Shell’s lobbying exit — a ‘warning shot’ or political play?

Source: Timothy Cama and Kelsey Brugger, E&E News reporters • Posted: Friday, April 5, 2019

Royal Dutch Shell PLC’s high-profile departure from the petroleum refining industry’s top lobbying association could embolden more companies to leave groups that they don’t think are progressive enough on climate change.

In a report this week, Shell cited “material misalignment” between itself and American Fuel & Petrochemical Manufacturers on climate, citing the group’s lobbying or silence in areas like vehicle fuel efficiency, carbon pricing and methane emissions.

It served as a reminder that big business groups like the American Petroleum Institute, U.S. Chamber of Commerce and National Association of Manufacturers have hundreds of members, many of whom favor more aggressive climate policies and openly disagree with the associations’ lobbying.

Shell’s exit from AFPM — and its warning to other groups that they have “some misalignment” on climate change — could usher in new departures or force associations to better accommodate their more climate-focused members, analysts say.

“Shell is not alone in assessing what associations it wants to be a member of given their evolving position on climate change,” said Alex Flint, executive director of the Alliance for Market Solutions, a conservative group that backs a carbon price.

One veteran of trade associations in the energy space said other groups like API and NAM likely heard Shell’s breakup with AFPM as a warning to listen more to members or be left in the dust.

“This is a shot across the bow, for sure. Shell has fired a warning shot,” the person said. “You can be sure that some of the other associations are watching this very closely.”

Big, international oil companies like Exxon Mobil Corp., Total SA and BP PLC have been some of the most outspoken members of major business associations in terms of climate change policy.

Many want the United States to impose taxes on carbon dioxide emissions and are supporting initiatives like the Climate Leadership Council to make their voices heard.

“Over the course of the last several years, there has been a clear shift and growing momentum among corporations for a carbon fee program as the primary way to address climate change,” said Greg Bertelsen, vice president of the CLC, which aims to get Republican officials on board with a plan to impose carbon taxes and refund them to taxpayers. “We continue to add companies that are lining up in support of a carbon dividend program.”

Big oil companies see carbon taxes as a way to boost demand for natural gas, while providing consistent accounting across the many countries where they operate.

But major Washington, D.C.-based business groups have thus far resisted.

AFPM, for example, issued a statement last year backing a congressional resolution that claimed a national carbon tax would be disastrous to the U.S. economy. The group argued, among other things, a price on carbon emissions would “disproportionately impact middle- and low-income families” (Climatewire, Sept. 26, 2018).

The Chamber of Commerce opposes the Paris Agreement on climate change, though it has stated that it sees climate as a major problem. API opposes the Obama administration’s methane rule for oil and gas drillers, along with numerous other greenhouse gas policies.

‘Purely political reasons’

Shell’s exit from AFPM came from a report the company wrote looking at its association memberships and how they align with its climate policies. That was prompted by increasing calls from institutional investors, including pension funds, to stop lobbying against efforts to reduce greenhouse gas emissions.

Edward Collins, the lead researcher for climate lobbying at the United Kingdom-based InfluenceMap, said that increasing efforts to make lobbying more transparent will inevitably lead more companies to exit associations that don’t align with their views.

“These trade groups, especially the ones that are being highlighted in these reports, are some of the most powerful oppositional forces on development of rigorous climate change policy,” said Collins, who researched the issue extensively.

“This concern around lobbying and companies’ disclosures around it has become more mainstream,” he said.

Shell is not the first company to leave an association over climate. A handful of companies, like Apple Inc. and PG&E Corp., left the Chamber of Commerce in 2009 over climate, while numerous companies like Exxon Mobil, Ford Motor Co. and Google LLC have cut ties with the American Legislative Exchange Council, often directly citing climate.

But Shell is the first oil major to leave AFPM.

Some of the groups on Shell’s warning list defended their climate policies but didn’t seem worried that they’d lose members.

“We support efforts to reduce greenhouse gas (GHG) emissions,” an American Chemistry Council spokeswoman said.

“ACC’s Sustainability Principles include a commitment to achieving measurable reductions in GHG emissions in the manufacture and distribution of our products. Since 1992, the GHG intensity (pounds of CO2-equivalent emitted per pound of production) of ACC members has fallen by 24 percent,” the spokeswoman said.

API said it “is proud of its work to create world class safety and sustainability standards for the entire natural gas and oil supply chain and advocate on behalf of our broad membership for smart local, state and federal policies — ranging from tax to trade, regulatory, access and more — to meet Americans’ demands for energy with affordable, reliable and ever cleaner energy.”

“We are proud to continue to serve Shell and all our member companies on behalf of the American public and consumers,” a spokesperson said.

None of the organizations supports putting a price on carbon emissions, a contrast with many oil majors.

But some doubt that Shell’s departure was any real indicator of how oil companies feel about their associations.

“This was a decision made in Europe at the Netherlands headquarters. It was not made in North America,” said Stephen Brown, an energy industry consultant.

“And it was made for purely political reasons. They are bowing to the institutional investment community. That’s all this is,” said Brown.

Brown pointed out that diversified energy companies like Shell and BP are much more equipped to handle climate policies than the refiners that AFPM represents, since they sell natural gas.

“It’s a very easy give for an Exxon Mobil or a BP to say, ‘We need to transition to natural gas.’ Guess who’s holding all that natural gas?” he said.

Frank Maisano, a consultant at the law and lobbying firm Bracewell LLP and veteran of energy policy battles, downplayed any overarching message from Shell’s AFPM exit.

“Enviros, shareholder activists and others always like to try and split industry. Many times, companies are doing what is in their best specific interest at the time or pleasing other political, policy or public constituencies,” he said.

“Most industry trade groups work on myriad issues for their member companies,” Maisano said. “Like any family, they aren’t always fully aligned on every policy, but always strive to reach consensus positions on policies that are in the best interest of that specific industry, as well as the communities and consumers that rely on them.”

Mike McKenna, a Republican energy lobbyist, said Shell might even go back to AFPM.

“This kind of thing happens from time to time,” he said. “Then after a while everyone recalibrates. Then they rejoin the associations.”