Bloomberg is reporting that while in the past, these expansion projects would have eventually paid off in fat profits for shareholders, we are now facing a new future, with a climate crisis that demands the world’s attention, and any expansion of fossil fuel extraction is not in the equation.
The U.S. Department of Energy, in a press release on Tuesday, announced it was authorizing new natural gas exports referring to the gas as “freedom gas,” a sign of how the Department views domestic natural gas production as a tool to spread prosperity and liberty, but actually, more to line investors pocketbooks.
“Increasing export capacity from the Freeport LNG project is critical to spreading freedom gas throughout the world by giving America’s allies a diverse and affordable source of clean energy,” Under Secretary of Energy Mark Menezes said in a statement included in the release.
The Pipeline Bubble
We know for sure the Trump Administration doesn’t give a hoot about the climate crisis, but shame, shame on the petroleum industry. Getting investors to put up a trillion dollars for expanding oil and gas projects is a sure recipe for blowing past the 1.5°C (2.7°F) increase in temperatures scientists say would avoid the worst effects of global warming.
A new report by the energy watchdog group, Global Energy Monitor, details the planned boom in new oil and gas pipeline infrastructure in North America. Not only will the projects greatly increase oil and gas production in the U.S., but those brand-new pipelines and related infrastructure are expected to last – and be used – for the next forty years.
The report, called Pipeline Bubble, notes that North America’s oil and gas industry has current new pipeline expansion plans totaling $232.5 billion (pre-construction and construction), just a portion of the $1 trillion.
However, as the report claims, building and using the new infrastructure for the next 40 years goes against our current climate goals. With governments getting serious about meeting their Paris Climate Agreement objectives, there is going to be a decline in the use of fossil fuels.
Added to this, renewable energy sources are continuing to grow, especially now that infrastructure has become less costly and battery storage has gotten better. But there is the question of what is driving the U.S.’s appetite for natural gas and oil? According to the U.S. Energy Information Agency (EIA), overall U.S. demand for petroleum liquids will decline from 2020 to 2035 to about 8 percent of current consumption.
The thing is, if the world is really serious about stopping this climate crisis, we will see a sharp decline in the use of fossil fuels over the next decade or so, and all the new pipelines, drilling infrastructure and whatever else goes with the fossil fuel projects will become what is called “stranded assets.” And they won’t be doing anyone any good.
Fossil fuels are losing their luster
While there are still many individuals and organizations willing to sink funding into fossil fuels, more and more banks, fund managers, institutions, and sovereign wealth funds are seriously questioning the moral and social implications of continuing to invest in fossil fuels.
Norway’s sovereign wealth fund — a state-owned investment fund worth approximately a trillion dollars — recently announced it would divest from oil and gas exploration and production companies in North America and around the globe. Additionally, the World Bank, as well as the governments of New Zealand, France, Costa Rica, Belize, New York, and Maryland have adopted restrictive investment in fossil fuels.
“The writing is on the wall for oil companies that do not support global efforts to avoid a climate catastrophe by urgently phasing out fossil fuels and transitioning to a low-carbon world,” said Simon Howard, CEO of UKSIF. “The investment community recognizes that these will make increasingly risky investments.”
