The ESG perspective

There are many who believe that ESG is something new, but the truth is, there is nothing new here. ESG today has evolved from Environmental, Health and Safety (EHS) and Corporate Social Responsibility (CSR) programs, with a renewed emphasis on emission reduction and reduced carbon footprint, in an effort to reduce our impact on climate change.

In addition to this, there is also a segment of the ESG movement that is calling for the elimination of fossil fuels. To understand what the oil and gas industry is facing, we need to become familiar with many terms and concepts that are entering into the ESG narrative.

Decarbonization. This is what many refer to as getting to net carbon zero or zero carbon emissions. Many major public companies have made claims to achieve net zero by 2030 or 2050.

Where this gets complicated is which emissions, and how? Typically, public companies are referring to Scope 1 emissions, those emissions they are directly responsible for. Essentially that would be from Exploration to Refining—not including the power used—which are Scope 2 emissions. Then there is Scope 3, which is the third-party emissions from subcontractors or the use of their products, like emissions from combustion of natural gas or vehicle exhaust. There are estimates that 80% of all emissions are Scope 3. Once we understand what emissions can be, then the next step is how.

While the first step would be by reducing emissions as much as possible, you cannot get to carbon zero without offsets. Offsets can be Carbon Capture and Sequestration (CCS) or as simple as tree planting. I will stay away from carbon credits for now, as that is its own topic that we can cover down the road. Many have already made great progress here with decarbonization efforts, as relates to Scope 1 emissions. Total Energies recently announced carbon-neutral LNG as an example. I know a common criticism is why just Scope 1 and that’s because currently, the SEC only requires Scope 1 emission reporting, but that can change. There are groups pushing for Scope 1,2 and 3 reporting and changes on boards to push for this adoption, but in the meantime, any progress is a success.

To some, decarbonization isn’t about getting to carbon zero or being carbon-neutral. It means the elimination of fossil fuels. And to some, this goes into population control, because we’re all carbon dioxide emitters. You may think I am exaggerating, but some of the most respected climate scientists and environmentalists have stated, we need a “good virus” to help achieve decarbonization. 

I do not bring this up as an excuse to undermine decarbonization efforts, but to help everybody understand how some of these terms are being applied. Decarbonization is critical to our industry, and I applaud all the carbon zero goals being established. But I do believe we need Scope 2 and 3 to enter the discussion. A recent Executive Order by President Biden calls for federal vehicles and buildings to be carbon-neutral by 2050. Part of the pushback was that this will be damaging to oil and gas, and the response was “that’s the point.”

So, going carbon-neutral or zero isn’t enough for some people—it’s about eliminating fossil fuels. A recent ESG report complained about “greenwashing” among oil and gas companies with all these claims of net carbon zero or carbon-neutral, because they were still using fossil fuels. So, let’s look at greenwashing.

Greenwashing is using misinformation or a false impression to convey an environmental benefit—like putting a damaging product in recycled packaging and labeling the product as “green.” I’ve seen, for example, many companies that refer to chemicals as “certified green” by the EPA, when the EPA does not certify chemicals as green or otherwise. The number of companies that have changed nothing about what they do or how they do it, but just added words like sustainable or green, is overwhelming. This is greenwashing. But calling carbon zero or neutral goals “greenwashing,” because they continue the use of fossil fuels, defeats the point of decarbonization, unless you define it, as I mentioned, as the elimination of fossil fuels.

We need to start paying attention to how these terms are used. It may be unpopular to put another greenwashing example out there, but eliminating the use of fresh water in shale plays while using brackish water, and calling it sustainable, is greenwashing. Produced water is generated at a rate three times more than is utilized in well completions. The goal should be using 100% produced water for completions. I understand landowner restrictions, logistical issues and long-term brackish water supply contracts may impact the accomplishment of this goal, but calling a transition from fresh to brackish “sustainable” is greenwashing. Fresh and brackish water supplies are critical to the drought-stricken communities we work in.

With Blackstone’s announcement that companies with better ESG metrics outperformed others in 2020, there appears to be an ESG premium being applied to publicly traded companies. So, besides being the right thing to do, continuing down the road to decarbonization is critical. More importantly, solar and wind have yet to decarbonize. What? Yes, I said it, solar panels are made from mined coal and silica, and even more coal in a blast furnace. Yet, nobody is calling for that to be decarbonized or the lubricating oils used in wind farms, or the mined lithium sourced from underdeveloped countries that still use child labor. Any mined resource has a tremendous carbon footprint, notwithstanding the environmental damage from open pit mining. But we cannot use this to detract from the goal, we must stay the course and march on to carbon-neutral or carbon zero through decarbonization. That is our path forward.

About the Authors

Mark Patton

Hydrozonix

Mark Patton is president of Hydrozonix and has more than 30 years of experience developing water and waste treatment systems for the oil and gas industry. This includes design, permitting and operation of commercial and private treatment systems, both nationally and internationally. He has seven produced water patents and two patents pending. He earned his B.S. in chemical engineering from the University of Southern California (USC) in 1985.