Shell Abandons Renewables, Slapped with Fine

One month after officially cutting off all new investment in renewable energy, the Shell oil company lost a legal battle with a two environmental organizations. The company today agreed to cut emissions and pay a $5.8 million fineto settle a Clean Air Act lawsuit, pending approval by a federal judge. The Sierra Club and Environment Texas filed the suit last year over alleged malfunctions and excessive emissions at a Houston-area refinery and chemical plant.

The renewable energy decision and the refinery malfunctions that prompted the lawsuit both point to a destructive corporate growth culture that should be reconsidered. First, the details of the two actions.

If the agreement is finalized, Shell must cut emissions and upgrade machinery at the chemical plant and a refinery that processes 329,800 barrels per day (1.6 percent of U.S. consumption). The proposal includes strict monitoring of emissions levels, with automatic financial penalties and no wiggle room for carbon offsets or exemptions.

The Dutch-British conglomerate may be able to cover the fines and upgrades with savings realized by backing away from renewable energy investments. The company has slowly been cutting back on renewable energy for at least a year. Last month, the company officially announced it will not make any new investments in solar or wind power.

New oil and gas investments are still going full-throttle, including investments in environmentally destructive and carbon-intensive Canadian tar sands, as reported by the Guardian last year. The firm announced expanded tar sands operations at about the same time they pulled out of a partnership in the London Array, the world's largest offshore wind-power project. A Wall Street Journal article about the corporate decision argues Shell abandoned renewable energy because it is less profitable than fossil fuels, and shareholders expect large dividends from Big Oil. The company may soon start feeling the heat. Today, Reuters reported that Shell expects to announce a 70 percent decline in profits from the first quarter of 2008 to the same period in 2009.

Analysts expect the quarterly current cost of supply net income to total $2.62 billion. This compares to $7.85 billion last year. During the same period, crude oil prices have dropped by half. It's simply not realistic to expect similar dividends this year.

Particularly in the current economic climate, perhaps investors should stop expecting large dividends year after year. Companies should clearly grow and make a profit, but the economic collapse is partly due to unrealistic profit expectations from investments. Such growth is not sustainable - for the company or the planet.

"In the short term, I can understand where they're coming from," said Philip Wolfe, chief executive of the U.K. Renewable Energy Association, as quoted in the Journal. But he added that energy companies must work on alternatives to fossil fuels to remain profitable and successful.

Shell's focus on the bottom line may already be upsetting the very shareholders they aim to please. At an annual meeting last May, a shareholder called the company short-sighted and irresponsible, according to the Guardian.

The Shell settlement will be reviewed by the Environmental Protection Agency, then submitted to a federal judge for approval. Of course, the whole deal may change if Texas secedes. No word on the new legal system for the nation of Texas.