“I kind of remind people, I personally think oil is a renewable, it just takes a little bit longer,” said Mari Salazar, senior vice president and manager of Energy Financial Services for BOK Financial, an Oklahoma-based bank that caters to the oil and gas industry.
Salazar made this analogy at the Hart Energy 2021 Energy Capital Conference this summer on a panel discussion about banking loans for the oil and gas industry. The main focus of the conference was the current hesitancy to provide funding to the struggling industry.
Salazar’s comment echoed the sentiment of the panel that the efforts to decarbonize the economy and switch to renewables appeared to be a laughing matter to them. Panelists, who included representatives from the energy banking industry and advisors to energy companies seeking financing, also expressed strong commitment to continue working to fund the expansion of fossil fuels.
In the lead up to her renewables joke, Salazar stated that: “We continue to support the oil and gas industry and it’s something we’re committed to long term.”
Lending issues due to failed economics, not ESG
The consensus from this energy finance panel was that the current lack of funding for the U.S. oil and gas industry is due to investors becoming increasingly aware that the industry is a bad investment — and has been unprofitable for years.
There was also a significant focus, however, on the impact of the growing importance among many investors of considering Environmental, Social and Governance (ESG) factors when it comes to oil and gas funding. This concern over ESG from some investors and activists comes as scientists repeatedly warn of the dangerous impacts fossil fuel extraction and burning have on the planet. Instead, a rapid shift towards clean energy and a decarbonized society is needed, experts say, to avoid catastrophic climate change.
The tone from the panel was that ESG is something to address in order to keep investors happy but that it could likely be achieved with little effort or few changes to the existing banking business model.
“Do what you can to inoculate yourself [against ESG],” Steven Kennedy, executive vice president and head of energy banking for Amegy Bank, told the conference. “I think ignoring ESG would be a mistake for any of us, but it may not take that much to actually inoculate a company from people being too critical of what they’re doing.”
The idea that oil and gas companies can address ESG concerns — like climate change, workers’ rights, and executive pay — by doing things that “may not take that much” effort is reflected right now as natural gas producers claim that their fracked gas is “responsibly sourced,” but offer little transparency about those standards. A recent Bloomberg article detailed how these types of efforts to claim natural gas is “carbon neutral” are just for show and not based on science, while DeSmog reports this week on the lack of evidence behind LNG projects’ “net-zero” claims.
Oil and gas investor Dan Pickering kicked off the Hart Energy conference with a keynote presentation that set the tone for much of what followed. “We have plenty of time to deal with the energy transition,” he told the audience.
Two months after the conference took place, António Guterres, secretary-general of the U.N., declared this August that the latest Intergovernmental Panel on Climate Change (IPCC) research was “a code red for humanity.”
Bankers plan to fund fossil fuels as long as it pays
Greg Determan, managing director at JPMorgan Chase & Co., represented the biggest player in oil and gas financing on the Hart Energy panel. A 2020 MarketWatch article about JPMorgan’s efforts to greenwash its fossil fuel funding referred to the company as “the oil industry’s bank of choice.”
Determan confidently told conference attendees that when it comes to addressing climate change, “our job is to take it head on and be part of the solution.”
This, however, contradicts the 2021 assessment by the Rainforest Action Network that concludes JPMorgan is “Still the Worst” when it comes to banks financing fossil fuel development — a distinction earned by loaning the largest amount of money to the fossil fuel industry since the Paris Agreement entered into force in 2016.
JPMorgan is run by Jamie Dimon, who was recently given a “special award” stock bonus estimated to be worth $50 million — intended to keep him motivated to stay at the company for another five years. This is in addition to his normal salary and bonus.
Steven Toon, editor-in-chief of Oil and Gas Investor magazine, moderated the panel. Toon asked Determan if “You [JPMorgan] [are] still going to be lending to oil and gas companies?”
“For a long time,” Determan said without hesitation, “Mr. Dimon is quite focused on the industry. It’s a huge business for us and that’s going to be the case for decades to come.”
Despite the financial struggles of the industry over the past decade, the conference made clear where banks appear to stand. As panelist Buddy Clark, partner at oil industry law firm Haynes and Boone, said at the conference: “If oil companies are making money, the banks are gonna be there.”