December 6, 2023

Letter to State Department on Saguaro Pipeline Permit

2023.12.6 Letter to State on Saguaro Pipeline Approval

Download the pdf of the letter here. 

December 6, 2023

Secretary Antony J. Blinken
U.S. Department of State
Washington, DC

Dear Secretary Blinken,

In December 2022, Oneok, Inc applied at the Federal Energy Regulatory Commission for a Presidential Permit to construct and operate the Saguaro pipeline, stretching 155 miles from the Waha hub in the Texas Permian Basin to export natural gas through Mexico to feed proposed Liquified Natural Gas (LNG) export terminals on Mexico’s pacific coast. Public Citizen is a party to the FERC proceeding. America has quickly emerged as a natural gas production and exporting behemoth, producing more gas than any other nation and vaulted to the world’s top gas exporter. While most LNG exports depart from the U.S. gulf coast, Oneok’s proposed 48-inch export pipeline will incentivize expanded fracking to fuel exports through Mexico to serve Asian markets.

Per a 1953 Executive Order, FERC must obtain a “favorable recommendation” from the Department of State prior to issuing a Presidential Permit authorizing the construction of a pipeline that crosses the borders of the United State for the exportation of natural gas.

On November 8, Hagen Maroney, Deputy Director of the State Department’s Office of Global Change, emailed FERC requesting “a greenhouse gas (ghg) emissions analysis for the Saguaro pipeline project that covers lifecycle upstream and downstream ghg emissions rather than only the local project construction and operation ghg emissions described in FERC’s Environmental Assessment for the project. Providing a full lifecycle ghg analysis for the Saguaro project would be consistent with the September 21, 2023, Fact Sheet: Biden Harris Administration Announces New Action to Reduce Greenhouse Gas Emissions and Combat the Climate Crisis, in which the President directs agencies to consider ghg impacts in environmental reviews conducted pursuant to the National Environmental Policy Act (NEPA).”

On November 13, FERC replied that the State Department request was “beyond the scope of the Commission’s analysis in this proceeding”, but nonetheless requested Oneok to respond to State’s email. Oneok submitted its reply on November 20, and, citing FERC’s determination that the State Department request was beyond the scope of the proceeding, declined to provide the requested GHG analysis.

Just two days later, Geoffrey R. Pyatt, the Assistant Secretary of the State Department Bureau of Energy Resources, “provided a favorable recommendation for the issuance of a Presidential permit” with no further requirement or mention of a lifecycle ghg analysis.

Today Public Citizen requests that the U.S. Department of State explain why it abdicated its authority to grant a favorable recommendation for a natural gas export pipeline without first obtaining a lifecycle analysis of the project’s impact on greenhouse gas emissions. We request a meeting with the appropriate representative to discuss. Thank you for your consideration.

Best,

Tyson Slocum, Energy Program Director
Public Citizen, Inc.
215 Pennsylvania Ave SE
Washington, DC  20003
(202) 454-5191
tslocum@citizen.org

December 5, 2023

Public Citizen’s Comment for OMB’s Federal Agency AI Guidance

2023.12.6 Letter to State on Saguaro Pipeline Approval

The Office of Management and Budget
c/o Cindy Martinez
725 17th Street, NW Washington, DC 20503

Submitted via email to: regulations.gov

OMB–2023–0020, Request for Comments on Advancing Governance, Innovation, and Risk Management for Agency Use of Artificial Intelligence Memorandum

Dear Director Young,

On behalf of more than 500,000 members and supporters of Public Citizen, we offer the following comment on the Office of Management and Budget’s (OMB) draft guidance[1] directing Federal agencies on artificial intelligence (AI) governance and innovation programs while managing risks from the use of AI. The stated intention of this draft guidance is to create new agency guidelines for AI governance, innovation, and risk management, by utilizing certain minimum risk management practices for AI use cases that affect the civil rights and safety of the public.[2]

Public Citizen has published several documents outlining our thoughts such as our generative AI[3]policy recommendations, and we have also filed a rulemaking petition[4] with the Federal Election Commission to prevent deepfakes in political ads. In addition, we are organizing numerous public meetings on AI topics with thought leaders and policy makers, an example being our recent bipartisan forum[5] discussing AI and the threats it poses to democracy. We now offer commentary on the proposed guidance’s guardrails/staff implementations and a recommendation to require all federal agencies to publicly release an inventory of their already existing AI regulatory authorities.

While AI may enhance government operations, particularly in scientific and research & development fields, the U.S. government’s use of AI has the potential to be an enormous danger to our society unless regulators place significant guardrails in place. Establishing safety standards, implementing rules to prevent racial and other discriminatory practices, and adopting protections for people’s rights and dignity is crucial both for governmental use of AI tools and to establish an example for the private sector.

We strongly support the proposed guidance’s imposition of guardrails for the federal government’s use of AI, particularly in the realm of generative AI use and algorithmic bias. We offer three proposals to strengthen the guidance: strengthening the labeling requirements for content produced with generative AI; modifying the power and responsibilities of the Chief AI Officers to ensure the safety and protective standards of the guidance are protected; and requiring agencies to publicly inventory their regulatory authorities relevant to AI.

A. The proposed labeling guardrails for generative AI use by the federal government are necessary but should be strengthened.

The OMB’s decision to create generative AI usage guardrails is a step in the right direction. While generative AI may be able to help federal agencies streamline workflows, reduce operational costs, and make informed, data-driven decisions, this type of AI can also create havoc for our civil rights and negatively impact trust in our democracy.

The President’s Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence and OMB’s draft guidance correctly see the transformative and worrisome power of generative AI in outputting misleading or deceptive content. Generative AI has powerful potential to manipulate individuals, tailoring content based on user-specific data and even adjusting the mechanism of presentation, e.g., through individualized and customized avatars. This threatens both widespread manipulation and the destruction of social trust. The issue is particularly acute in civic spaces, where deepfakes have the potential to fundamentally and fraudulently impact policy debates and elections.

For example, generative AI can swamp societal discourse with misinformation. With AI’s ability to generate highly realistic text, audio, and visual content, malicious actors will have the ability to manipulate information at an unprecedented scale. A recent deepfake showed President Biden making transphobic remarks.[6]  In Slovakia, a deepfake audio recording is reported[7] to have impacted the recent parliamentary election, with deepfake images also reportedly[8] affecting Argentina’s just-concluded presidential election.

Left unchecked, these generative AI creations will negatively impact public trust, as it will become increasingly challenging for ordinary people to discern between authentic and manipulated content creations from federal agencies. The OMB draft guidance correctly identifies labeling, content authentication, and provenance tracking as vital solutions to the problem of deceptive AI-generated content.

AI labeling helps citizens to contextualize and process AI generated content. For example, after seeing a label stating that generative AI produced a video, the viewer can then decide to ignore or discount the content, seek additional non-AI sources about the content, or share it with their network while providing the context that AI created the content. Federal agencies must do all that they can to help citizens discern between authentic and AI generated content, and the guidance’s labeling requirement is a good starting point toward that goal.

We applaud the guidance’s encouragement to federal agencies include provisions in generative AI model procurement contracts requiring that procured systems have labeling and content provenance capabilities.[9]

But OMB should insist on more. First, OMB should require agencies, not just encourage them, to ensure that generative AI contracts include guarantees on labeling and provenance. Second, OMB should require that every federal agency label all content generated in part or entirely by AI. Third, it should set an expedited schedule for this standard. While it may take some time to establish industry standards for provenance and labeling, the federal government should never rely on AI to generate content without disclosing that fact.

B. The proposed AI bias guardrails contained in the guidance are welcome and much needed.

We strongly applaud the inclusion of AI bias guardrails in the proposed guidance because it shows the Biden Administration’s commitment to ethical AI deployment. By acknowledging the risks of bias and discrimination in AI systems, OMB’s emphasis on transparency, fairness, and accountability will hopefully serve as a north star to guide other AI stakeholders on how to address these issues in their own AI systems. We support the guidance’s determination framework of safety-impacting and rights-impacting AI and the requirement of minimum practices when using these types of AI. These proposed guardrails not only address the ethical implications of AI but also will help build public trust in federal agencies’ use of AI applications.

AI systems are susceptible to biases contained within their training data.[10] Some examples of these biases include race, gender, and income.[11] For example, a federal agency’s resume review algorithm could drift (behaves in an unknown or unpredictable way that doesn’t follow the original parameters) due to a data set input that shows a racial difference between applicants. This drift could result in the hiring algorithm becoming biased against a certain race. And this algorithmic based decision could lead to discriminatory hiring outcomes in federal agencies that end up reinforcing cultural stereotypes and leading to the maintenance or growth of societal divisions.

We have already seen numerous examples of biased algorithms in the private sector. Amazon found a hiring algorithm favored applicants based on words such as “executed” or “captured” that were more commonly found on men’s resumes, and Google’s online advertising AI system showed high-paying positions to men more than to women.[12]

To address and prevent bias in AI systems, federal agencies must take care in their use of AI training data and in programming its algorithms. They must also continuously monitor these systems to ensure fair and unbiased AI outputs. We are pleased to see that the proposed guidance requires federal agencies to implement several AI bias guardrails for safety-impacting and rights-impacting AI systems such as completing impact assessments, actively identifying and addressing elements that contribute to discriminatory or biased outcomes in algorithms, evaluating and minimizing unequal effects, utilizing inclusive and representative datasets, and seeking input and integrating feedback from the groups affected.[13] These guardrails will help protect citizens from the negative impacts of AI usage.

We particularly want to uplift the requirement to consult affected groups. We hope that this proposed guardrail is utilized to allow racial, ethnic, and other minorities to have a full seat at the table and take part in determining how AI is used by the federal government.

C. The proposed waiver power of the Chief AI Officers should be weakened, and conflicts of interest frameworks must be introduced to avoid corporate capture and the misuse of AI within federal agencies.

We understand that a centralized source of AI decision-making power and knowledge is justified for federal agencies. However, under the current proposed guidance, we fear that the discretionary power of the Chief AI Officer (CAIO) to grant waivers from safety and rights protection requirements is too great.

In the proposed guidance, in collaboration with other pertinent authorities, a federal agency’s CAIO can grant an AI application or component a waiver from having to follow the guidance’s minimum practices for safety/rights-impacting AI.[14] The CAIO can justify its waiver decision if it determines that meeting the AI minimum practices stipulation could elevate safety or rights risks in general or pose an unacceptable obstacle to vital agency functions.[15]

It is unclear what is meant by other pertinent authorities, and there is no definition of “unacceptable obstacle” included in the guidance. Additionally, we are concerned about the concept of a federal agency’s CAIO granting a waiver to an AI use case that serves the agency’s vital functions while harming the general public’s rights. For example, the Department of Homeland Security’s CAIO could grant a waiver for facial recognition AI usage for its operations and potentially not be blocked from doing that under the current guidance rules.

