Dominion Resources – Financial Risks of Continued Reliance on Coal
WHEREAS
For electric power companies, continued reliance on coal is increasingly problematic in the face of declining reserves of high quality central Appalachian coal, unprecedented price increases and coal price volatility, and the high cost of carbon capture and storage for coal plants. By comparison, natural gas prices have reached record lows and supplies are increasingly abundant in the U.S., and costs for wind and solar are declining.
Coal combustion for electricity is a major contributor to air pollution, accounting for one third of the nitrous oxides (NOx), 50% of the mercury, a hazardous air pollutant, and over 36% of the carbon dioxide (CO2) emitted in the U.S. Older coal plants emit substantially more of these pollutants per megawatt hour (MWh) than newer plants.
The U.S. Environmental Protection Agency (EPA) is moving, in some cases pursuant to court order, to tighten regulation of the air, water and waste impacts of coal plants. Industry analysts (Bernstein Research, Jeffries & Company, Standard & Poor’s, Wood Mackenzie) have concluded that the cost of additional environmental control equipment for NOx, particulates and mercury may make it uneconomic to retrofit small, older coal plants. Pending EPA regulations governing storage and disposal of coal combustion wastes will likely increase operating costs for coal plants.
EPA is also developing regulations for CO2 and other greenhouse gas emissions. However, the lack of national climate policy to reduce CO2 emissions further adds to economic uncertainty for coal plants. Commercial deployment of carbon capture and storage technology for coal plants is 10 to 15 years away and “would increase electricity costs by about 30 – 80%,” the U.S. Government Accountability Office reports.
This unprecedented combination of forces has led a number of utility companies to announce coal plant retirements. Dominion has stated that it expects to close two aging coal plants in Massachusetts and Indiana within 5-7 years if environmental regulations occur as expected, as it would become uneconomic to run them. Nevertheless, with 41% of its 2009 electric generation originating from coal-fired units, Dominion will remain heavily reliant on coal. Coal combustion contributes more than 90% to the company’s total NOx, SO2, CO2 and mercury emissions, according to a data extrapolated from the report Benchmarking Air Emissions of the 100 Largest Electric Power Producers in the United States (Natural Resources Defense Council, 2010).
RESOLVED
Shareowners request that Dominion’s Board of Directors, at reasonable cost and omitting proprietary information, issue a report by September 2011 on the financial risks of continued reliance on coal contrasted with increased investments in efficiency and cleaner energy, including assessment of the cumulative costs of environmental compliance for coal plants compared to alternative generating sources.
Idacorp – Greenhouse Gas Emissions Reduction
WHEREAS
In 2007, the Intergovernmental Panel on Climate Change found that that “warming of the climate system is unequivocal” and that man-made greenhouse gas emissions are now believed to be the cause with greater than 90 percent certainty.
In October 2007, a group representing the world’s 150 scientific and engineering academies, including the U.S. National Academy of Sciences, issued a report urging governments to lower greenhouse gas emissions by establishing a firm and rising price for such emissions and by doubling energy research budgets to accelerate deployment of cleaner and more efficient technologies.
In October 2006, a report authored by former chief economist of the World Bank, Sir Nicolas Stern, estimated that climate change will cost between 5% and 20% of global domestic product if emissions are not reduced, and that greenhouse gases can be reduced at a cost of approximately 1% of global economic growth.
The electric industry accounts for more carbon dioxide emissions than any other sector, including the transportation and industrial sectors. U.S. power plants are responsible for nearly 40 percent of U.S. carbon dioxide emissions, and 10 percent of global carbon dioxide emissions.
Coal is the most carbon-polluting type of power generation. Coal accounted for 53% of power generation from Idaho Power Company owned resources in 2007 and 38% of its energy portfolio source. Numerous studies including the 2007 Idaho energy plan have indicated adequate renewable resources and efficiency opportunities within state of Idaho to handle Idaho power’s load growth over the next 20 years.
A majority of U.S. states are involved in initiatives to reduce greenhouse gas emissions, and at least 34 states have enacted renewable portfolio standards. National climate change legislation is expected to be a priority for the Obama administration and the 111th Congress.
