Environmental, social, and governance (ESG) risks continue to drive corporate efforts to combat climate change, particularly with respect to the energy industry. Over the past two years, numerous companies have announced "net-zero" goals in an effort to align their operations with the greenhouse gas emissions (GHG) reduction goals of the Paris Climate Accord. Given the lack of any comprehensive legal requirements to drive GHG emission reductions among U.S. companies, and that the U.S. Securities and Exchange Commission, to date, has not promulgated rules related to ESG disclosures, there are a number of regulatory pathways to approach meeting net-zero commitments. Critical factors for identifying the optimum pathway include 1) the availability and quality of a company's emission data, 2) the timing and scope of the net-zero goal (Scope 1, 2, and/or 3 emissions), and 3) carbon management tools (e.g., direct emissions reduction, carbon capture and sequestration (CCS), use of carbon offsets). Permitting risks, such as the timeline for obtaining a Class VI Underground Injection Control well for CCS projects may limit carbon management options, particularly if Company has compressed timeline for achieving net-zero goals. Other methods of carbon management, however, may fail to achieve the necessary sequestration volumes to achieve net-zero. Moreover, investor pressure may also drive the reassessment of the scope of emissions targeted in a Company's net-zero goals. Under the right circumstances, direct investment in zero-emission facilities may provide a viable pathway to offset emissions in furtherance of net-zero goals. Navigating these considerations will be essential to minimizing legal risk and maximizing potential ESG impacts.