We urge the OMB to narrow the grounds for waiver, establish sharper standards for when a waiver is permitted, and institute other procedural protections, perhaps including obtaining authorization from OMB.

Additionally, the guidance should address concerns about the CAIO’s interactions and relationships with the private sector. The potential for a CAIO coming directly from the AI industry is high due to the elevated level of technical expertise needed for this role. A CAIO’s past work in the AI industry could lead to an increase in industry influence, conflicts of interest, and undue favoritism towards private entities because of the CAIO’s past relationships. We worry that any CAIO’s industry past could compromise the public interest and trust in the process. The final OMB AI guidance must contain clear and stringent ethical guidelines, disclosure requirements, and conflicts-of-interest frameworks to prevent the CAIO from becoming a conduit for private industry interests. At minimum, the Biden Day One Ethics Executive Order standards[16] must be applied, but we would also recommend thinking about stronger safeguards due to the high likelihood of revolving door issues with these positions. For example, upon leaving public office, CAIOs should not be allowed to lobby on AI policy for one year or longer, and CAIOs must clearly and publicly report all contact or correspondence with private sector stakeholders.

D. To improve this guidance, OMB should require a public inventory from all federal agencies on their existing authority relevant to AI regulation.

To promote the public interest, OMB should update the proposed guidance to require federal agencies to publicly release a current inventory of their AI regulatory authorities that also contains ideas of how to strengthen or add on to them. The purpose of this inventory requirement would be to encourage agencies to study their existing authorities which may apply to AI and to help them think about where additional regulatory powers might be needed. This exercise should be done by agencies publicly, and would help Congress, civil society, and the public evaluate the adequacy of existing laws and prioritize new regulations where they are needed.

We welcome the OMB’s proposed guidance in utilizing AI in a trustworthy and safe manner and look forward to working together to refine this guidance. For questions, please contact Richard Anthony at ranthony@citizen.org.

Sincerely,

Public Citizen

[1] This notice was published in the Federal Register on Nov. 3, 2023 (88 FR 75625 Fed.Reg.) and is available at https://shorturl.at/clwIO

[2] Staff of Office of Management and Budget, Advancing Governance, Innovation, and Risk Management for Agency Use of Artificial Intelligence, The Office of Management and Budget (Nov. 3, 2023) https://www.whitehouse.gov/wp-content/uploads/2023/11/AI-in-Government-Memo-draft-for-public-review.pdf

[3] Staff of Public Citizen, Public Citizen’s Recommendations for Regulating Generative AI, Public Citizen (Sept. 8, 2023) https://www.citizen.org/article/public-citizens-recommendations-for-regulating-generative-ai/

[4] Craig Holman and Robert Weissman, Second Submission: Petition for Rulemaking to Clarify that the Law Against “Fraudulent Misrepresentation” Applies to Deceptive AI Campaign Communications, Public Citizen (July 13, 2023) https://www.citizen.org/article/second-submission-petition-for-rulemaking-to-clarify-that-the-law-against-fraudulent-misrepresentation-applies-to-deceptive-ai-campaign-communications/

[5] Staff of Public Citizen, Generative Artificial Intelligence and Threats to Democracy, Public Citizen (Sept. 21, 2023) https://www.citizen.org/article/generative-artificial-intelligence-and-threats-to-democracy/

[6]  Reuters Staff, Video does not show Joe Biden making transphobic remarks, Reuters (Feb. 10, 2023) https://www.reuters.com/article/factcheck-biden-transphobic-remarks/fact-check-video-does-not-show-joe-biden-making-transphobic-remarks-idUSL1N34Q1IW

[7] Morgan Meaker, Slovakia’s Election Deepfakes Show AI Is a Danger to Democracy, Wired (March 3, 2023) https://www.wired.co.uk/article/slovakia-election-deepfakes

[8] David Feliba, FEATURE-How AI shaped Milei’s path to Argentina presidency, Reuters (November 21, 2023) https://jp.reuters.com/article/argentina-election-ai-idUSL8N3CM2MB

[9] Advancing Governance, Innovation, and Risk Management for Agency Use of Artificial Intelligence, at pg. 22 https://www.whitehouse.gov/wp-content/uploads/2023/11/AI-in-Government-Memo-draft-for-public-review.pdf

[10] IBM Data and AI Team, Shedding light on AI bias with real world examples, IBM (Oct. 16, 2023) https://www.ibm.com/blog/shedding-light-on-ai-bias-with-real-world-examples/

[11] Id.

[12] Id.

[13] Advancing Governance, Innovation, and Risk Management for Agency Use of Artificial Intelligence, at pgs. 15-20 https://www.whitehouse.gov/wp-content/uploads/2023/11/AI-in-Government-Memo-draft-for-public-review.pdf

[14] Advancing Governance, Innovation, and Risk Management for Agency Use of Artificial Intelligence, at pg. 13 https://www.whitehouse.gov/wp-content/uploads/2023/11/AI-in-Government-Memo-draft-for-public-review.pdf

[15] Id. at pg. 14

[16] Biden Administration Staff, Executive Order on Ethics Commitments by Executive Branch Personnel, WhiteHouse.gov (Jan. 20, 2021) https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/executive-order-ethics-commitments-by-executive-branch-personnel/

Letter to OMB on Federal Insurance Office Climate-Related Financial Risk Data Collection

2023.12.6 Letter to State on Saguaro Pipeline Approval

Download the letter here. 

December 4, 2023

Office of Information and Regulatory Affairs
Office of Management and Budget
Executive Office of the President

Re: OMB Control Number 1505–NEW, Federal Insurance Office Climate-Related Financial Risk Data Collection,

A growing climate-driven insurance crisis has dominated the news this summer, confirming the reality that climate change imposes tangible financial costs that everyday Americans are paying through their insurance premiums.^[i] At least eight large insurance companies, including State Farm, AIG, and Farmers have begun withdrawing from or limiting coverage across entire states, forcing a growing number of people to rely on barebones coverage from expensive last-resort programs.^[ii] For those who are able to retain private insurance, anecdotal evidence shows that many of these vulnerable consumers are paying more for less as insurers raise premiums and cut coverage. In the aftermath of climate-related disasters, investigations into long delays and underpayments from underprepared insurers show that insurers’ post-disaster profit-seeking strategies can be devastating for the recovery of vulnerable communities.^[iii]

As climate harms increase, these trends will only accelerate. A climate-driven industry retreat is set to create an affordability crisis that threatens Americans’ homes, life savings, and the economies of already vulnerable regions. Yet a widely recognized lack of comprehensive, neighborhood-level data obscures the full extent of the problem, impeding efforts to protect insurance consumers, monitor potential systemic risks, and inform climate adaptation efforts.^[iv] While anecdotal data, voluntary industry surveys, and data from last-resort programs have effectively raised the alarm, these data do not paint a full picture, and selective disclosures from insurers can just as easily be used to exploit a crisis as they can to solve it.^[v]

Public Citizen and thirty undersigned organizations applaud the Federal Insurance Office (FIO) for taking an important step forward to finalize the proposed data collection, and we urge the Office of Management and Budget (OMB) to swiftly approve the collection. Given the speed and scale at which a climate-driven insurance crisis is currently unfolding, comprehensive national data collection should be a high priority. While FIO has further narrowed an already limited proposal, the urgency of the crisis necessitates that FIO move forward to collect this data to establish a national baseline of granular data. It is essential that FIO continue to collect this data annually and expand the focus to include additional policy types and data elements over time.

A national study on climate impacts on insurance markets is necessary, inexpensive, and long overdue.

Congress created FIO with the specific authority to collect and analyze this data and a mandate to monitor impacts on low- and moderate-income, minority, and traditionally underserved communities.^[vi] In 2021, President Biden’s Executive Order on Climate-Related Financial Risk instructed the Treasury Department to direct FIO to assess the potential for major disruptions of private insurance in regions of the country particularly vulnerable to climate change impacts.^[vii] This finalized collection is a necessary step to respond to that Executive Order and fulfill FIO’s statutory mandate.

The burden of this collection should be considered in light of the enormous financial risks to homeowners, communities and the economy. Insurance industry losses now regularly exceed $100 billion annually, and Secretary Yellen has warned that this crisis is creating a “protection gap,” as only 60% of $165 billion in damages from 2020’s climate disasters were insured.^[viii] This risk is particularly acute for uninsured families, who stand to lose their entire life savings. But it also threatens the broader economy; a recent analysis suggests the mortgage market could be overvalued by $200 billion due to unrealized flood risk alone.^[ix] In the context of the enormous risks to insurance companies, their policyholders, mortgage lenders, and the broader economy, the financial burden of the FIO data collection, estimated at a maximum potential cost of $2.7 million for all impacted insurers, is remarkably low.^[x]

While insurance is regulated at the state level, a data collection from FIO is necessary due to the absence of sufficiently granular and timely data available through state regulators. After consulting with state regulators, FIO determined that four of the necessary data fields are not collected at the right level of granularity (the zip code level), and three are simply not collected by states.^[xi] While the National Association of Insurance Commissioners (NAIC) subsequently issued a press release in August with a welcome announcement that it will help states collect some of this data, it remains unclear whether or when these NAIC data calls may be implemented and how many states would participate.^[xii] A piecemeal, state-level approach will not provide the timely nationwide review necessary to allow federal financial regulators to evaluate the potential for systemic risks.

Reductions to limit paperwork already exclude crucial information.

FIO has already narrowed the proposed collection significantly, focusing on just the largest homeowners’ insurers and only one policy type. FIO cut eight of fifteen original data fields and extended the timeline for collection. While this limited collection will enable FIO to create a national baseline for analytics, these changes restrict a collection that was already too narrow when first proposed. As attention to insurance markets grows rapidly, the omission of crucial information in this collection will only appear more glaring over time.

The narrow focus on just one type of homeowners insurance, HO-3, leaves out a broad range of consumers and policy types impacted by climate change, including condominium, co-op and mobile homeowners, as well as renters. It also excludes the impact of climate change on businesses and auto insurance. While FIO has committed to analyze some publicly available information about residual markets, the absence of residual markets in the data collection will leave out the policyholders who have been unable to find other insurance, meaning those who are likely most vulnerable to climate change.

