Bloomberg: ConocoPhillips Chief’s Travel Overseas Set Climate Change Views

By Jim Kennett

April 19 (Bloomberg) — As head of a U.S. oil and gas company with operations in more than 40 countries, ConocoPhillips Chief Executive Officer Jim Mulva travels the world, spending almost half the year outside of headquarters in Houston.

Those travels, and growing scientific certainty that burning fossil fuels is raising the Earth’s temperature, convinced Mulva that the U.S. was falling behind in combating climate change. So he became the first U.S. oil industry leader to back legislation to fight global warming, enrolling ConocoPhillips in an industry coalition that seeks a federal cap on greenhouse gas emissions.

“The rest of the world’s ahead,” Mulva, 60, said in an interview in Houston. “If we wait too long, it won’t be an issue of mitigation. It becomes one of adaptation,” he said, with society paying a high price to live with rising sea levels, water shortages and changed growing seasons resulting from higher global temperatures.

ConocoPhillips is moving closer to European rivals such as BP Plc, whose chairman said a decade ago that climate change “cannot be ignored,” and farther from Exxon Mobil Corp. The climate-change skepticism of former Exxon Mobil Chairman Lee Raymond, dubbed by Greenpeace as the Darth Vader of global warming, has made Exxon Mobil a favorite target of environmentalists.

Mulva is among a growing number of U.S. executives finding common ground with environmental groups and pushing Congress to pass legislation to cut emissions of carbon dioxide and other gases that contribute to global warming.

The U.S. Climate Action Partnership, the group ConocoPhillips joined last week, was founded in January by companies such as investment bank Lehman Brothers Holdings Inc. and chemical maker DuPont Co., working with environmental groups such as New York-based Environmental Defense.

`Policy Shift’

“It is amazing how long it took, but now the policy shift is taking place in the U.S.,” said Kate Hampton, head of policy at Climate Change Capital, a London investment bank that raises capital for projects that cut greenhouse gas emissions.

The Climate Action Partnership’s first move was to declare support for a cap in the U.S. on carbon dioxide emissions and a trading program to facilitate compliance. Cap-and-trade is the system European nations are already using to meet greenhouse gas reductions they committed to by signing the Kyoto Protocol, the 1997 treaty that went into force in 2005.

The gap Mulva has seen develop between the U.S. and most of the rest of the industrialized world stems in part from President George W. Bush having rejected the Kyoto treaty in 2001. In Europe today, refiners and power producers already have to meet limits on emissions of greenhouse gases or else buy allowances from other companies to meet their targets.

Mulva’s Goals

Mulva said he wants a U.S. policy that avoids putting an unfair burden on any single industry and prevents the migration of jobs to countries that can offer cheaper energy for manufacturing because they have less stringent emissions rules.

“We want to be part of the discussion and have a seat at the table,” he said.

While a direct tax on carbon emissions might be the best option, the momentum favors a cap-and-trade approach, Mulva said.

ConocoPhillips, the third-largest U.S. oil company after Exxon Mobil and Chevron Corp., was also motivated by a desire to prevent a patchwork of state rules on greenhouse gas emissions. Mulva said refiners are hamstrung by blending specifications for gasoline that vary by state or region. These rules, based on state and federal air pollution laws, make it difficult to move fuel around to ease shortages or price differences. Mulva said he wants to avoid a repeat in greenhouse gas rules.

Avoiding Patchwork

California last year became the first state to pass a law that would limit emissions of heat-trapping gases; it has yet to establish how the limits will be implemented. Governor Arnold Schwarzenegger is working with other Western governors on a regional plan. New York and other eastern states are developing their own regulations, which would use a cap-and-trade system.

State programs “are well intentioned,” Mulva said. “But on the other hand, this is a national and international issue, and it seems to make a lot of sense to develop a national program.”

Chevron favors a “national framework” rather than a state-by-state approach and hasn’t taken a position on whether it should be cap-and-trade or some other system, Chevron Vice Chairman Peter Robertson said in an April 18 interview. Chevron hasn’t joined the Climate Action Partnership, he said.

DuPont Influence

ConocoPhillips was a likely candidate to be a leader in the U.S. oil industry on global warming issues, according to Peter Schwartz, head of the San Francisco-based consulting firm Global Business Network.

The energy company, a product of the 2002 merger between Conoco Inc. and Phillips Petroleum Co., still has managers who worked at Conoco when it was a DuPont unit from 1981 to 1999. DuPont has long been in the vanguard of corporate environmentalism, according to Schwartz.

