Exxon Mobil Has Been Silent About Climate Change Risks to Its Operations: Will Hurricane Harvey Change That?

By Anne Polansky
CSPW Sr. Climate Policy Analyst

As detailed in the most recent installment of our ongoing investigation into how the Exxon Mobil Corporation has characterized risks to its business operations associated with climate change in its annual 10-K reports to shareholders, year after year, the company has alleged that one of the risks to its operations is the regulation of carbon dioxide emissions as a public policy to mitigate global climate change, but has failed to list climate change itself as a risk when communicating with its shareholders (See previous segments of our investigation here: Part One (1993-2000); Part Two (2000-2008); Part Three(A) (2009), Part Three(B) (2010), Part Three(C) (2011), and Part Three(D) (2012)). On this matter – the subject of a criminal investigation by at least two state Attorneys General for this failure – the largest publicly traded oil and gas company in the world has been silent. It has been tight-lipped even about the risks for its massive oil refinery facilities in coastal areas subject to storm surges and flooding and associated with sea-level rise and the projected increased intensity and rainfall rates of North Atlantic hurricanes.

Hurricane Harvey inflicted a large amount of damage on ExxonMobil oil refining and chemical processing facilities in Baytown and Beaumont, Texas, though the full extent of the damage has not yet been fully assessed. The floating roof on an oil storage tank collected so much rainwater that the sheer weight caused it to partially collapse, resulting in a large volume of toxic air emissions. Countless other repairs are being conducted in the weeks following the unprecedented rains accompanying the hurricane and its aftermath. There is no question that climate change added extra energy and moisture to Hurricane Harvey, exacerbating its devastating effect. Will ExxonMobil change its tune and start reporting climate change impacts as potential risks to its operations, or will it continue to bury its head in the sand?

Hurricane Harvey, which made landfall on August 25 near Rockport Texas with maximum sustained winds at 130 miles per hour, was the most powerful storm to hit Texas in half a century. The first of a slew of devastating, catastrophic hurricanes to haunt Atlantic waters this season, Harvey dumped a massive amount of precipitation on Southeastern Texas. The unusually slow-moving, Category 4 hurricane was the wettest ever recorded: “all-time continental US tropical cyclone rain records were broken” between August 25 and 30, according to The Weather Channel (see “Historic Hurricane Harvey’s Recap,” Sept. 2). Unprecedented rainfall – more than 50 inches in some areas – flooded entire regions in and around Houston and the Texas Gulf Coast.

Floodwaters rose so swiftly and powerfully that they gave new meaning to the term “flash floods.” The storm came on so fiercely that it inflicted a sense of shock-and-awe, even among Texans who had lived to see plenty of hurricanes. Many overestimated the time they had to grab their loved ones and valued possessions to escape to higher ground or a nearby emergency shelter. Virtually everyone was taken by surprise. Some drowned. As of September 14, there were 82 confirmed fatalities in Texas as a result of Hurricane Harvey, according to the Washington Post, (Sept. 14).

Exxon Mobil and the Oil Industry Took a Big Hit
In addition to displacing over a million people and inflicting catastrophic damage and destruction to all economic sectors in the region, Hurricane Harvey had a crippling effect on the US oil industry that continues today. Harvey caused about one-fifth of the nation’s total refining capacity to shut down and temporarily ceased about one-fourth of oil production from the Gulf of Mexico (Fortune, August 28).

The Exxon Mobil Corporation owns and operates two massive oil refineries in the area; one in Beaumont with a capacity of about 400,000 barrels per day, the other in Baytown, the second-largest US refinery with a capacity of about 560,000 barrels per day. Along with about a dozen other large oil refineries in the area, both were completely closed down on August 27.

As referred to above, the heavy rains added so much weight to the floating roof of an oil storage tank at ExxonMobil’s Baytown facility that the roof partially sank, and caused the more volatile petroleum-based components – including known and suspected carcinogens and otherwise toxic substances – to evaporate and release harmful air emissions in sufficient quantities to require reports to be submitted to state environmental regulators. The required regulatory filings to the Texas Commission on Environmental Quality (here and here) listed all the air pollutants emitted and their amounts.