As insurers transfer costs to policyholders by charging higher deductibles and by delaying or underpaying claims, the removal of data on deductibles and lack of data on claims closed without payment also significantly limits FIO’s ability to examine how climate change is impacting insurance markets. Higher deductibles can dramatically impact a policyholder’s ability to recover and receive a claim payout, particularly for marginalized communities without large savings or sufficient access to credit, and consumers may not realize the full effect of these changes until after a disaster.^[xiii] Additionally, several investigations into illicit strategies for delaying, underpaying, or denying claims show the need for further analysis, yet a lack of data on unpaid claims or delays will prevent FIO from expanding this focus to the national level.^[xiv]

Conclusion

The public cannot afford to wait for disasters to reveal further gaps in coverage, and this collection is essential to enable consumers, regulators, and legislators to understand the relationship between climate disasters and the growing insurance crisis. We urge OMB to approve FIO’s data collection swiftly.

Once the data are collected, FIO should make the data accessible for further analysis by academic or independent researchers in the most granular form that meets FIO’s statutory mandates. FIO should also provide detailed recommendations on how to maintain access to affordable insurance and recommend that the Financial Stability Oversight Council and Office of Financial Research investigate the effects of insurer responses to the climate crisis on financial stability.^[xv] Given the limitations of the current data collection, FIO should also plan to expand the policy forms and data fields over time to ensure that the full extent of climate impacts, particularly those impacting marginalized communities, can be accurately addressed.

Please contact Carly Fabian at cfabian@citizen.org with any questions.

Sincerely,

Public Citizen
Americans for Financial Reform
Better Markets
Center for Economic Justice
Coal Action Network
Connecticut Citizen Action Network
Consumer Watchdog
Earth Action, Inc.
Ekō
Green America
Greenpeace USA
Indigenous Environmental Network
Invest Vegan
MN Interfaith Power & Light
Mothers Rise Up
National Association for Latino Community Asset Builders
National Coalition for Asian Pacific American Community Development (National CAPACD)
National Consumer Law Center
National Fair Housing Alliance
Rainforest Action Network
Revolving Door Project
Rise Economy
Sierra Club
Stand.earth
Texas Campaign for the Environment
The Center for NYC Neighborhoods, Inc.
The Phoenix Group
The Vessel Project of Louisiana
Zevin Asset Management
350Brooklyn
7 Directions of Service
Dr. Mark Blythe, Brown University

^[i] Jacob Bogage, “Home insurers cut natural disasters from policies as climate risks grow,” (September 2, 2023).

^[ii] Justine McDaniel, “Citing climate change risks, Farmers is latest insurer to exit Florida,” Washington Post (July 12, 2023); Public Citizen, Insurance Giant AIG to Limit Homeowners Insurance Sales; Home insurers cut natural disasters from policies as climate risks grow (June 8, 2023).

^[iii] Brianna Sacks, “Insurers slashed Hurricane Ian payouts far below damage estimates, documents and insiders reveal,” (March 11, 2023). Consumer Watchdog, “Up In Smoke: How Insurance Companies and the Insurance Commissioner Burn Wildfire Victims,” (July 11, 2022); The New York Times, “New Suit Uses Data to Back Racial Bias Claims Against State Farm,” Emily Flitter (Dec. 14, 2022).

^[iv] Gregory Squires, Sally O’Connor, and Josh Silver, “The unavailability of information on insurance unavailability: Insurance redlining and the absence of geocoded disclosure data,” Housing Policy Debate  Vol. 12, 2001; Zac Taylor and Manuel Albers, Climate Gentrification: Risk, Rent and Restructuring in Greater Miami, 112 Annals AM. Ass-n Geographers 1685; Daniel Schwarcz, “Transparently Opaque: Understanding the Lack of Transparency in Insurance Consumer Protection,” 61 UCLA L. Rev. 394 (2014); Madison Condon, Climate Services: The Business of Physical Risk, 55 Arizona State Law Journal 147 (2023), p. 206

^[v] David Arkush and Carly Fabian, “Like a Bad Neighbor, State Farm is Gone,” San Francisco Chronicle, July 12, 2023; Sierra Sun Times, “At healing, U.S. Senator Elizabeth Highlights Heightened Risk from Climate-Related Disasters, Calls for Transparency, Oversight from Insurance Industry and Regulators.”

^[vi] FIO Act, 31 U.S.C. 313 (c)(1)(B).

^[vii] White House, Executive Order on Climate-Related Financial Risk (May 20, 2021).

^[viii] Stephan Kahl, “Insured Losses Hit $120 Billion as Extreme Weather Spreads,” Bloomberg (January 9, 2023); Christopher Condon and Bloomberg, “Janet Yellen sees a ‘protection gap’ between insurance and climate change– just 60% of 2020’s $165 billion in losses got covered” Fortune (July 30, 2023).

^[ix] First Street, Environmental Defense Fund, Federal Reserve, and Resources for the Future, “US Housing Market Overvalued by $200 Billion Due to Unpriced Climate Risks,” (February 16, 2023).

^[x] Department of the Treasury, Submission for OMB Review, Federal Register Notice, p. 21.

^[xi] Ibid, p. 14.

^[xii] National Association of Insurance Commissioners, “NAIC to Issue Data Call to Help Regulators Better Understand Property Markets,” (August 12, 2023).

^[xiii] Testimony of Sharon Lewis, Executive Director of the Connecticut Coalition for Economic and Environmental Justice before the U.S. House Financial Services Housing and Insurance Subcommittee

“Factors Influencing the High Cost of Insurance for Consumers”

(November 2, 2023).

^[xiv] Brianna Sacks, “Insurers slashed Hurricane Ian payouts far below damage estimates, documents and insiders reveal,” (March 11, 2023). Consumer Watchdog, “Up In Smoke: How Insurance Companies and the Insurance Commissioner Burn Wildfire Victims,” (July 11, 2022); The New York Times, “New Suit Uses Data to Back Racial Bias Claims Against State Farm,” Emily Flitter (Dec. 14, 2022).

^[xv] Public Citizen, “Groups Call on FSOC to Take Action on Insurance,” (November 1, 2023)

Poisoned Wells: U.S. Taxpayers Could Be on Hook for Up to $18 Billion Well Cleanup Shortfall

2023.12.6 Letter to State on Saguaro Pipeline Approval

Oil industry lobbyists and their allies on Capitol Hill are working to defeat a proposal to strengthen federal requirements to force fossil fuel companies to cover the cost of cleaning up drilling sites around the country. Without these crucial protections, the oil and gas industry could stick taxpayers with a massive bill of between $2.9 billion and  $17.7 billion.

For decades, the U.S. oil and gas industry has taken advantage of toothless federal rules that govern drilling on public lands. The federal government has charged woefully inadequate royalties to compensate taxpayers for oil and gas extraction^[1] and failed to require that drilling companies provide adequate financial guarantees^[2] to ensure that wells get cleaned up if drillers go bust.

The Biden administration is now working to ensure that fossil fuel companies take responsibility for cleaning up their operations if they fall into financial trouble,^[3] proposing more stringent drilling and cleanup rules. This new proposal, released in summer 2023, builds on legislation passed in 2022 that hiked the royalties charged to fossil fuel companies for drilling on public lands.

To illustrate the scale of the well-cleanup problem, Public Citizen estimated the potential taxpayer cost of cleaning up nearly 89,350 wells on 23.7 million acres of federal land, based on the Bureau of Land Management’s estimate for how many existing wells are capable of production.^[4]  As of August 2022, the BLM identified 8,968 wells that are defined as “idle” – meaning that have not been operational for at least four years.[5]

The analysis (Table 1) examines these three scenarios for oil and gas companies’ public lands cleanup costs under three scenarios outlined by the government. These are: a low-end scenario of $35,000 in cleanup costs per well, a midrange estimate of $71,000 and a high-end estimate of $200,000.

The cost estimates were included in the Bureau of Land Management’s summer 2023 proposed rulemaking for stricter well cleanup requirements and other oil and gas reforms.^[6] The Public Citizen analysis also incorporates $2,122 per well in bonds purchased by oil and gas companies to cover cleanup costs — the average coverage estimated by the Government Accountability Office in a 2019 study.^[7]

Based on these figures, the analysis arrived at a high-end cleanup estimate of $17.7 billion, a medium range of $6.2 billion, and a low-end of $2.9 billion. Nearly 90% of the potential high-end cleanup bill is in just five states: New Mexico, Wyoming, Utah, Colorado and California, with almost 65% of the potential tab in New Mexico and Wyoming alone.

Table 1: Projected Potential Taxpayer Liability from Oil and Gas Drilling on Federal Lands

State	Wells	Bond Coverage (Average)	Low ($35k/well)	Medium ($71K/well)	High ($200k/well)
New Mexico	31,186	$66,176,692	$1,025,333,308	$2,148,029,308	$6,171,023,308
Wyoming	26,794	$56,856,868	$880,933,132	$1,845,517,132	$5,301,943,132
Utah	8,352	$17,722,944	$274,597,056	$575,269,056	$1,652,677,056
Colorado	7,427	$15,760,094	$244,184,906	$511,556,906	$1,469,639,906
California	6,319	$13,408,918	$207,756,082	$435,240,082	$1,250,391,082
North Dakota	2,931	$6,219,582	$96,365,418	$201,881,418	$579,980,418
Montana	2,443	$5,184,046	$80,320,954	$168,268,954	$483,415,954
Ohio	583	$1,237,126	$19,167,874	$40,155,874	$115,362,874
Texas	546	$1,158,612	$17,951,388	$37,607,388	$108,041,388
Other	2,769	$5,875,818	$91,039,182	$190,723,182	$547,924,182
Total	89,350	$189,600,700	$2,937,649,300	$6,154,249,300	$17,680,399,300
Pct Cleanup Costs Covered			6.5%	3.1%	1.1%

Source: Public Citizen analysis of Bureau of Land Management Fiscal Year 2022 data for drilling on federal lands. Cleanup cost calculations assume $2,122 per well in bonding coverage, as estimated by the Government Accountability Office in 2019.

As shown in Table 1, average bonding coverage under current rules is far below what would be needed to pay for the cleanup of oil wells on federal lands, even at a low-end cleanup cost of $35,000 per well. Bond coverage would cover about 6.5% of cleanup costs under the lowest-cost scenario and only 1.1% for the highest-cost scenario, raising the prospect that taxpayers would be forced to make up the difference.

Under the Bureau of Land Management’s proposal, companies must post a bond of at least $150,000 per oil lease, covering up to two wells. They would no longer be allowed to secure a nationwide bond to cover cleanup costs. However, they would still be able to post a cleanup bond of $500,000 for all leases in a state, up from the current level of $25,000 — which was established in the 1950s and has not been adjusted for inflation.^[8]

Without adequate financial guarantees from oil and gas companies, the government would be forced to rely on taxpayers to clean up old wells. The scale of this problem is unclear. Oil industry lobbyists claim the problem is limited, pointing to small numbers of “orphaned” wells that have no known owner and are cleaned up at taxpayer cost. But that significantly underplays the scale of the problem, which may be enormous.

