In times of economic crisis, bankruptcy has been a frequent fate for struggling corporations. Given the troubled state of the fossil fuel sector, almost 250 oil and gas companies could file for bankruptcy protection in the US by the end of 2021. This ismore than the previous five years combined.
But what does filing for bankruptcy actually mean for a corporation? What patterns can we observe from fossil fuel companies that have declared bankruptcy in the past? What are key elements to consider in a restructuring process that might result from bankruptcy, like spin offs or asset sales? How do these issues stack up when we are looking at bankruptcy as a way to wind down the fossil fuel industry?
In this episode, we will explore lessons from past bankruptcies in the fossil fuel sector, and what they might mean for Shell. While most people agree that Shell is not currently close to filing bankruptcy, bold climate policy and emissions targets set by governments might bring Shell closer to the edge. This is how we arrive at the question, would letting Shell go bankrupt be a reasonable strategy? Could letting big polluters go bankrupt finally facilitate a Just Transition away from fossil fuels? Or will they simply leave workers and impacted communities to fend for themselves in the midst of abandoned fossil infrastructure?
In this episode we will be speaking to Dr. Joshua Macey, assistant professor of law at the University of Chicago Law School. He specializes in environmental and energy law as well as in bankruptcy and financial regulation.
Show Notes
Joshua Macey and Jackson Salovaara’s paper on Bankruptcy in the coal sector: https://review.law.stanford.edu/wp-content/uploads/sites/3/2019/04/Macey-Salovaara-71-Stan.-L.-Rev.-879.pdf
Peabody case, where coal company Peabody Energy spun off obligations to workers and retirees under a new company, which was doomed to go bankrupt: https://www.greenpeace.org/usa/peabody-energy-creates-company-designed-to-fail-dumps-pensioners-and-union-members-in-it/
In September 2021, Shell sold a number of assets in the Permian basin (i.e. infrastructure) to Conoco Phillips, but these result in continued extraction: https://www.cnbc.com/2021/09/20/shell-nears-9point5-billion-deal-to-sell-west-texas-oil-field-assets-to-conocophillips.html
More information on the Fieldwood case, where companies like BP and Chevron tried to evade obligations for clean-up: https://grist.org/accountability/oil-gas-bankruptcy-fieldwood-energy-petroshare/