In the Carbon Disclosure Project’s most recent annual survey of the S&P 500 (released 2008), 37% of utility respondents disclosed absolute greenhouse gas emission reduction targets, and 52% disclosed intensity reduction targets.
Some of Idacorp’s electric industry peers who have set absolute reduction targets include American Electric Power, the nation’s largest electric generator, Entergy, Duke Energy, Exelon, National Grid and Consolidated Edison. Those with intensity targets include CMS Energy, PSEG, NiSource and Pinnacle West.
Duke, Exelon, FPL, NRG, and others, through their participation in the U.S. Climate Action Partnership, have also publicly stated that the U.S. should reduce its GHG footprint by 60% to 80% from current levels by 2050. They have endorsed adoption of mandatory federal policy to limit CO2 emissions as a way to provide economic and regulatory certainty needed for major investments in our energy future
RESOLVED
Shareholders request that the Board of Directors adopt quantitative goals, based on current technologies, for reducing total greenhouse gas emissions from the Company’s products and operations; and that the Company report to shareholders by September 30, 2009, on its plans to achieve these goals. Such a report will omit proprietary information and be prepared at reasonable cost.
Big Coal Losing Momentum in the U.S.
Poor coal. For so long, it has gotten away with being the largest contributor (41 percent) to global CO2 emissions from energy use, a widespread public health hazard by virtue of lead, mercury and other pollutants, the source of black lung disease, and now we can add deforestation to its achievements. “Coal will be coal,” they said. “Isn’t it great that it’s cheap and abundant?” Coal claims that it’s now clean and has offered to change its ways by burying its carbon instead of spewing it all over the atmosphere, but its persecutors have obtained restraining orders and are bent on keeping it out of the house.
According to Coal Moratorium Now! and the Rainforest Action Network (RAN), fifty-nine coal plants (of more than 150 proposed between 2000 and 2006) were cancelled or shelved in 2007. Carbon emissions played a role in at least 15 cancellations, and coal plants disappeared entirely from some utilities’ long-range plans due to increasing regulatory scrutiny of long-range integrated resource plans. In some states, regulators are starting to favor utility-scale renewables over coal. Interestingly, more plants have been abandoned by their sponsors than rejected outright by regulators, courts or local authorities. Rising construction costs, insufficient financing or lack of subsidies and even lower demand estimates were contributing factors along with climate change.
At Trillium Asset Management Corporation, it’s always been our policy not to invest in mining companies, and we try to avoid holding electric power companies that favor coal over cleaner sources of energy. But fortunately our hands are not tied when it comes to advocacy. As my colleague Lauren McLean writes about in this issue (see p. 10), we’ve used our voice at Alliant Energy to promote greater development of energy efficiency incentives. We’re also on Bank of America‘s case. The Ceres member has received a lot of praise for being the first bank to adopt an “intensity” (reduction per unit) GHG target for its energy and utility lending portfolio; its goal is to realize a 7 percent decrease by 2008 from a 2004 benchmark. It is on its way to meeting that goal. So what’s wrong with this picture? It’s simple. Reductions per unit are all well and good, unless overall (“absolute”) emissions are going up – as Bank of America’s did by 11 percent between 2005 and 2007.
The company has refused to answer shareholders’ questions as to why this is. Could it have something to do with RAN’s research identifying the Bank as one of the top financiers of coal power plants? We’re starting to wonder if the kudos Bank of America is getting for its intensity reduction goals isn’t a little like patting a dieter on the back for reducing calories per meal even as he eats so many meals that he’s put on 11 percent more pounds since 2005.
This metaphorical epiphany was one of the motives behind our shareholder resolution calling on the Bank to embrace a moratorium on financing coal-fired power plants and coal mining by means of mountain top removal (MTR). A moratorium on building new coal plants is a radical idea that’s increasingly supported by non-radicals, such as the U.S. public. Seventy-five percent of American adults would support a five-year moratorium on new coal plants if funding for renewable alternatives was increased and efficiency standards were tightened.1
Mountain top removal is a double whammy on the climate front. The method clear-cuts forests and blasts away mountain tops to extract coal. The rubble is dumped in the valleys below, filling streams and destroying water resources. Between 1992 and 2012, the US Environmental Protection Agency estimates that MTR will have destroyed approximately 7 percent of Appalachian forests in coal mining regions studied.
