Even the climate-conscious Biden administration supported ConocoPhillips’s $6 billion oil development on Alaska’s Northern Slope, but that couldn’t stop a judge from throwing it in limbo on environmental grounds.
U.S. District Judge Sharon Gleason’s decision to rescind the Trump administration’s approval of the project is a “surprise” given that in May the current government defended the project in court, RBC Capital Markets analyst Scott Hanold said in a note Thursday.
The setback for ConocoPhillips highlights how difficult it’s become for Western oil producers to seek growth in a world gripped by an unprecedented wave of heat, droughts, floods and wildfires blamed on man-made climate change. Investors, governments, lawmakers and courts are increasingly embracing concerns that in the past had been more typical of environmental activists.
In the U.S., oil production has dropped about 13% from a record high of 13.1 million barrels a day before the pandemic, and has only shown signs of slow growth even as demand for crude and prices have come roaring back this year.
The federal judge’s ruling comes just days after President Joe Biden called for OPEC to boost crude supplies to keep a lid on oil prices that are making gasoline more expensive for Americans and stoking inflation.
Biden’s plea — recognizing that the long-term clean energy push doesn’t preclude the immediate need for cheap fuel — triggered speculation the administration may be softer on the oil industry than many had expected. Pro-oil advocates have criticized the government for limiting domestic production for environmental reasons while calling for more supplies from the Middle East and Russia.
Just this week, Chevron Corp. Chief Executive Officer Mike Wirth called for “an increase in engagement” from the White House on oil and gas in order to boost U.S. energy security and the economy.
But the global race to avert climate disaster is gaining momentum beyond any government’s position. Court battles have long challenged pipeline projects regardless of the White House incumbent. And shareholders have tamed shale’s once insatiable thirst for growth, mostly because of concerns over their balance sheets, but also due to pressure for more environmentally responsible investments.
Judge Gleason said Willow’s prior approval failed to adequately protect polar bears and didn’t properly consider the effects on climate change.
“We think this ruling greatly increases the likelihood for ConocoPhillips’s Willow project to be materially delayed or permanently shelved,” said Leo Mariani of KeyBanc Capital Markets Inc.
ConocoPhillips will review the decision and evaluate the options available, spokesman Dennis Nuss said by email.
The shares dropped as much as 4% Thursday, in line with a 3.8% slump in the S&P 500 energy index.
Stuart Turley is President and CEO of Sandstone Group, a top energy data, and finance consultancy working with companies all throughout the energy value chain. Sandstone helps both small and large-cap energy companies to develop customized applications and manage data workflows/integration throughout the entire business. With experience implementing enterprise networks, supercomputers, and cellular tower solutions, Sandstone has become a trusted source and advisor. He is also the Executive Publisher of www.energynewsbeat.com, the best source for 24/7 energy news coverage, and is the Co-Host of the energy news video and Podcast Energy News Beat. Energy should be used to elevate humanity out of poverty. Let's use all forms of energy with the least impact on the environment while being sustainable without printing money. Stu is also a co-host on the 3 Podcasters Walk into A Bar podcast with David Blackmon, and Rey Trevino.
Stuart is guided by over 30 years of business management experience, having successfully built and help sell multiple small and medium businesses while consulting for numerous Fortune 500 companies. He holds a B.A in Business Administration from Oklahoma State and an MBA from Oklahoma City University.
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