The Exxon Mobil Corporation has stayed true to its reputation (for example, see Steve Coll’s book, “Private Empire”) for being secretive and tight-mouthed about disruptions to its operations. Through spokespersons, the corporation issued reassurance after reassurance but little detailed information, and continually downplayed the harm Harvey caused at its facilities. For example, the Houston Chronicle reported on August 29 that ExxonMobil said the partially collapsed tank was not a threat, and described the sunken roof as “stable” and “not creating any containment issues.” The article quoted a company spokesperson:

“This is an unprecedented storm, and we have taken every effort to minimize emissions and safely shut down equipment.”

According to a news report by CNN Money, ExxonMobil was taking action to “minimize emissions” (though neither the nature of the damage nor the details of these actions were disclosed to the reporter), claimed the emissions caused by the damage done on Monday, August 28 would stop by the following Friday, and pledged to assess the damage “once it safe to do so.” However, there is no confirmation that air pollutant emissions did indeed cease September 1 as promised. Moreover, it is common knowledge in the oil refining business that both any intentional, rapid shutdown of an entire facility, and its restart, will result in a temporary surge of hydrocarbon emissions. Oil and gas facilities also typically wait until the last possible moment to shut down plants before major storms or other extreme weather events, in order to maximize revenue. Rushed shutdowns tend to result in greater air emissions than do slower, more orderly shutdowns.

ExxonMobil is not alone. Residents living near refineries dotting the Texas landscape reported terrible smells surrounding these facilities. Some environmental groups have estimated that, overall, more than a million pounds of air pollution were released as a result of Harvey and its aftermath. Luke Metzger, director of Environment Texas, estimated that two million pounds of air pollutants were emitted during Harvey, compared to more than five million pounds emitted in all of 2016 (New York Times, Sept. 8). According to several news reports (for example, by the Times Picayune, Sept. 9), the Associated Press collected raw data from state regulatory agencies and other sources and performed an analysis which revealed that more than 30 fuel and chemical storage tanks at facilities in the region collapsed or otherwise failed during Hurricane Harvey, releasing more than 600,000 gallons of crude oil, gasoline, and other fuels and chemicals. One report (Newsworks, Sept. 14) indicated that less than 20 percent of the volume spilled was recoverable; the remaining evaporated (i.e., polluted the air) or soaked into the ground (i.e., polluted the land.)

Given the sheer amount of hazardous and toxic substances released to air, water, and land over such a large area along the Texas coast, it is reasonable to expect that ExxonMobil, along with other oil and gas companies affected by Harvey, will be named as defendants in a class-action suit for failing to take proper precautions to prevent these releases. It is also possible that ExxonMobil will be sued for failing to take adequate precautions to prevent its storage tank from collapsing, and to prevent other spills and air emissions from occurring in the harsh flood conditions Harvey brought. This is a problem that ExxonMobil leadership could have planned and prepared for, but did not.

Poor Preparedness for Climate Change Impacts Is Much to Blame for Exxon’s Hurricane Troubles
Climate scientists and scientific reports have long predicted that a warmer planet will lead to serious and harmful impacts such as sea level rise, more intense storm surges, more frequent and devastating flooding, and more extreme weather such as more powerful hurricanes.

This topic has been addressed by the Intergovernmental Panel on Climate Change (IPCC) and in multiple iterations of the National Climate Assessment, a comprehensive report of national and regional climate change impacts produced periodically by the US Global Change Research Program (USGCRP). For example, a summary of the 2014 assessment states:

“The intensity, frequency, and duration of North Atlantic hurricanes, as well as the frequency of the strongest (Category 4 and 5) hurricanes, have all increased since the early 1980s. The relative contributions of human and natural causes to these increases are still uncertain. Hurricane-associated storm intensity and rainfall rates are projected to increase as the climate continues to warm.”

