fall, just before the merger of two of the state's largest oil well operators. California Resources Corporation, whose purchase of Area Energy was completed on July 1, has not said whether it has already complied or will comply with the new law. If the company fails to come up with a guarantee to plug its roughly 37,000 oil wells, that burden will fall on the state and could cost taxpayers billions.

Another bank manager says a freeze on investments in oil and gas is “unrealistic”

The CEO of Barclays, Europe's biggest fossil fuel lender, is just the latest bank executive to say an end to such investments is unrealistic. Banks “can't stop financing the oil and gas sector overnight,” CS Venkatakrishnan told Bloomberg on June 25. In recent months, other bankers have resisted pressure from regulators and activists to stop financing oil companies. Since 2015, Barclays has invested $232.5 billion in the fossil fuel sector, according to the report “Banking on Climate Chaos.” Earlier this year, the bank announced it would stop directly financing new oil and gas projects.

Climate activists want to stop fossil fuel financiers with lawsuits

The number of lawsuits filed by activist groups against public and private financial institutions to stop their financing of fossil fuel projects is small but growing, according to research by the London School of Economics. Over the past nine years, 33 such cases have been filed – six in 2023 alone. “Their shared goal is to amplify the importance of climate risk in financial decisions and to raise the cost of capital for emissions-intensive activities to the point that such activities become economically unviable, even if they remain legally permitted,” the report said.

Recently, Australia's export credit agency Export Finance Australia and another government agency were sued by environmental group Jubilee Australia Research Centre for helping to finance new fossil fuel projects. The plaintiffs are seeking to pressure government agencies to disclose the climate impacts of such investments.

Activists of the “hot summer” block doors of Citigroup headquarters

As part of the second week of the “Summer of Heat on Wall Street,” a campaign aimed directly at banks and financial institutions, hundreds of activists demonstrated outside Citigroup's New York headquarters against the bank's financing of fossil fuel projects. The bank is the largest financier of oil and gas companies that have expanded production over the past year, according to the Rainforest Action Network's “Banking on Climate Chaos” report.

“We don't want to be here, but we feel like we have to,” Alice Hu, an activist with New York's Communities for Change campaign, said at the rally to boos and heckles from the crowd. “The fires, the floods, the famines and the mass migration caused by the climate crisis are all because of the $396 billion that Citibank has pumped into fossil fuels since the Paris Agreement.”

Fossil fuel companies finance investments through retained profits

According to the International Energy Association, price increases caused by the pandemic and Russia's invasion of Ukraine have allowed oil and gas companies to reduce their debt by borrowing from banks and other financial institutions. This has allowed them to service shareholders more generously, such as through buybacks and dividends. However, their debt levels (46 percent of total spending) are still much higher than those of clean energy companies, which account for about 20 percent. The latter are more likely to be financed through venture capital rather than credit markets.

Agreement to end public financing of global oil and gas projects prevented by US inaction

The US election is five months away, but it is already having an impact on some of the world's most important climate policy decisions. Last week, members of the Organisation for Economic Co-operation and Development met behind closed doors but failed to reach a decision on a proposal to end public financing (through loans and guarantees) for international oil and gas projects. This was due to the lack of clear support from the US: “We have not yet seen an explicit proposal from the US to limit export financing of all fossil fuels, not just coal…” [but] “Oil and gas too,” Jake Schmidt, senior director for international climate at the Natural Resources Defense Council, told E&E News. According to a recent report from Oil Change International, G20 governments and multilateral development banks provided $142 billion in public finance for fossil fuels between 2020 and 2022. That's nearly 50% more than they provided for clean energy financing ($104 billion) during that period.

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