Now, as oil and gas prices surge again, private shale drilling and fracking are leading a rebound in oil and gas drilling. Hilcorp, Carlyle and ConocoPhillips did not provide comment.ĭavid McNeil, head of climate risk at Fitch Ratings, wrote in a memo earlier this year that there is a growing trend among publicly traded companies and investors to divest from fossil-fuel or other holdings that contribute to climate change, but “comparatively little focus is on who purchases these assets,” and private equity firms, in particular, “will generally have fewer incentives to reduce emissions than their public counterparts.”Īt the height of the pandemic, dozens of private equity-backed oil and gas producers filed for bankruptcy, raising concerns that they would use the restructuring process to evade cleanup rules. Hilcorp is now the country’s largest known emitter of methane, reporting almost 50 percent more emissions from its operations than the nation’s largest fossil fuel producer, Exxon Mobil, despite only producing about a third of Exxon’s oil and gas volume. In 2017, Hilcorp, a private company backed by the private equity giant Carlyle, bought oil major ConocoPhillips’ San Juan Basin assets in Colorado and New Mexico for $3 billion, and last year bought all of BP’s Alaska operations and interest for $5.6 billion. As a result, some of the country’s largest emitters of methane, a particularly potent planet-warming gas, are oil and gas producers backed by relatively little-known investment firms. Though all companies, public or private, must follow environmental regulations, private firms are exempt from many public financial disclosure rules. In the fossil fuel industry, one effect of sales to private equity investors is to transfer those assets, and their emissions and other environmental hazards, further from the public eye. Clients include public pension funds, which now on average allocate about 20 percent of their investments in private equity. The private equity industry, which manages $7.4 trillion in global assets, now plays a major role in a wide swath of American life, from firefighting services to nursing homes, often financing its deals with debt while generating profits for its clients and fees for its managers. “This significant investment is delivering more jobs and cleaner energy for the future,” Mr. As a result, many oil companies have begun shedding some of their dirtiest assets, which have often ended up in the hands of private equity-backed firms.ĭrew Maloney, president and chief executive of the American Investment Council, a trade group that represents private equity, said the industry was “playing an important role in the energy transition and investing more each year in renewable energy projects.” In 2020, private equity had funded over half of all private renewable energy projects across America, he said. Private equity investors are taking advantage of an oil industry facing heat from environmental groups, courts, and even their own shareholders to start shifting away from fossil fuels, the major force behind climate change. Only about 12 percent of investment in the energy sector by private equity firms went into renewable power, like solar or wind, since 2010, though those investments have grown at a faster rate, according to Pitchbook data. The overwhelming majority of those investments was in fossil fuels, according to data from Pitchbook, a company that tracks investment, and a new analysis by the Private Equity Stakeholder Project, a nonprofit that pushes for more disclosure about private equity deals. Since 2010, the private equity industry has invested at least $1.1 trillion into the energy sector - double the combined market value of three of the world’s largest energy companies, Exxon, Chevron and Royal Dutch Shell - according to new research. As the oil and gas industry faces upheaval amid global price gyrations and catastrophic climate change, private equity firms - a class of investors with a hyper focus on maximizing profits - have stepped into the fray.
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