HOUSTON - The oil and gas industry must provide reliable, affordable and sustainable energy amid changing regulations and disclosure requirements.

Jack Belcher, principal at Cornerstone Government Affairs, told an audience at Hart Energy’s 2022 Energy ESG conference that the industry is facing an energy trilemma of meeting public demand for these three factors and highlighted the difficulty but necessity of achieving them.

“All of them impact ESG metrics,” he said.

Reliability is critical, he said, citing energy security challenges in Europe, California and “what could happen and has happened in Texas.”

Sustainability is rising in importance, but it’s moving in “fits and spurts” that are tied to affordability, he said, noting high commodity prices relate to the affordability factor.

And the industry faces public policy, regulatory and decarbonization pressures. 

“Climate is a prime driver,” Belcher said.

But, he added, ESG is becoming a political football that could taper off after the midterm elections.

“We’re really seeing a red state, blue state thing right now,” he said. “Republicans are politizing” and “vilifying” ESG. 

And Tesla’s Elon Musk has called ESG a scam, he added.

States like Texas, Florida and West Virginia oppose ESG while California is encouraging more disclosure about emissions, he said.

There has also been frustration around the lack of standardization and consistency when it comes to reporting emissions, he said.

“We’re hearing a lot of questioning about ESG, especially when it comes to consistency in rating and reporting,” he said. Inconsistency and lack of standardization is “going to impact the public debate over time,” but there are movements by rating agencies to bring in some standardization to address the ESG backlash, he added.

Some public policy around ESG is within the regulatory and executive branches of the government, but “we’re seeing more legislation addressing it” and action in the courts, he said. “Ultimately, a lot of these things are going to happen in the courts.”

The Securities & Exchange Commission Disclosure Rule regarding the reporting of Scope 1, 2 and 3 emissions will be phased in for companies through 2026, he said, but the rule is not yet finalized. 

“We know it’s going to be challenged in the courts, and that’s already gearing up, even before the rule comes out,” Belcher said.

The recently passed $750 billion Inflation Reduction Act was a bit of a mixed bag for the oil industry, he said.

The act brought changes to fiscal terms for oil and gas leases but it also brought back lease sales that had been delayed, he said. It also earmarked funding for carbon capture and storage, he said, and that “changes things in terms of economics of potential projects.”

And the $550 billion Infrastructure Investment and Jobs Act that passed last year also made available money for plugging and abandoning orphan wells, he noted. 

Money was also tagged in both acts to support climate resiliency or greener energy sources, he added.

“Decarbonization is proliferating” around the world, he said.

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