A Boom-and-Bust Industry

The oil and gas industry is infamous for its boom-bust cycles. The industry’s current wave of record-breaking profits^[9] due to high oil prices is unlikely to last. Severe losses and bankruptcies battered the industry from 2015 through 2020, when more than 600 oil and gas companies filed for bankruptcy, including 274 oil and gas exploration and production companies, according to the energy industry law firm Haynes and Boone.^[10]

An oil and gas industry crisis is not a far-fetched outcome. Overall production in the U.S. is expected to peak, then gradually decline in the coming years.^[11] Parts of the country that fueled the fracking boom of the early 2010s, such as North Dakota, have gone into long-term decline. Production in the Permian basin, the largest oil patch in the U.S., may be nearing a peak, with the highest-producing wells already drilled.[12]

If U.S. oil prices crash due to an economic downturn, surge in OPEC+ oil production, or a drop in consumer demand due to the adoption of electric vehicles, the result could be disastrous for fossil fuel companies that fail to diversify their operations.[13] The International Energy Agency projected in fall 2023 that global demand for coal, oil and methane gas will peak by 2030, partly due to increased adoption of solar power and electric vehicles.[14] Fitch Ratings warned in fall 2023 that oil and gas companies could face credit rating downgrades due to their high exposure to climate transition risk. The reason is simple: Oil and gas assets would be far less valuable in a clean energy economy.[15]

U.S. oil and gas drillers could be especially vulnerable as they typically have higher production costs than much of the world and rely on expensive fracking and horizontal drilling technology to extract fuel from shale rock deep in the ground. If the fossil fuel industry experiences a severe downturn, oil and gas companies could face a massive bill for cleaning up old oil and gas infrastructure after wells are no longer viable.

An analysis by the Carbon Tracker Initiative estimated that cleaning up after California’s oil and gas industry, which has declined for several decades and has more than 107,000 unplugged well bores, could cost between $13.2 billion and $21.5 billion.^[16] The lack of sufficient cleanup regulations in many states ensures that the problem will continue to grow into the future, raising the threat that the oil and gas industry could wind up relying on taxpayers for well-cleanup.

Without stricter regulations, wells will be transferred between owners without any guarantee that they will be cleaned up. In fall 2023, California lawmakers, concerned about the costs of decommissioning the state’s aging oil fields, recently passed legislation^[17] that would force the companies that acquire oil and gas assets to fund well cleanup before they acquire them.

Big Oil Must Not Leave Taxpayers on the Hook

To determine which companies could be most on the hook for cleanup bills in the event of a fossil fuel industry bust, Public Citizen separately examined 16,000 drilling permits^[18] approved by the federal Bureau of Land Management since 2017. These permits, which are required for drilling on federal and tribal lands, are concentrated in New Mexico, Wyoming and Colorado.

The analysis found that wells drilled by the top 10 public lands drillers since 2017 could leave taxpayers on the hook for between $257 million and $1.5 billion in cleanup costs for public lands drilled since 2017 alone. During that period, Trump administration policies encouraged the U.S. oil and gas industry to lease millions of acres of public lands for exploitation, stockpiling thousands of permits for future drilling in the ensuing years.^[19]

Table 2: Major Oil and Gas Companies’ Projected Cleanup Costs on Federal Lands from Drilling Permits Approved Since 2017

Company	Wells	Bond Coverage	Low- ($35k/well)	Medium ($71K/well)	(High -$200k/well)
EOG Resources Inc.	2,047	$4,343,734	$67,301,266	$140,993,266	$405,056,266
Devon Energy	1,166	$2,474,252	$38,335,748	$80,311,748	$230,725,748
ExxonMobil	984	$2,088,048	$32,351,952	$67,775,952	$194,711,952
Mewbourne Oil Co	671	$1,423,862	$22,061,138	$46,217,138	$132,776,138
Occidental Petroleum	648	$1,375,056	$21,304,944	$44,632,944	$128,224,944
Terra Energy	564	$1,196,808	$18,543,192	$38,847,192	$111,603,192
ConocoPhillips	530	$1,124,660	$17,425,340	$36,505,340	$104,875,340
Chevron	419	$889,118	$13,775,882	$28,859,882	$82,910,882
Matador Resources	391	$829,702	$12,855,298	$26,931,298	$77,370,298
Continental Resources	390	$827,580	$12,822,420	$26,862,420	$77,172,420
Grand Total	7,811	$16,574,942	$256,810,058	$538,006,058	$1,545,625,058

Source: Public Citizen analysis of Bureau of Land Management data from Jan 1, 2017 to June 30, 2023. Cleanup cost calculations assume $2,122 per well in bonding coverage.^[20]

Over the past two years, Republican lawmakers on Capitol Hill, backed by sizeable oil and gas campaign contributions, pushed to derail any reforms of the nation’s public lands leasing and exploration system. Numerous studies have identified serious flaws in this system, including a 2021 report from the Interior Department finding that the federal oil and gas leasing program does not provide a fair return to taxpayers and fails to account properly for environmental harms.[21]

Nevertheless, Republicans on Capitol Hill have backed industry-friendly legislation to force the Interior Department to lease all lands nominated by the fossil fuel industry for oil drilling automatically and at least four times a year. They have tried unsuccessfully to repeal commonsense reforms passed in 2022 to ensure oil and gas companies pay a reasonable rate to drill on public lands. The American Petroleum Institute, along with 13 other oil and gas groups, attacked the Biden administration’s 2023 public lands rulemaking proposal, with the group’s vice president of upstream policy claiming that “overreaching land management regulations place our domestic energy supply at risk.”

Rep. Lauren Boebert (R-Colo.), who introduced legislation^[22] to block the Interior Department’s oil and gas rule, falsely claimed during a House hearing that “Joe Biden is using every tool in his administration to dismantle American energy production” — even though U.S. oil production on public lands has grown to the highest level on record (Figure 2) under the Biden administration. At the same House hearing, a Wyoming oil and gas regulator, Tom Kropatsch, claimed that many oil and gas companies would not be able to afford higher bonding rates. “This proposed rule will result in oil and gas production being forced out of Wyoming,” he said in written testimony.^[23] Nevertheless, a study by Accountable.US showed Wyoming oil and gas producers have been able to boost production even after tighter bonding requirements were imposed at the state level in 2015.[24] Republican lawmakers also have tried to depict themselves as defenders of American oil and gas workers. “We must also make sure that we produce energy here instead of relying on foreign adversarial nations that are hostile towards the United States and that have weak environmental, labor and safety standards,” Rep. Pete Stauber (R-Minn) said at the same hearing.

These complaints are disingenuous at best. U.S. oil production on federal lands, which represents about 10% of domestic oil production, has more than tripled over the past decade (Figure 2) to the highest level on record. Methane gas production on public lands, representing about 8% of total U.S., production, has been relatively constant (Figure 3).

Industry lobbyists have been minimizing the problem of managing the cleanup of oil infrastructure. Kathleen Sgamma, president of the Western Energy Alliance, said in written Congressional testimony in September 2023 that the administration’s bonding proposal “raise costs unnecessarily for the vast majority of companies who are responsible and fulfill their reclamation obligations.”^[25]

Despite these protestations, oil wells and extraction equipment have long been abandoned by oil and gas drillers, left rusting and often unsealed around the country.^[26] The public already bears the burden of cleaning up old oil wells, as the federal infrastructure bill signed into law in 2021 contained $4.7 billion in funding^[27] for well-plugging.

Inactive wells can leak pollutants and can contaminate water.^[28] The U.S. Environmental Protection Agency estimates there are about 3.7 million abandoned oil and gas wells nationwide, including about 2.2 million that have yet to be plugged.^[29] Scientific research identified more than 123,000 “orphaned” wells — wells with no known owner as of April 2022, across the U.S., with the highest numbers in Ohio, Pennsylvania, Oklahoma, Kentucky and Texas.^[30]  These wells are a significant source of climate-warming emissions, emitting about 294,500 tons of methane in 2021 — as much annual climate-warming emissions as bout 1.5 million cars. ^[31] One study found that a single county in Colorado was home to a small number of ‘super-emitting’ wells that leak massive quantities of methane, far more than the average unplugged well in the state.[32]

Conclusion

Despite oil industry and Republican pushback, public protections for oil and gas drilling are sorely needed. Irresponsible practices are common in the oil and gas industry[33],  with numerous oil and gas companies abandoning wells, selling off assets and delaying legally required environmental cleanup for years[34]. The involvement of private equity firms, which have been purchasing U.S. oil and gas assets, also raises concerns that oil and gas investors may evade their responsibility to perform environmental cleanup.[35]

Under President Biden, the federal government has made progress toward enacting a better approach for managing public lands, fulfilling the Bureau of Land Management’s mandate to put conservation and wildlife protection on equal footing with oil and gas extraction. This policy is a welcome reversal from the Trump administration, which employed oil and gas lobbyists to run federal agencies and promoted climate change denial. The Interior Department’s long-overdue rules for oil and gas well cleanup would hold those who seek to drill on federal and tribal land to a minimum standard of corporate responsibility – and protect the public from paying for corporate recklessness. The Biden administration must quickly finalize these rules, which will be a welcome change from the longstanding status quo of giveaways to the oil and gas industry.

Endnotes

[1] Zibel, Alan “Royal Ripoff: How Oil Companies Exploiting Public Lands Shortchange American Taxpayers” Public Citizen, 21 June 2022 https://www.citizen.org/article/royal-ripoff/

[2] “Federal Oil and Gas Bonding When oil and gas companies do not reclaim wells, taxpayers end up picking up the slack” Taxpayers for Common Sense. August 2023. https://www.taxpayer.net/wp-content/uploads/2023/05/Updated-Oil-and-Gas-Bonding-fact-sheet_April-2023-1.pdf

[3]“Interior Department Takes Steps to Modernize Oil and Gas Leasing on Public Lands, Ensure Fair Return to Taxpayers.” U.S. Department of the Interior 20 July 2023. www.doi.gov/pressreleases/interior-department-takes-steps-modernize-oil-and-gas-leasing-public-lands-ensure-fair.

[4] U.S. Bureau of Land Management, Proposed Rule Fluid Mineral Leases and Leasing Process 88 Fed. Reg. 47564 (July 24, 2023) https://www.govinfo.gov/content/pkg/FR-2023-07-24/pdf/2023-14287.pdf

[5] “The Bureau of Land Management Made Progress in Implementing Corrective Actions to Improve Its Idle Well Program” Inspector General, Department of the Interior. 1 Aug 2023. https://www.doioig.gov/sites/default/files/2021-migration/Final%20Inspection%20Report_Idle%20Wells%20Verification%20Review_Public.pdf

[6] U.S. Bureau of Land Management, Proposed Rule Fluid Mineral Leases and Leasing Process 88 Fed. Reg. 47581 (July 24, 2023) https://www.govinfo.gov/content/pkg/FR-2023-07-24/pdf/2023-14287.pdf

[7] “Bureau of Land Management Should Address Risks from Insufficient Bonds to Reclaim Wells” Government Accountability Office 18 Sep 2019.  https://www.gao.gov/products/gao-19-615

[8] “Federal Oil and Gas Bonding When oil and gas companies do not reclaim wells, taxpayers end up picking up the slack” Taxpayers for Common Sense. Aug. 2023. https://tinyurl.com/2vwx5jb4

[9] Meredith, Sam. “Big Oil Rakes in Record Profit Haul of Nearly $200 Billion, Fueling Calls for Higher Taxes.” CNBC, 2023, www.cnbc.com/2023/02/08/big-oil-rakes-in-record-annual-profit-fueling-calls-for-higher-taxes.html.

[10] Haynes and Boone Oil Patch Bankruptcy Monitor January 2022. https://www.haynesboone.com/-/media/project/haynesboone/haynesboone/pdfs/energy_bankruptcy_reports/oil_patch_bankruptcy_monitor.pdf?rev=e57d3129b7504ea190df5d33dbacae44&hash=F461E4FE13446BE821B8A

[11]Eaton, Collin, and Benoît Morenne. “U.S. Shale Boom Shows Signs of Peaking as Big Oil Wells Disappear.” Wall Street Journal, 8 Mar. 2023, https://www.wsj.com/articles/u-s-shale-boom-shows-signs-of-peaking-as-big-oil-wells-disappear-2adef03f?st=fmsceuwhv7llq8h&reflink=desktopwebshare_permalink

[12] Messler, David, “The Imminent Peak in Permian Oil: What Does it Mean For Investors?” OilPrice.com, 31 Jul 2023.https://oilprice.com/Energy/Crude-Oil/The-Imminent-Peak-In-Permian-Oil-What-Does-it-Mean-For-Investors.html

[13] Coffin, Mike and Guy Prince “Navigating Peak Demand” Carbon Tracker Initiative, 8 November 2023. https://carbontracker.org/reports/navigating-peak-demand/

[14] International Energy Agency World Energy Outlook 2023, IEA, Paris 24 Oct 2023. https://www.iea.org/reports/world-energy-outlook-2023

[15]Naik, Gautam “Oil and Gas Companies Face an Era of Credit Downgrades, Fitch Warns.” Bloomberg .News, 31 Oct. 2023, www.bloomberg.com/news/articles/2023-10-31/credit-downgrades-loom-large-as-fitch-zeroes-in-on-oil-issuers.‌

[16] Purvis, Dwayne “There Will Be Blood: Decommissioning California’s Oilfields.” Carbon Tracker Initiative, 18 May 2023 https://carbontracker.org/reports/there-will-be-blood/

[17] Plachta, Ari “New California Law Makes Oil Companies More Accountable for Cleaning, Plugging Idle Wells.” Yahoo News, 7 Oct. 2023. https://news.yahoo.com/california-law-makes-oil-companies-212723304.html

[18] The Bureau of Land Management maintains a database of federal permits granted to oil and gas companies for drilling but does not publish public data on oil and gas wells, other than annual summary data that does not include corporate details.

[19]  Brown, Matthew and Cathy Bussewitz, “Oil Companies Stockpile Drilling Permits, Challenging Biden on Climate.” Associated Press as published in the Denver Post, 10 Jan. 2022. https://www.denverpost.com/2021/01/10/oil-companies-drilling-permits-biden-climate/

[20] Among the nearly 16,000 drilling permits analyzed, about 3,800 drilling permits, or 24 percent were listed in BLM’s database as connected to wells that are not actively drilling or producing oil and gas. We estimated how many of these undrilled wells would likely proceed to drilling based on a historical average number of well bores drilled (spud) for every drilling permit approved by state in recent years. Those averages are New Mexico (45%), Wyoming (41%), North Dakota (68%), Colorado (56%), California (55%), Utah (29%).

[21] U.S. Department of the Interior “Report on the Federal Oil and Gas Leasing Program” November 2021. https://www.doi.gov/sites/doi.gov/files/report-on-the-federal-oil-and-gas-leasing-program-doi-eo-14008.pdf

[22] “Congresswoman Boebert’s Restoring American Energy Dominance Act Receives Key Hearing” Rep. Lauren Boebert (R-Co.) 25 Oct. 2023, https://boebert.house.gov/media/press-releases/congresswoman-boeberts-restoring-american-energy-dominance-act-receives-key

[23] Written statement of Tom Kropatsch, Wyoming Oil and Gas Conservation Commission for House Natural Resources subcommittee hearing 10 Oct 2023 https://boebert.house.gov/sites/evo-subsites/boebert.house.gov/files/evo-media-document/testimony-kropatsch-10-25-2023.pdf

[24] “Oil & Gas Bonding Reform Is A Common-Sense Solution to A Significant Problem: Just Look At Wyoming” Accountable.US, 21 Sep. 2023 https://accountable.us/wp-content/uploads/2023/09/20230918-Wyoming-Bonding-Case-Study-FINAL.docx.pdf

[25] Testimony of Kathleen Sgamma, Western Energy Alliance, House Natural Resources Committee 19 September 2023 https://naturalresources.house.gov/uploadedfiles/testimony_sgamma.pdf

[26] Dennis, Brady. "There Could Be Millions of Abandoned Wells in the U.S. Plugging Them Is a Monumental Task." The Washington Post. 12 Apr. 2023. https://www.washingtonpost.com/climate-solutions/2023/04/11/plugging-abandoned-oil-wells/

[27] Peischel, Will. “Pay and Plug: Federal Funds Spur Cleanup of Lost Oil Wells.” The New York Times, 22 Feb. 2023, www.nytimes.com/2023/02/22/science/plugging-oil-wells.html.

[28] Ho, Jacqueline, et al. Plugging the Gaps in Inactive Well Policy Plugging the Gaps in Inactive Well Policy, Resources for the Future 2016.‌ https://media.rff.org/documents/RFF-Rpt-PluggingInactiveWells.pdf

[29] Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2021. U.S. Environmental Protection Agency, EPA  https://www.epa.gov/system/files/documents/2023-04/US-GHG-Inventory-2023-Main-Text.pdf

[30] Jade Boutot, Adam S. Peltz, Renee McVay, and Mary Kang Documented Orphaned Oil and Gas Wells Across the United States Environmental Science & Technology 2022 https://pubs.acs.org/doi/pdf/10.1021/acs.est.2c03268

[31]This estimate was derived using U.S. Environmental Protection Agency greenhouse gas equivalencies calculator based the EPA’s estimate of 231.1 kilotons of methane emissions from abandoned oil wells and 63.4 kilotons of methane emissions from abandoned gas wells in 2021 https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator#results

[32] Jaffe, Mark. ““Super-Emitting” Oil Wells near Denver Are Releasing 142% More Pollution per Hour than State Average, CSU Study Finds.” The Colorado Sun, 23 Oct. 2023. https://coloradosun.com/2023/10/23/methane-emissions-super-emitting-oil-gas-adams-county/?utm_medium=email

[33] Lutz, Mariel and Jenny Rowland-Shea “How the Federal Government Can Hold the Oil and Gas Industry Accountable.” Center for American Progress, 19 Sept. 2023, www.americanprogress.org/article/how-the-federal-government-can-hold-the-oil-and-gas-industry-accountable/.‌

[34] Morgan, Peter. “New Lawsuit Targets Fraudulent Transfer of Oil and Gas Wells to Evade Cleanup Obligations.” 15 Jul 2022. www.sierraclub.org/articles/2022/07/new-lawsuit-targets-fraudulent-transfer-oil-and-gas-wells-evade-cleanup-obligations.‌

[35] Zibel, Alan “Private Profits, Public Risks” Public Citizen, 8 Aug. 2023. https://www.citizen.org/article/private-profits-public-risks/

December 1, 2023

Comment to IAASB on Sustainability Assurance Engagements

2023.12.6 Letter to State on Saguaro Pipeline Approval

Download the PDF here.

Chair
International Auditing and Assurance Standards Board (IAASB)
529 Fifth Avenue, 6th Floor
New York, NY 10017

December 01, 2023

Re: General Requirements for Sustainability Assurance Engagements

Dear Mr. Seidenstein,

On behalf of more than 500,000 Public Citizen members and supporters, we welcome the opportunity to respond to the International Auditing and Assurance Standards Board’s request for comment on the Proposed ISSA 5000, General Requirements for Sustainability Assurance Engagements. Investors are increasingly relying on auditors to provide assurance for information associated with climate change, environmental impacts, and the clean energy transition. Around 80 percent of S&P 100 companies are already using third-party assurance or verification for climate information, including greenhouse gas (GHG) emissions and ESG metrics, to boost investor confidence in these disclosures. Increasingly, there is a vital need for clear standards for third-party assurance engagements of climate-related disclosures. We commend IAASB for proposing standards for sustainability assurance engagement to enhance market confidence in sustainability-related information. We strongly urge IAASB to establish clearly the distinction between limited and reasonable assurance, set expectations for communication between assurance providers and financial auditors to align sustainability disclosures with financial reporting, and promote the use of sustainability-related key audit matters.

Differentiation of Limited Assurance and Reasonable Assurance (Q7, Q13, Q17)

The distinction between limited and reasonable assurance is crucial due to the high prevalence of limited assurance engagements for sustainability disclosures. Limited assurance is inherently a lighter touch process, which has led many companies to opt for it because it is cheaper and subjects them to less scrutiny. It also fails to provide auditors with sufficient evidence to confidently assert an affirmative opinion that claims are reasonably stated, and therefore provides a false impression of thorough examination in its presentation to investors. There is market confusion on the level of assurance provided by the limited assurance of sustainability disclosures, and its popularity among companies raises concerns of widespread greenwashing.

The inadequacies of limited assurance in the context of sustainability reporting are extensive.  The primary problem is that registrants have broad discretion in deciding the evidence to be shared during the engagement. Unlike reasonable assurance audits, limited assurance does not require a practitioner to probe and design an audit process to affirmatively state an opinion that the disclosure is fairly presented. The scope and nature of limited assurance is determined by the issuer, allowing it to define what data will be presented to the auditor. As a result, the auditor’s statement is limited to confirming that management hasn’t given them anything to suggest its own assertions are inaccurate. This falls short of gathering sufficient evidence and essential information required for a thorough examination and testing of the purported claims.

IAASB’s likening of limited assurance to the assurance process for interim or quarterly financial statements is not accurate. For limited assurance sustainability reports, auditors typically don’t proceed to conduct a subsequent reasonable assurance engagement in a manner analogous to interim financial statements leading to an annual report. While quarterly reviews mandate auditors to affirm that they have identified nothing inconsistent with their comprehensive yearly audit, this “negative” attestation relies on the context and understanding developed during the annual audit conducted at a reasonable assurance level.

