Environmental, social, and governance (ESG) is a broad and not well-defined term that seems to have become associated with non-financial factors investors use to measure an investment or a company’s sustainability. Companies that may have ignored, resisted, or ‘green-washed’ ESG disclosures may be forced into such disclosures by large investors or the government. It may prove impossible to not be caught up in the coming wave of ESG requirements, both private and public.

As its name implies, there are three ‘pillars’ of ESG. An exact definition of each is difficult as each has been generally described to include any number of factors or criteria. The environmental pillar relates to the impact a company may have on the environment, such as its carbon footprint, including its direct and indirect greenhouse gas emissions, the chemicals involved in its manufacturing processes, or its overall stewardship of natural resources. The social pillar relates to a company’s relationships with its stakeholders or how it deals with people within the company and in the broader community, including diversity programs, hiring practices, and even how a company advocates for social good with its supply chain partners or in the wider world. The governance pillar refers to how a company is led and managed, including how leadership’s incentives are aligned with stakeholder expectations and the types of internal controls which exist to promote transparency and accountability by leadership.

Carbon capture, utilization, and sequestration (CCUS) offer a known and readily available method to reduce the net emissions of carbon dioxide and meet ambitious climate goals. The regulatory framework, and the multiple protections built into it, ensure that it is safe. However, as the number of requests for authorizations of CCUS projects increases, it is uncertain whether that very regulatory framework and the agencies in charge of permitting and regulating the injection of carbon dioxide will facilitate or inhibit our ability to meet those climate goals.     

Upon rejoining the Paris Agreement on January 20, 2021, the United States announced ambitious climate goals: reduce greenhouse gas emissions 50-52 percent from 2005 levels by 2030, create a carbon-free power sector by 2035, and reach net-zero greenhouse gas emissions economy-wide by no later than 2050. The State of Louisiana, through the Governor’s Climate Initiatives Task Force, has also announced its own climate goals: reduce emissions 26-28 percent from 2005 levels by 2025; reduce emissions 40-50 percent from 2005 levels by 2030, and reach net-zero emissions by 2050.

Carbon capture, utilization, and sequestration (CCUS) offer a known and readily available method to reduce the net emissions of carbon dioxide and meet ambitious climate goals.  The regulatory framework, and the multiple protections built into it, ensure that it is safe.  However, as the number of requests for authorizations of CCUS projects increases, it is uncertain whether that very regulatory framework and the agencies in charge of permitting and regulating the injection of carbon dioxide will facilitate or inhibit our ability to meet those climate goals.     

In response to President Biden’s executive order requiring all federal agencies to embed equity into their programs and services, Michael Regan, EPA’s Administrator, directed all EPA offices to “strengthen enforcement of violations of cornerstone environmental statutes and civil rights laws in communities overburdened by pollution.” Internal memoranda were then issued regarding strengthening civil, criminal, and clean-up enforcement in communities with environmental justice concerns.

These internal memos are fairly general in nature but do have enough information to provide some insight into EPA’s direction as to environmental justice and enforcement. Essentially, the overall message is that EPA will use all available statutory and regulatory methods and mechanisms to minimize potential risks from ongoing or historic pollution in or near overburdened communities.

As to enforcement, EPA will increase the number of inspections in overburdened communities, resolve non-compliance using remedies with tangible benefits to that community, such as environmental projects, preventing further pollution, or fence-line monitoring, and increasing engagement with overburdened communities about enforcement cases. EPA’s Office of Land and Emergency Management also announced in December 2021 that it will analyze compliance patterns of Spill Prevention, Control, and Countermeasure (SPCC) and Facility Response Plan (FPC) facilities in overburdened communities and identify locations that are more likely non-compliant in order to focus future inspections and compliance efforts on these areas. In other words, SPCC/FRP facilities with past violations which are located in or near overburdened communities will likely be faced with increased inspections and scrutiny.

The EPA has published a proposed rule to regulate methane and other emissions from new and existing oil and gas production sites and other portions of the oil and gas industry. The proposed rules are to be revisions and additions to the rules in Subparts OOOO and OOOOa and are the Biden Administration’s first entry into the back-and-forth regulation of this sector during the Obama and Trump Administrations. The proposed rules, however, go farther and are more expansive than even the Obama-era regulations.

The Biden Administration has famously imposed an “all of government” approach to addressing climate change. The effort began on President Biden’s first day when, among other things, he revoked the permit for the Keystone XL pipeline, paused new oil and gas leasing on federal lands, and re-entered the Paris Agreement. These, and other actions, contrasted sharply with the Trump Administration’s full-throated support of oil and gas production. 

According to the U.S. Energy Information Agency, the United States produced more petroleum in 2020 than it consumed and exported more petroleum than it imported, making the United States a net annual petroleum exporter for the first time since at least 1949. As to natural gas, total annual exports generally increased each year from 2000 through 2019 as increases in natural gas production contributed to lower natural gas prices and the competitiveness of natural gas in international markets. In 2019, the United States exported natural gas to about 38 countries and total annual natural gas exports were 4.66 trillion cubic feet, the highest on record, and the United States was a net exporter of natural gas for the third year in a row.  For more information about Trump-era oil and gas production, click here.