Michael Giberson
Last Friday, New York Attorney General Andrew Cuomo sent subpoenas to five power generating companies seeking to find out if the companies had properly disclosed financial risks associated with proposed new coal-fired power plants.
All five of the letters accompanying the subpoenas are available from the NYAG’s website. Here is the opening paragraph of the letter to Dominion Resources, Inc.:
We are aware that Dominion Resources, Inc., (“Dominion”) has plans to build a coal-fired electric generating unit that would generate 585 megawatts of electricity without current plans to capture and sequester the resulting carbon dioxide (CO2) emissions. The increase in CO2 emissions from the operating of this unit, in combination with Dominion’s other coal-fired plants, will subject Dominion to increased financial, regulatory, and litigation risks. We are concerned that Dominion has not adequately disclosed these risks to its shareholders, including the New York State Common Retirement Fund, which is a significant holder of Dominion stock. Pursuant to the Attorney General’s investigatory authority under New York General Business Law § 352, and New York Executive Law § 63(12), accompanying this letter is a subpoena seeking information regarding Dominion’s analysis of its climate risks and its disclosures of such risks to investors.
A little later, the letter gets more specific: “For example, any one of the several new or likely regulatory initiatives for CO2 emissions from power plants – including state carbon controls, EPA’s regulations under the Clean Air Act, or the enactment of federal global warming legislation – would add a significant cost to carbon-intensive coal generation, such as the new coal plant planned by Dominion.” In addition to Dominion, the NYAG’s office sent subpoenas to AES, Dynegy, Peabody, and Xcel. Here is the story from the New York Times.
The letter doesn’t say so explicitly, but I’m sure the message was clear, that in addition to new or likely legislative actions and substantive regulatory initiatives, the companies also faced the risks and costs associated with being harassed by swarms of officers from the NYAG’s office.
The NYAG suggests that investors in the companies — the New York State Common Retirement Fund apparently among them — may be unaware of global warming or that policymakers around the country may try to do something about it or that the generating companies in which they are investing might be affected by this potential legislation. If the NYAG is concerned that the state employee’s retirement fund is inadequately informed about the companies they invest in, maybe they should be sending a letter to the retirement fund directly. Meanwhile, if the NYAG isn’t happy with current federal and state global warming policies, it should take up its case with federal and state legislators.
This is no way to do energy policy.
Well, worse than that, it is simply no way to do business. Businesses need a clear regulatory environment, with clear rules and clear procedures. Barring that, investment becomes too risky.
Let me give you an excellent example. BP is re-jiggering its Whiting, Indiana refinery to be able to process Canadian Tar Sands. As a result, the amount of pollutants that will be processed by its waste water treatment plant will increase, and they will have to increase their emissions of ammonia and total suspended solids (TSS).
BP went through the proper regulatory process to get the permits to increase their emissions. They did everything exactly the way they were supposed to, but after the fact the Chicago Tribune created a kerfuffle by claiming that BP was increasing the amount of “sludge” it was “dumping” in the lake.
As a result, politicians became involved and put a lot of pressure on BP to not increase emissions. BP was threatened with losing its needed air permits if it didn’t give up the water permits.
This kind of regulatory risk puts the whole project at risk. Besides being able to refine the Canadian Tar Sands, the Whiting project will increase the capacity of the refinery. Refining capacity is desperately needed in the Chicago region, and the nation as a whole.
Keep in mind that one good rainstorm will force the City of Chicago to dump raw sewage into Lake Michigan, which in one day can add more ammonia and TSS into the Lake than BP would emit in 2 or 3 years. This doesn’t even take into account runnoff from streets. Chicago’s dog population and Chicago’s dog owners’ dog feces removal habits are such that any rain storm cleans the streets right into the Lake.
At least in the Chicago/BP case, if BP’s costs go way up most of the costs will fall on Chicago area consumers. Chicago residents are also absorbing some of the costs of any change in emissions, and presumably a some political balance can be attained.
(Not making any particular claim about the efficiency of the process, but at least there is some internal feedback mechanism.)
In the NYAG case, my sense is that the coal producing plants at issue are not in the state of New York at all, so any costs imposed on the affected (i.e. harassed) companies falls on non-residents. In such a case there is very little in the way of a natural feedback/check on any political over-reaching.
The NYAG got you to talki about him. It worked.