Reasonable assurance demands a more comprehensive and rigorous approach, necessitating a thorough risk assessment and examination to address the risk of material misstatements. This higher level of scrutiny, which is essential for forming a well-founded opinion, is not conducted for limited assurance. Additionally, since assurance providers are not giving an affirmative opinion, this allows room for assurance providers to circumvent liability for the failure to identify material misstatements that would have been identified by an auditor exercising due care.

The broad definition of “limited assurance” within the proposal may result in varied interpretations by practitioners regarding the required procedures for achieving limited assurance. These interpretive differences might not align with investors’ expectations. Clearly defined procedures for limited assurance engagements are needed to minimize expectation gaps between assurance providers and market participants and the difficulty for investors of navigating an array of inconsistent limited assurance practices in the market. IAASB should articulate detailed procedures for “limited assurance” engagements, including defining how (1) organizational and operational boundaries for sustainability-related disclosures are reasonably set, justified, and disclosed; (2) credible data sources are utilized when primary measured data is lacking, with full disclosure of data inputs and assumptions; and (3) procedures are established for testing of calculations to ensure accuracy.

Finally, IAASB’s proposal should require a more substantially different presentation of practitioners’ conclusions for limited and reasonable assurance. The similarity of practitioners’ statements in company filings may obscure the distinction between the two levels of assurance, potentially leading to misunderstandings regarding the depth of examination and the strength of the conclusions made. By asserting that the practitioner’s analysis is “based on the procedures performed and evidence obtained,” even though the procedures for limited assurance are minimal or insufficient to form an affirmative opinion, the proposed presentation inaccurately conflates limited and reasonable assurance and implies that limited assurance offers much more than it does. IAASB should align practitioner statements for limited assurance with the true nature of the engagement—simply checking management’s presented information for material misstatement, rather than undertaking rigorous procedures and collecting evidence to challenge and verify claims, as done in a reasonable assurance engagement.

Fraud and Greenwashing (Q19)

The widespread use of limited assurance today, in connection with corporate sustainability disclosures, has not meaningfully reduced the risk of greenwashing. Limited assurance engagements, by definition, are exposed to a greater risk of greenwashing by leaving room for inaccuracies, incompleteness, or even potentially misleading information. An auditor’s ability to uncover and address potential greenwashing is restricted by the scope and lack of proactive information gathering inherent to limited assurances, yet the majority of sustainability assurance engagements are conducted at a limited assurance level.

We believe even companies understand the risks associated with limited assurance.  For example, Allbirds, a company that prominently promotes its commitment to sustainability, acknowledged in an SEC Form 10-X that limited assurance itself presented a risk worthy of discussion in a risk factor. Specifically, the company acknowledges in its filings that

certain metrics we use receive limited assurance from and/or verification by third parties. This process may entail a less stringent review compared to traditional audits, and such a review might not uncover errors or shield us from potential liabilities under securities laws.

This disclosure underscores the inherent weakness of the limited assessment process, suggesting that the findings may not provide investors with sufficiently robust information for making informed decisions. To combat greenwashing and fraudulent sustainability claims, IAASB should establish a more extensive process for limited assurance engagement and distinguish the presentation of practitioner conclusions for a limited assurance engagement to avoid misleading investors on the strength of the assessment.

Use of Key Audit Matters (Q22)

IAASB should establish standards and expectations for the discussion of key audit matters (KAMs) related to sustainability and climate-related disclosures. The triggering of KAMs is crucial for communicating the impact of climate risk and the energy transition on financial statements. KAMs convey the materiality of disclosures to the financial statements or the involvement of significant auditor judgment. This is evident in climate-related estimates and assumptions that require extensive auditor judgment, making them a prime example for discussion as key audit matters. Though auditors have been slow to identify climate-related KAMs, they are starting to show up in companies’ audit reports. Shell’s 2022 annual report includes a KAM that details the impact of climate change and the energy transition on areas of accounting judgment. IAASB should provide guidance on the link between sustainability disclosures and financial statements to prompt further use of climate-related KAMs.

Alignment of sustainability information with financial statements (Q24)

Because IAASB oversees financial statement audits, it is in a unique position to develop assurance standards that integrate the assurance of sustainability-related disclosures with the financial statement audit. This integration will benefit both assurance engagements and financial audits, as it will give financial statement auditors deeper insights about companies’ climate-related financial risks and activities, and will provide sustainability assurance providers deeper insights about financial risks that may impact the accuracy of disclosures. Established regular communication between assurance providers of sustainability information and auditors is crucial to maintain consistency of the data and information used in financial statements and sustainability reports. To reinforce this uniformity, IAASB should establish requirements for communication between sustainability assurance providers and financial auditors, especially regarding sustainability matters closely linked to the financial statements.

Conclusion

We commend IAASB for proposing assurance standards for third-party validation of sustainability-related disclosures. We support the proposal and urge further clarification to provide investors with more meaningful and accurate information about practitioner conclusions.

For questions, please contact Mekedas Belayneh at mbelayneh@citizen.org.

Sincerely,

Public Citizen

Respiratory Syncytial Virus (RSV) Vaccines for Adults Ages 60 and Older and to Protect Newborns

Health Letter, December 2023

By Michael T. Abrams, M.P.H., Ph.D.
Senior Health Researcher, Public Citizen’s Health Research Group

2023.12.6 Letter to State on Saguaro Pipeline Approval

Severe respiratory syncytial virus infection (RSV) is an important cause of hospitalization among the very old and the very young. In 2019, industrialized countries experienced 470,000 RSV-associated hospitalizations and 33,000 in-hospital deaths among adults age 60 and older.^[1] In the United States, annual estimates for childhood (<5 years of age) hospitalizations are 58,000 to 80,000 per year.^[2] The Centers for Disease Control and Prevention (CDC) recognizes RSV as the leading cause of infant hospitalization.

In 2023, the Food and Drug Administration (FDA) approved two vaccines (AREXVY and ABRYSVO) to prevent RSV lower respiratory tract disease in adults ages 60 and older. Soon after those approvals, the CDC recommended that pregnant persons and older adults consult with their physicians about obtaining one of these two vaccines in anticipation of the cold and flu season.

One of the vaccines (Abrysvo by Pfizer) has also been approved for use during weeks 32 through 36 of pregnancy to protect newborns from severe RSV lower respiratory tract infection from birth through 6 months of age.

Background on RSV

RSV is an airborne virus^[3] that can cause lower respiratory tract disease and symptoms including cough, runny nose, headache, fever and, in more severe cases, difficulty breathing. In most patients, the virus manifests as a cold lasting less than 5 days. The contagious period usually spans two days prior to the onset of symptoms to eight days after symptoms begin.^[4]

Developing the vaccine for RSV has been challenging. Recently, there has been a breakthrough involving engineering a vaccine that utilizes pre- rather than post-fusion parts of the virus as a key ingredient. Fusion refers to the virus’s ability to attach to cells that it infects. The pre-fusion form of the surface protein is different than the post-fusion form, and that difference is important to developing a useful antigen for making a vaccine. An antigen is any substance that causes the immune system to produce antibodies against it; the antibodies help the body to fight off future attacks by organisms containing the antigen, in this case the RSV virus.

The two vaccines, Arexvy^[5],^[6] and Abrysvo,^[7] contain pre-fusion antigens. Both vaccines are delivered by intramuscular injection and contain the same antigen; Abrysvo also contains a second antigen, making it bivalent.^[8]

Efficacy and safety of the RSV vaccines

A randomized trial to test the effectiveness of Arexvy to prevent RSV-associated disease in persons age 60 years or older involved 12,467 subjects receiving the vaccine and 12,499 receiving a placebo vaccine. About 8% of of the subjects were ages 80 and older. For every 1,000 persons studied over an average of one year following immunization, it was estimated that there were 7 (0.7%) cases of RSV-associated lower respiratory tract disease in the Arexvy group compared to 40 (4%) such cases in the placebo group. Lower respiratory tract disease in this study was defined as the presence of at least two symptoms or signs (cough, sputum, shortness of breath, wheezing, increased respiratory rate).^[9] The most common adverse reactions were injection site pain, fatigue, muscle aches, headache and joint stiffness.

Clinical data leading to FDA approval of Arexvy included two other trials with 2,500 subjects ages 60 and older. In one trial, Arexvy was delivered with an influenza vaccine. In the combined RSV and influenza vaccine trial, two participants developed disseminated encephalomyelitis, a rare inflammation that affects the brain and spinal cord, and one of these patients died. In the second trial, with RSV vaccine alone, one case of Guillain-Barre syndrome (a rare immune disorder that damages nerves causing muscle weakness and paralysis) was observed. These findings led the FDA to require a postmarketing study of Arexvy that further assesses the risk of such serious adverse events.

The effectiveness of Abrysvo as compared to placebo was assessed in a randomized, double-blind trial in adults ages 60 and older; 17,197 subjects received Abrysvo and 17,186 subjects received a placebo. Of the participants, 6 percent were age 80 or older. The primary endpoint was the emergence of RSV-associated lower respiratory tract disease with at least two symptoms. Based on evaluable data from just over 16,300 subjects in each group, and a median follow-up of seven months post-vaccination, Abrysvo vaccine was estimated to reduce the number of RSV-associated lower respiratory tract disease cases from 33 to 11. Unlike the large Arexvy trial, a limitation of the large Abrysvo trial is that immunocompromised individuals were excluded.

In a second randomized, double-blind trial, Abrysvo was compared to placebo in pregnant persons; 3,495 pregnant persons received Abrysvo and 3,480 pregnant persons received placebo. Six months after birth, severe lower respiratory tract disease caused by RSV occurred in 19 infants exposed in utero to Abrysvo and in 62 infants exposed to placebo. The frequency of RSV-related hospitalizations among newborns was also significantly lower in the Abrysvo group.

In individuals 60 years of age and older, the most commonly reported adverse reactions were fatigue, headache, pain at the injection site and muscle pain. In pregnant individuals, the most commonly reported adverse reactions were pain at the injection site, headache, muscle pain and nausea.