Exxon’s Beaumont and Baytown facilities are in low-lying areas that are already prone to flooding, but will be much more so with sea level rise and more extreme storm events. Mapping of areas prone to flooding is readily available. As indicated earlier, CSPW has written extensively about ExxonMobil’s sustained silence on vulnerabilities such as this in our investigative series on the corporation’s required 10-K reports to the Securities and Exchange Commission (for example, here), and in this July 2016 piece about ExxonMobil vulnerabilities to climate change impacts such as out-of-control wildfires and extreme flooding.

Oil and chemical storage tanks located in the path of hurricanes and in areas prone to flooding are just one example of the many ways the US remains in a state of abysmally poor preparedness for a climate-changed world. Excellent coverage of this particular problem appears in the Washington Post (Sept. 9), “Tank failures in Harvey reveal vulnerabilities in storm.” Although we do have federal regulations that require oil and gas companies to be prepared for and to respond effectively to accidental spills, we do not have any public policies in place that address the vulnerabilities associated with storage tanks prone to breach during major floods. A strong national preparedness initiative for dealing with climate impacts could require oil, fuel, and chemical storage tanks to be built differently to be able to withstand the heavy downpours that accompanied Harvey. It is quite likely that the engineers who designed and built these tanks assumed the weather conditions of the past were a reliable guide to the future weather conditions under which their facilities would operate. That approach is no longer valid. It’s time to go back to the drawing board.

Meteorologist Eric Holthaus writes in Politico (August 28, 2017, emphasis our own):

“In all of US history, there’s never been a storm like Hurricane Harvey. That fact is increasingly clear, even though the rains are still falling and the water levels in Houston are still rising. But there’s an uncomfortable point that, so far, everyone is skating around: We knew this would happen, decades ago. We knew this would happen, and we didn’t care. Now is the time to say it as loudly as possible: Harvey is what climate change looks like. More specifically, Harvey is what climate change looks like in a world that has decided, over and over, that it doesn’t want to take climate change seriously.”

The fact of the matter is that many Americans do take climate change seriously, and are serious about wanting to do something meaningful about it – including people who own Exxon stock. Over the past decade, ExxonMobil shareholders have offered resolution after resolution calling for the oil and gas company to take positive steps toward reducing carbon dioxide emissions and to be more open and transparent regarding the effect its products have on our global climate system. Just about all of these resolutions have been summarily rejected by ExxonMobil corporate leadership, and voted down.

Recovery Will Be Slow and Expensive, But Will ExxonMobil Change Its Tune on Climate Impacts?
Several weeks after Harvey hit, on September 14, ExxonMobil announced it was developing plans for restarting the Beaumont refinery and chemical plant, according to the Beaumont Enterprise, but gave no timeline for the restarts. (As of this writing, neither facility has resumed normal operations.) The same article in the local newspaper quoted ExxonMobil CEO Darren Woods praising employees who “pored over technical blueprints” of the facilities “while floodwaters poured through their kitchens” at home, and noted that while many workers did all they could to provide expert help from their homes, many others had been stranded at work and forced to set up temporary living quarters.

“It’s very difficult to predict exactly when all those units will be back up and we’ll be back on our full load,” Woods told CNBC.

It is not known yet precisely how much damage Hurricane Harvey and the associated flooding inflicted on the Exxon Mobil Corporation’s Baytown and Beaumont facilities; a full damage assessment has yet to take place. We therefore don’t yet know what this will cost the corporation or how it will affect the company’s bottom line. CEO Darren Woods has assured investors that the capital spending plans of ExxonMobil will not be affected.

But, then again, Darren Woods, like Rex Tillerson and so many of his predecessors at ExxonMobil, say a lot of things that turn out not to be true, especially where environmental impacts are concerned. But the problem here is that Darren Woods is failing to say certain things that are true, things like, “climate change and related impacts present a significant risk to our operations.”

Whether a statement like this appears in future 10-K and other reports to shareholders is yet to be seen.

 

CSPW Senior Climate Policy Analyst Anne Polansky has 30 years of experience in public policies relating to energy and the environment, with a strong focus on climate change and renewable energy. She is a former Professional Staff Member of the House Committee on Science, Space and Technology.