“The leadership of Conoco was kind of infected with the genes of DuPont,” said Schwartz, a former planning executive at Royal Dutch Shell Plc, the largest European oil company. “You find a culture inside the company and support from the board for this kind of action, so it’s not surprising that of the three U.S. majors, it would be ConocoPhillips that would move first.”

Sitting on ConocoPhillips’ board is William Reilly, administrator of the U.S. Environmental Protection Agency under President George H.W. Bush.

Reilly is building a reputation for helping industry find common ground with environmental groups. He negotiated recently for a buyout group, led by Kohlberg Kravis Roberts & Co. and TPG Inc., that is trying to acquire the Texas utility TXU Corp. He helped broker a deal for TXU to drop plans for eight new coal- fired power plants that became controversial because they would boost greenhouse gas emissions. In return, Environmental Defense and the Natural Resources Defense Council threw their support behind the buyout.

Exxon’s Critics

Exxon Mobil, based in Irving, Texas, supports “putting policies in place that start us on a path to reduce emissions,” according to an e-mail from spokesman Dave Gardner. It hasn’t endorsed any U.S. legislation. A regulation plan should be evaluated based on its cost and its “implications for economic growth and quality of life,” Gardner said.

The company is the object of a campaign, called Exxpose Exxon, by groups that include Greenpeace, the Sierra Club and the Union of Concerned Scientists. The coalition, launched in July 2005, says on its Web site that Exxon Mobil is “the only major oil company that denies the urgency of global warming and funds global warming skeptics.”

The Natural Resources Defense Council, based in Washington, is part of Exxpose Exxon — and a founding member of Climate Action Partnership, the group ConocoPhillips joined.

BP, Shell

Exxpose Exxon’s characterization of Exxon Mobil’s position “is a complete falsehood,” according to Kenneth Cohen, the company’s vice president for public affairs, who oversees corporate contributions to think tanks and charities.

The funding the company provides to organizations ranging from the Brookings Institution to the American Enterprise Institute helps foster debate on “the issues of the day,” and doesn’t serve to support a particular point of view on climate change, Cohen said.

London-based BP, the second-largest European oil company, is another founding member of the Climate Action Partnership.

Shell has committed to reducing its carbon dioxide emissions by 5 percent from 1990 levels, applying standards similar to the Kyoto Protocol everywhere it has operations, whether the host country is subject to the treaty’s limits or not.

“We have closed the CO2 discussion some time ago,” spokesman Wim van de Wiel said by phone from the Hague, where Shell is based. “It is now time to act.”

`Tipping Point’

The actions of ConocoPhillips may be one sign that the U.S. is reaching a “tipping point” on recognizing climate change, according to Michael Liebreich, chief executive officer of New Energy Finance, a research firm in London. If so, Exxon Mobil may follow soon, he said.

“When Exxon Mobil gets religious, I’ll be impressed,” Liebreich said.

The Democratic takeover in Congress in January improved the prospects for legislation to address greenhouse gases. Five proposals are pending in the Senate. The debate also changed after a United Nations panel on Feb. 2 said it’s “very likely” human activity is heating the planet.

That same day, U.S. Energy Secretary Samuel Bodman said the human role in climate change “is no longer up for debate.”

`Lightning Speed’

A shift in the approach to climate change by U.S. business leaders, including oil industry executives, could come now at “lightning speed,” Hampton said at Climate Change Capital. “Any savvy company would engage in this debate and get to know the rules of the game,” she said.

Exxon Mobil, for its part, has been trying to counter its image as a company that denies the threat of global warming.

“The appropriate debate isn’t on whether the climate is changing but rather should be on what we should be doing about it,” Exxon Mobil’s Cohen said on a conference call on Feb. 8. “Many people want to stick us in a bucket that says we want to deny this,” he said. “That is flat wrong.”

Exxon Mobil, like Mulva, says it wants predictable rules that don’t affect one industry disproportionately.

The praise from environmentalists is going to ConocoPhillips for now.

“They didn’t just make a general statement,” said David Yarnold, executive vice president with Environmental Defense in New York. “They did a very specific thing. They joined a very specific call to action that has very specific goals.”

To contact the reporter on this story: Jim Kennett in Houston at [email protected]

Last Updated: April 19, 2007 00:11 EDT