Do Subsidiaries Engage More Heavily in Methane Producing Activities in the Oil and Gas Industry?

• In Event: 1461 - Environmental Change and Inequality

Abstract

Introduction: Scholars have found that because there is a “liability firewall” protecting ultimate parent companies from being directly responsible for the environmental harmful activities of their subsidiary organizations, subsidiaries are more prone to emit toxic pollutants contributing to global climate change. Researchers studying the structural determinates of global climate change have focused on carbon dioxide emissions by the power plant industry. However, pollution by the energy production sector is not only conducted at power plants. A large amount of methane gas is emitted through venting and flaring at oil and gas extraction sites. Understanding the structural determinates of methane emissions is important because, in comparison to carbon dioxide, methane is roughly 30 times more potent of a greenhouse gas. By primarily focusing on carbon dioxide emissions by the power plant industry, there is a failure to fully understand the effect subsidiaries have on global climate change.

Objectives: To better understand the effect of subsidiaries on methane producing industrial activities, I determine whether oil and gas wells owned directly by subsidiaries vent and flare more gas than those owned by non-subsidiary organizations.

Approach: I use Texas Railroad Commission, Lexis Nexus Corporate Affiliations, Energy Information Administration, National Center for Charitable Statistics and restricted Census data to quantify the relationship between subsidiaries and Texas oil and gas venting and flaring volumes.

Results: I find that oil and gas wells directly owned by subsidiary organizations have significantly higher venting and flaring volumes than oil and gas wells owned by ultimate parent companies or companies not organized using a multilayered subsidiary form.

Conclusions: Results suggest how recent research on the structural determinates of global climate change might be advanced by focusing on methane producing activities by the oil and gas extraction industry using restricted Census data.

Author

• Katherine Ann Calle Willyard, Texas A&M University