The safety of Abrysvo in pregnant persons was also assessed. From vaccination through 6 months post-partum, maternal high blood pressure and preeclampsia were more common in the Abrysvo than the placebo group. Preterm births were also more common in the Abrysvo (n=202) than the placebo (n=169) group, although only 83 and 80 infants, respectively, had an extended hospitalization for this reason. The available data were deemed “insufficient to establish or exclude a causal relationship between preterm birth and Abrysvo.” Accordingly, the FDA has required the manufacturer to conduct postmarketing studies of the potential risk of preterm birth.^[10]

Studies of the co-administration of RSV vaccine with influenza or other (tetanus, diphtheria, pertussis) vaccines have thus far been inconclusive. Until more data become available, it may be best to receive RSV separately from other vaccines.^[11]

What You Can Do

If you are age 60 or older or pregnant, discuss with your clinician whether you should receive an RSV vaccine. Older adults are at especially high risk of severe RSV if they have chronic illnesses including lung, heart, kidney, liver, neurologic or immune-compromising disease or diabetes, or if they reside in a nursing home.^[12] During pregnancy, RSV vaccination is recommended during weeks 32 through 36, but not earlier so as to mitigate concerns about preterm birth.

Nirsevimab for prevention of RSV lower respiratory track disease in infants and children up to 24 months of age

In 2023, the FDA also approved nirsevimab (BEYFORTUS), a RSV-preventive antibody, which the CDC has recommended for some infants and young children.^[13],^[14] The antibody targets the pre-fusion form of a surface protein of the RSV virus. The drug is delivered via a single intramuscular injection. The approval was primarily based on data from two randomized clinical trials, one of 1,453 infants and the other of 1,490 infants. Both trials were placebo-controlled; infants born prematurely and at term were included.

Both trials found that nirsevimab protects infants and toddlers from RSV lower resipiratory tract disease for at least 150 days. Jointly, these studies found that 2% of infants receiving nirsevimab had RSV severe enough to require medical attention, compared to 7% of those receiving placebo. Across both studies, about 1% of infants had adverse reactions, which were mostly mild to moderate in severity.

The CDC recommends the neonates and infants born during or entering their first RSV season (fall through spring) receive a single dose of nirsevimab within 1 week after birth.^[15] Most newborns whose mothers received the RSV vaccine during pregnancy do not need nirsevimab too.^[16] Infants born outside of the RSV season and who are younger than 8 months as they enter their first RSV season should receive a single dose shortly before the season begins, but may receive a dose at any time during the season.

The CDC further recommends that older infants and toddlers (9 to 19 months) be considered for nirsevimab if they are at increased risk of severe RSV disease.

In October 2023, the CDC issued a nirsevimab shortage alert for the 2023-2024 RSV season, and recommended that the drug be prioritized for infants less than 6 months of age who were born prematurely (<29 weeks) or infants who otherwise have significant immune, heart, lung or neuromuscular conditions that place them at increased risk for lower respiratory infection.^[17] Rural Native Americans up to 19 months of age also should be prioritized as they have an approximately three times higher risk of RSV hospitializaiton compared to the general U.S. infant and toddler population.^[18]

---

References

[1] Papi A, Ison MG, Langley JM, et al. Respiratory syncytial virus prefusion F protein vaccine in older adults. N Engl J Med. 2023;388(7):595-608.

[2] U.S. Centers for Disease Control and Prevention. Respiratory syncytial virus infection (RSV). August 4, 2023. https://www.cdc.gov/rsv/high-risk/infants-young-children.html. Accessed October 30, 2023.

[3] Melgar M, Britton A, Roper LE, et al. Use of respiratory syncytial virus vaccines in older adults: recommendations of the Advisory Committee on Immunization Practices – United States, 2023. Am J Transplant. 2023;23(10):1631-1640.

[4] Linder KA. RSV infection in older adults. JAMA. 2023;330(12):1200.

[5] GlaxoSmithKline Biologicals. Label: respiratory syncytial virus vaccine, adjunvanted (AREXVY). May 2023. https://gskpro.com/content/dam/global/hcpportal/en_US/Prescribing_Information/Arexvy/pdf/AREXVY.PDF. Accessed October 30, 2023.

[6] U.S. Food and Drug Administration News Release. FDA approves first respiratory syncytial virus (RSV) vaccine. May 3, 2023. https://www.fda.gov/news-events/press-announcements/fda-approves-first-respiratory-syncytial-virus-rsv-vaccine. Accessed October 30, 2023.

[7] Pfizer. Label: respiratory syncytial virus vaccine (ABRYSVO). August 2023. https://www.fda.gov/media/171482/download?attachment. Accessed October 16, 2023.

[8] Two vaccines (Arexvy and Abrysvo) for prevention of RSV disease. Med Lett Drugs Ther. 2023;65(1686):155-156.

[9] Papi A, Ison MG, Langley JM, et al. Respiratory syncytial virus prefusion F protein vaccine in older adults. N Engl J Med. 2023;388(7):595-608.

[10] Harris E. Medical news in brief. FDA approves maternal RSV vaccine. JAMA. 2023;330(11):1029.

[11] Two vaccines (Arexvy and Abrysvo) for prevention of RSV disease. Med Lett Drugs Ther. 2023;65(1686):155-156.

[12] Linder KA. RSV infection in older adults. JAMA. 2023;330(12):1200.

[13] U.S. Food and Drug Administration News Release. FDA approves new drug to prevent RSV in babies and toddlers. July 17, 2023. https://www.fda.gov/news-events/press-announcements/fda-approves-new-drug-prevent-rsv-babies-and-toddlers. Accessed November 9, 2023.

[14] AstraZeneca. Label: nirsevimab-alip (BEYFORTUS). July 2023. https://www.accessdata.fda.gov/drugsatfda_docs/label/2023/761328s000lbl.pdf. Accessed November 9, 2023. [p.1 under indication]

[15] U.S. Center for Disease Control and Prevention. Respiratory syncytial virus infection (RSV). August 4, 2023. https://www.cdc.gov/rsv/clinical/index.html#immunizations-protect-infants. Accessed November 9, 2023.

[16] Fleming-Dutra KE, Jones JM, Roper LE, et al. Use of the Pfizer respiratory syncytial virus vaccine during pregnancy for the prevention of respiratory syncytial virus-associated lower respiratory tract disease in infants: recommendations of the Advisory Committee on Immunization Practices – United States, 2023. MMWR Morb Mortal Wkly Rep. 2023;72(41):1115-1122.

[17] CDC Health Alert Network. Limited Availability of Nirsevimab in the United States—Interim CDC Recommendations to Protect Infants from Respiratory Syncytial Virus (RSV) during the 2023–2024 Respiratory Virus Season. October 23, 2023.

[18] U.S. Center for Disease Control and Prevention. Respiratory syncytial virus infection. December 18, 2020. https://www.cdc.gov/rsv/research/aip.html. Accessed November 9, 2023.

Product Recalls: October 11, 2023 – November 14, 2023

Health Letter, December 2023

2023.12.6 Letter to State on Saguaro Pipeline Approval

Note: Never stop taking a drug that appears on the product recall list without first talking to your doctor or pharmacist. Most recalls are limited to a single manufacturer and may not be related to the version of a particular drug you are taking. If a recall does relate to the version of the drug you are taking, you should not stop taking the drug until you discuss an alternative treatment with your doctor or pharmacist.

For Class 1 recalls, there is a potential for serious injury or death.

For Class 2 recalls, there is a potential for serious adverse events but a lower chance of the drug causing serious injury or death than in a Class 1 recall.

CLASS I

Betaxolol tablets, 10 mg, 100-count bottles. Manufactured by: KVK Tech Inc. Lot #: 17853A, exp. date: 06/27.

CLASS II

Deferasirox tablets for oral suspension, 500 mg, 30-count bottles. Manufactured for: Glenmark Pharmaceuticals Inc. Lot #: 17220063, exp. date: 12/23; Lots #17220396, 17220397, exp. date: 04/24; Lot #17220965, exp. date: 04/24; Lots #17221187, 17221523, exp. date: 07/24; Lots #17221793, 17221794, 17221801, exp. date: 08/24.

Liothyronine Sodium tablets, 5mcg or 25mcg, 100-count bottles. Manufactured and distributed by: Sun Pharmaceutical Industries Ltd. Lot #: DND0058A, exp. date: 12/23; Lot #DNC2204A, exp. date: 11/23.

Montelukast Sodium tablets, 10 mg, 1000-count bottle. Distributed by: Dr. Reddy’s Laboratories. Lot #: C2305569, exp. date: 03/26.

Oxybutynin Chloride extended-release tablets, 5 mg, 10 mg or 15 mg, 100-count bottles. Manufactured by: Cadila Healthcare Ltd. Distributed by: Zydus Pharmaceuticals (USA) Inc. Lots #M212749, M214477, M214478, M214479, M214480, exp. date: 11/24; Lots # M213318, M213314, M213315, M214436, M214437, M214438, M300653, M300654, exp. date: 12/24; Lots #: M211541, M211542, M212746, exp date. 10/24; Lot # M300660, exp. date: 12/24.

Ranolazine extended-release tablets, 500 mg, 60 tablets per bottle. Manufactured by: Glenmark Pharmaceuticals Limited. Lot #: 17230388, exp. date: 01/25.

TUMS Antacid Calcium Carbonate, 1000 mg, peppermint flavor, chewable tablets, 72-count bottle or 12-count roll. Distributed by: GSK CH. Lot #: HB2G, exp. date: 08/27; Lot #: HA7G, exp. date: 08/27.

TUMS Antacid Calcium Carbonate, 1000 mg, assorted fruit flavor, chewable tablets, 106-count bottles. Distributed by: GSK CH. Lot #: HV6B, exp. date: 09/27.

TUMS Antacid Calcium Carbonate, 1000 mg, assorted berries flavor, chewable tablets, 72-count bottles, 12-count rolls or 265-count bottles. Distributed by: GSK CH. Lot #: HR5W, exp. date: 09/27; Lot #: HR6A, exp. date: 09/27; Lot #: J96X, J96W, exp. date: 09/27; Lot #: KH5L, exp. date: 09/27.

For more information about the drug recalls listed above, please visit http://www.accessdata.fda.gov/scripts/ires/index.cfm.

CONSUMER PRODUCTS

For a list of recent recalls of consumer products, please visit the Consumer Product Safety Commission website at http://www.cpsc.gov/en/Recalls/.

Outrage of the Month: The Philips Respironics Recall of Ventilators and Positive Airway Pressure Machines

Health Letter, December 2023

By Robert Steinbrook, M.D.
Director, Public Citizen's Health Research Group

2023.12.6 Letter to State on Saguaro Pipeline Approval

If you’re not outraged,
you’re not paying attention!

Read what Public Citizen has to say about the biggest blunders and outrageous offenses in the world of public health, published monthly in Health Letter.

The Philips Respironics (Philips) recall of ventilators and positive airway pressure machines, initiated in June 2021, is one of the largest recalls of medical devices in history, involving more than 10 million devices in the United States and 15 million devices worldwide. The devices that were recalled (about 20 models of ventilators and positive airway pressure machines) used a polyester-based polyurethane sound abatement foam that can degrade and harm patients who breathe in toxic particles and emissions. The Food and Drug Administration (FDA) classified the recall as Class 1 (the most severe category) because of the reasonable probability that use of the devices can cause serious health issues or death.

