Coastal impacts of climate change

As global temperatures continue to rise, impacts will strike coastal areas in several interconnected ways.

First, sea levels are rising. This is primarily due to the expansion of seawater as it warms and the melting of mountain glaciers and polar ice sheets. In the United States, sea levels are rising fastest along the East and Gulf Coasts, where many oil refineries are located.

Climate change is also expected to increase the strength of coastal storms, so that when hurricanes form, they will fall into more intense categories.

Both of these effects will amplify the impacts of storm surge—the rise of water above normal tide lines that accompanies severe storms such as hurricanes and nor’easters. As sea levels continue to rise, the flooding and destructive waves associated with storm surge will be more severe—and felt further inland.

Demanding transparency: the role of investors and the SEC

Stakeholders are beginning to put pressure on fossil fuel companies to address climate risks. In recent years, shareholder resolutions have emerged as a useful tactic to influence companies to address climate risk. Starting in 2004, investors began asking the SEC to help improve companies’ climate risk disclosures in financial filings; in 2010, the SEC issued guidance to companies for discussing climate risks in their annual Form 10-K reports.

The 2010 SEC guidance document explicitly stated that “significant physical effects of climate change … have the potential to have a material effect on … business and operations. These effects can impact … personnel, physical assets, supply chain, and distribution chain. They can include the impact of changes in weather patterns, such as increases in storm intensity, [and of] sea-level rise.”

While a few companies have begun to publicly address risk from the physical impacts of climate change in a substantive way, many have not. Investor groups and UCS partnered to send letters to the companies highlighted in this report expressing concern about this lack of disclosure.

Methodology

Stormy Seas, Rising Risks focuses on the top five U.S. energy companies with respect to total crude-refining capacity. For each company, one coastal refining facility was chosen based on perceived risk, which was determined by vulnerability of location and historical storm damage.

Using data including property boundaries and elevation, recently published, localized sea level rise projections, IPCC climate change scenarios, and National Weather Service storm surge models, the report maps the potential impact on each facility of current and future storms of various strengths.

The report also looks at the companies’ recent SEC filings to determine the extent (if any) of climate risk disclosure. Only one of the five companies, Phillips 66, made any physical climate risk disclosure in its filings, and the report rates this disclosure as “poor.” Instead, companies address climate risk only in terms of the possible impact of emissions regulations.

The following companies and facilities are analyzed in the report: