US regulator pushes oil companies to toe a stricter line on climate

The SEC denied requests by two oil majors that would force them to detail plans to cut 'Scope 3' emissions

The Biden administration has been working to reverse the damage done by his predecessor's term in office, which allowed for more lax regulations to govern the sector. Reuters

The US Securities and Exchange Commission rebuffed attempts by ConocoPhillips and Occidental Petroleum to dismiss shareholder motions on emissions targets, a move that will force them to detail plans to cut their 'Scope 3' emissions.

The companies sought to strike out the motions, alleging that such proposals would allow shareholders to "micromanage" their operations but the federal body dismissed their requests.

"Only a court can determine whether a company may legally exclude the shareholder proposal from its proxy materials," the SEC said in a note.

In a note to ConocoPhilips, which was reviewed by the Financial Times, the regulator said the proposal "does not seek to micromanage the company to such a degree that the exclusion of the proposal would be appropriate".

Oil majors in the US, the world's biggest producer of oil and gas, are facing increasing scrutiny from President Joe Biden’s administration, which is pushing to transition to cleaner sources of energy in a bid to lower emissions. It has frozen new exploration activities on federal lands and has brought the US back to the Paris Agreement, which seeks to limit emissions to below 2°C above pre-industrial levels, preferably about 1.5°C.

The administration also reinstated a metric from the previous Obama administration to calculate the social cost of carbon – a move that could help it introduce stricter reforms to combat climate change.

The yardstick to assess the damage that greenhouse gases and associated pollution inflict on society was set at $51 per tonne of carbon dioxide.

The White House has been working to reverse the damage done by predecessor Donald Trump's administration, which loosened regulations governing the sector.

Under Mr Trump, the SEC allowed companies to dismiss shareholder proposals rather than put them to a vote.

Oil companies in the US rejected around 15 per cent of environmental, social and governance proposals in 2018, compared with 9 per cent in 2016 at the end of President Barack Obama's second term in office, according to Institutional Shareholder Services, an independent investor advisory group.