An ongoing investigation by the Pittsburgh Post-Gazette and ProPublica has demonstrated in detail how Philips kept secret more than 3,700 complaints about the faulty devices over an 11-year period before initiating the recall. The complaints were withheld from the FDA, and the company did not launch its own formal investigation until 2019—nine years after the first complaints and three years after known tests for the company found that the foam was degrading. Indeed, Philips continued to sell more machines, including new models that contained the hazardous foam. The health problems for people using the Philips machines have included “vomiting, dizziness, and headaches, along with newly diagnosed cancers of the lungs, throat, sinuses, and esophagus.”

When presented with a summary of the investigation’s findings, Dr. Sidney M. Wolfe, Public Citizen’s Health Research Group founder and senior adviser, called the situation “one of the two or three worst things I have ever seen…It was unacceptable to sell those machines.”

One of the articles quotes from the complaints received by the company; these include descriptions of “‘black particles’ or ‘dirt and dust’ inside machines” that pump air into the lungs of patients with preexisting breathing difficulties. The article also includes descriptions of “black shavings in the chamber” and of contamination “with unknown sticky substance.”

A follow-up article, published in October 2023, highlighted the very disturbing decision by the company to halt shipments of the defective devices from its factories near Pittsburgh in April 2021 (two months before the recall), yet approved the continued sale of the same devices by distributors.

In a statement, Philips took issue with “the characterizations made in these articles,” adding that it “regrets any distress and concern for patients, their families and care providers in this matter, and deeply apologizes for this.”

The Philips recall is a public health crisis, because of both the harm to patients and the breakdowns in medical device surveillance and regulation that the recall has exposed. Lawsuits against the company are ongoing in federal court. Sen. Richard Blumenthal (D-Connecticut) has called on the FDA and the Department of Justice to investigate the “allegations thoroughly, taking the strongest enforcement action possible, including criminal charges, if the allegations are substantiated.” As the current post-market surveillance system for medical devices in the United States relies in large part on voluntary action by companies, the FDA also requires greater oversight authority. Reforms are needed to ensure that manufacturers of moderate and high-risk medical devices are required to track individual devices through unique device identifiers and the use of product registries and other systems. Medicare must also include the unique device identifiers on claim forms.

November 30, 2023

Civil Society Expresses Support for CFPB Data Rights Rule

Proposed rule would help consumers and competition

2023.12.6 Letter to State on Saguaro Pipeline Approval

Director Rohit Chopra
Consumer Financial Protection Bureau
1700 G Street NW
Washington, D.C. 20552

Re: Docket No. CFPB-2023-0052

Submitted via Federal Rulemaking Portal

Dear Director Chopra:

We the undersigned 18 civil society groups write to express our support for the goals of the proposed Personal Financial Data Rights Rule you recently announced. As you know, the new rule will advance the twin objectives of promoting competition and safeguarding consumer data privacy and security within the financial services sector.

As you also know, this rule is long overdue. In 2010, when Congress created the Consumer Financial Protection Bureau (CFPB) as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act, it also provided consumers with the right to access and transfer their financial data in Section 1033 of that legislation. President Biden’s Executive Order on Promoting Competition in the American Economy explicitly encouraged the CFPB to commence rulemaking under Section 1033 “to facilitate the portability of consumer financial transaction data so consumers can more easily switch financial institutions and use new, innovative financial products.”

The proposed rule seeks to do exactly that, by providing consumers with the ability to switch service providers without fear of losing their transaction history or disrupting their automatic bill pay arrangements. This, in turn, empowers individuals to access better financial products and services while encouraging financial institutions to compete on quality and service.

Market concentration within the financial industry has reduced options for consumers and disincentivized financial service providers from improving their offerings. The challenge of transitioning between providers has deterred many consumers from seeking better alternatives, raising concerns about a lack of competition, undesirable fees, and barriers to more favorable rates.

The proposed Personal Financial Data Rights rule seeks to break down these barriers, offering consumers greater agency in their financial choices and enabling smaller community banks and emerging competitors to vie for customers based on superior products and services at competitive rates. Polling indicates Americans’ strong support for data portability and for the CFPB’s role in helping make it possible for consumers to switch banks.

In addition, the proposed rule aligns with the CFPB’s mission to protect consumers from financial abuse and misuse of their personal data.  The rule recognizes the inherent risks associated with financial data and ensures that such data will not be exploited in unintended or unauthorized ways. This data protection helps to maintain the trust and privacy of consumers, a vital component of a healthy financial system. We commend the rule’s requirement that financial providers delete data upon the end of a consumer’s relationship with a firm. This is essential to ensure consumer privacy and data security.

We applaud the CFPB’s initiative to jumpstart competition in the banking and consumer finance sectors, and we believe that this rule will address the ongoing imbalance between financial service providers and consumers. It promises to strengthen and improve the industry, allowing individuals to find affordable credit cards, loans, and savings accounts while enjoying improved customer service.

As the proposed Personal Financial Data Rights rule progresses through the review and finalization process, we commend the effort and look forward to commenting further. In announcing the rule, you made a particularly apt comparison: After the FCC required wireless phone number portability, it dramatically changed consumer behavior and transformed the industry: “Rather than being locked in, you could now switch with less hassle, and that led to better prices and service.”

This rule, as well, will lead to better prices and service for consumers. Thank you for your leadership.

Sincerely,

Access Now
American Economic Liberties Project
Center for Digital Democracy
Center for Justice and Democracy
Consumer Action
Consumer Federation of America
Demand Progress Education Fund
Electronic Privacy Information Center (EPIC)
Fight for the Future
The Greenlining Institute
Incarcerated Action Network
Institute for Local Self-Reliance
Main Street Alliance
Media Alliance
Open Markets Institute
Public Citizen
Revolving Door Project
Rise Economy (formerly California Reinvestment Coalition)

Elliott Management Controls NRG Energy

Filed November 27, 2023

By Tyson Slocum

2023.12.6 Letter to State on Saguaro Pipeline Approval

Nearly 90 years ago, Congress established “that the business of transmitting and selling electric energy for ultimate distribution to the public is affected with a public interest,”[1] requiring any public utility transferring control to first secure “an order of the Commission authorizing it to do so,” and only authorizing such acquisitions if the Commission “finds that the proposed transaction will be consistent with the public interest”.[2]

The Commission must determine that the activist investors Elliott Management and Bluescape Energy Partners are affiliated with NRG Energy per 18 CFR § 35.36(a)(9), as the funds coordinated on an investment strategy that resulted in economic control over NRG exceeding 10%.

Activist investors like Elliott Management flourish with a business model explicitly designed to circumvent regulatory compliance, deploying complex financial engineering to engage in hostile upheaval of reluctant public utilities without ever triggering the Commission’s oversight.

On April 4, 2023 Elliott Management registered the repowernrg.com domain as part of a campaign to force significant management and investment changes at NRG Energy.[3]

In a May 15, 2023 letter to NRG Energy’s board of directors posted to its repoweringnrg.com site, Elliott Management disclosed that it had “an investment of approximately $1.0 billion representing a more than 13% economic interest in NRG Energy, Inc.” and, using that “economic interest” as an explicit negotiating tactic, issued a number of demands, including a request for NRG to consider five of its recommended names for the board of directors.[4]

That letter was followed by a second one on June 27, 2023, insisting on the termination of NRG’s CEO, among other ultimatums, stating that the “CEO has lost the confidence of the core investor base, and the Board lacks the will to make the right decision for the Company.”[5]

Elliott Management ultimately succeeded in forcing its requested changes upon NRG’s CEO and board of directors. On November 20, NRG Energy entered into a Cooperation Agreement with Elliott Management, resulting in the resignation of NRG’s CEO and the appointment of four new members to NRG’s board of directors.[6] This boardroom coup d’état demonstrates that Elliott’s use of cash-settled derivatives to obtain control of more than 13% of NRG’s economic interest constitutes affiliation and control under the Commission’s regulations.[7] Elliott Management also concealed from the Commission its coordination with Bluescape Energy Partners in its efforts to control NRG.

Elliott Management was able to remove NRG’s CEO and secure the appointment of four new members of the board through its use of cash settled swaps that conveyed control of more than 10% of NRG’s economic interest. The U.S. Securities and Exchange Commission is so alarmed at the ability of activist investors to utilize such derivatives to control target companies that it proposed a rulemaking last year stipulating that using cash settled swaps in this manner replicates control over voting securities.[8] The Commission must determine whether Elliott Management’s use of derivatives to acquire more than 10% of the economic interest of NRG Energy requires it to be deemed an affiliate of NRG Energy, per 18 CFR § 35.36(a)(9).

Elliott Conceals Its Coordination With Bluescape Energy Partners

Elliott Management has concealed from the Commission its coordination with Bluescape Energy Partners as part of its effort to influence and control NRG Energy. Bluescape Energy Partners reported to the U.S. Securities and Exchange Commission that it owns 4,858,000 voting shares of NRG Energy, Inc.[9] According to Bluescape Energy Partners’ “investment highlights” website, the purpose of the investment in NRG Energy is “restructuring”, with a start date of May 2023[10]—coinciding with Elliott Management’s May 15 letter to NRG’s board of directors announcing its campaign to influence and control the utility. Public Citizen has previously documented the history of extensive collaboration between Elliott Management and Bluescape Energy Partners to influence and control public utilities.[11]

Read the full filing here: NRGElliottBluescape

[1] 16 USC § 824.

[2] 16 USC § 824b(a).

[3] www.godaddy.com/whois/results.aspx?domain=repowernrg.com

[4] www.prnewswire.com/news-releases/elliott-sends-letter-and-presentation-to-the-board-of-nrg-energy-301824565.html

[5] www.prnewswire.com/news-releases/elliott-calls-for-new-ceo-and-strategic-review-at-nrg-energy-301864470.html

[6] www.sec.gov/ix?doc=/Archives/edgar/data/1013871/000110465923119741/tm2331129d1_8k.htm

[7] 18 CFR § 35.36(a)(9).

[8] www.sec.gov/files/rules/proposed/2022/33-11030.pdf

[9]www.sec.gov/Archives/edgar/data/1629283/000117266123003847/xslForm13F_X02/infotable.xml

[10] https://bluescapegroup.com/portfolio/

[11] See November 12, 2021 Joint Protest of Public Citizen and The Communications Workers of America, Docket Nos. ER20-116-001, ER20-67-001 and ER20-113-001, at pages 3-4, www.citizen.org/article/joint-protest-of-public-citizen-the-communications-workers-of-america-on-elliott-managements-control-of-evergy/