Over 110 coal-fired electrical generating plants and synfuels plants are currently under construction or in the planning process. In addition to bearing their share of ethical responsibility for the disaster that is coal, those that finance it assume additional financial risk due to rising construction costs for coal plants and the eventual attachment of a price tag for emitting carbon (which Bank of America recently estimated at $20-$40 a ton in the absence of federal regulation).
Coal enthusiasts insist that capturing and storing carbon underground will solve the GHG problem, but as a new report from the Interfaith Center on Corporate Responsibility observes, these technologies are untested at actual plant-scale sizes.2
Bank of America successfully petitioned the Securities and Exchange Commission to exclude our proposal from the proxy ballot. However, Citigroup’s shareholders will vote on a similar resolution filed by Boston Common Asset Management. Vote Yes on Proposal 9. Coal is a bad investment.
Notes
1. “A Post Fossi-Fuel America: Are Americans Ready to Make the Shift?” opinion survey conducted by Opinion Research Corporation, October 18, 2007.
2. ICCR and Synapse Energy Economics, Inc., The Risks Of Investing In New Coal-Fired Generating Facilities, p. 29.
Bank of America – Moritorium on Coal Financing
WHEREAS
Bank of America (BOA) is a diversified financial services company providing banking,investment, investment banking, credit card and consumer finance services.BOA recognizes that its ability to attract and retain customers and employees could be adversely affected “to the extent our reputation is damaged” and that “failure to address, or to appear to fail to address various issues” could damage the Corporation and its business prospects. (2005 Annual Report)BOA also recognizes that:
- The health of our company is dependent on the health of communities and our society;
- Climate change and atmospheric pollution represent a risk to the ultimate stability and sustainability of our way of life; and
- Every part of our business has a potential impact on our environment.
http://www.bankofamerica.com/environment/index.cfm?template=env_clichangepos
BOA’s greatest impact on climate change and the environment arises from its financing of businesses and activities, such as electric power generated from coal-burning plants, that emit substantial greenhouse gases (e.g., carbon dioxide) and other pollutants.
As a leading financial institution, BOA has adopted a goal of reducing direct greenhouse gas (GHG) emissions from its facilities by 9% and indirect GHGs within its energy & utility portfolio by 7%.
However, BOA continues to provide financing for companies engaged in mountain top removal (MTR) coal mining and for coal-fired electric power, which, in addition to having serious adverse impacts on communities, the environment, and public health, may also increase the long-term indirect GHG emissions within BOA’s portfolio.
MTR devastates the environment. Forests are clear-cut, the top of mountains blasted away to reveal coal seams and the rubble dumped in the valleys below, filling streams and destroying water resources. Between 1992 and 2012, the US Environmental Protection Agency estimates MTR will have destroyed approximately 7% of Appalachian forests in coal mining regions studied. (http://www.epa.gov/Region3/mtntop/pdf/mtm-vf_fpeis_full-document.pdf)
Deforestation is the second leading source of GHG emissions worldwide. (http://www.gsfc.nasa.gov/gsfc/service/gallery/fact_sheets/earthsci/green.htm)
The carbon in forests destroyed by MTR each year roughly equals the annual emissions from two 800 megawatt coal-fired power plants.
Coal-burning plants, which supply nearly half of U.S. electric power, are responsible for 80% of the nation’s GHG emissions from this sector. Technology for capturing and sequestering carbon from coal-burning plants is in the pilot stage and not widely available. Uncertainties remain regarding leakage and impact on underground water sources.
Coal plants also release most of the sulfur dioxide, nitrogen oxide, particulate matter and mercury, which harms reproductive health and mental development in children. (http://www.ucsusa.org/clean_energy/coalvswind/c02c.html)
Dr. James Hansen, a leading climate scientist at NASA’s Goddard Space Center, has urged an immediate moratorium on the construction of new coal fired power plants in the U.S. as a priority to avoid triggering dangerous destabilization of the Earth’s climate systems. (http://www.columbia.edu/~jeh1/dots_feb2007.ppt)
RESOLVED
Shareholders request that BOA’s board of directors amend its GHG emissions policies to observe a moratorium on all financing, investment and further involvement in activities that support MTR coal mining or the construction of new coal-burning power plants that emit carbon dioxide.
