Scale of Environmental Debt
As shown in this chart, in 2015 the largest publicly traded U.S. oil companies cumulatively reported environmental debt of $40B, equivalent to 36% of total financial debt. Total environmental debt consisted of $39.3 billion in AROs and $2.7 billion in environmental liabilities unrelated to asset retirement.
Oil and gas environmental debt is material on an absolute and relative basis. Accordingly, some credit ratings agencies treat environmental debt as additions to financial debt and regard asset retirement obligations as a significant component of financial risk in part because the cash flows occur at the end of an asset’s economic useful life.