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The Times-Picayune (New Orleans): WARMING TO THE FUTURE

Many industries are starting now to get more environmentally friendly — before it’s the law

Sunday, February 18, 2007
By Pam Radtke Russell
Business writer

The debate over climate change is becoming as much about economics as the environment.
 
Companies such as Entergy Corp., BP plc. and Royal Dutch Shell are working to reduce or offset their greenhouse gas emissions, which are linked to climate change, saying it’s just good business.

“It’s not a trade-off to be an environmentally conscious company,” said Sarah Howell, a spokeswoman for BP. Both BP and Entergy lead their industries in calling for reductions in greenhouse gas emissions as well as reducing their own.

Others who have long questioned the science of climate change are now speaking up, wanting a say in any legislation to curb such emissions — regulations that are likely to affect their balance sheets.

“The train is leaving the station. We will see greenhouse gas legislation in the next couple of years,” said Brent Dorsey, director of environmental programs for Entergy Corp.

Just last week, Rex Tillerson, chairman and chief executive officer of ExxonMobil, which has long been critical of climate change science, said that the oil and gas industry has a responsibility to contribute to the discussions and take concrete action to reduce greenhouse gas emissions.

Louisiana has high stakes in the debate. If greenhouse emissions aren’t cut, a recent report by the Intergovernmental Panel on Climate Change says, that climate change would affect Louisiana more than any other state in the nation.

But cutting greenhouse gases — which are produced when fossil fuels such as oil, natural gas and coal are burned — might be a tall order for a state that emits more of the gases per capita than any other state in the nation because of its concentration of petrochemical companies, according to statistics by the federal Energy Information Administration.

And steps to reduce emissions associated with energy and power production often result in higher prices for those commodities, something U.S. industries are not always willing to embrace.

“American manufacturing is already reeling from the high cost of energy and natural gas feed stocks versus the rest of the world. If we are not careful how we approach this serious policy matter, we will put a nail in manufacturing’s coffin and kill another several million American jobs,” said Dan Borne, president of the Louisiana Chemical Association.

But using Hurricanes Katrina and Rita as an example of the havoc climate change might bring, Dorsey said there will be an even greater cost for businesses if they do nothing.

“If this stuff is real, this is the kind of stuff we are going to be faced with, can we afford to be wrong?” Dorsey said.

Companies are beginning to address climate change, but it will take time, said Jeff Erikson of SustainAbility, a company that helps businesses address environmental issues.

“They are taking steps to turn this into a business opportunity, but they still have to answer to shareholders and they can’t turn this around overnight,” Erikson said.

And in some cases, even the environmentally friendly steps they are taking — such as planting trees — are subject to debate about their merits.

Become more efficient

Many businesses say they are doing enough to reduce greenhouse gas emissions without federal regulations. Instead, the American Petroleum Institute and the Bush administration among others support voluntary approaches to reducing greenhouse gases.

Such voluntary measures include steps to reduce the amount of energy that companies themselves use to operate, programs to offset the release of carbon dioxide, and investments in renewable fuels and technology.

Moves to increase energy efficiency are among the most popular because they are almost guaranteed to save a company money.

“Using less fuel lowers the cost for the customer,” said Susan Broussard, a spokeswoman for CLECO.

The American Petroleum Institute promotes energy efficiency as the best way to reduce greenhouse gas emissions, and API member companies have committed to increasing refinery energy efficiency by 10 percent by 2012, said Lou Hayden, senior policy analyst at API.

“We believe energy efficiency is the easiest, cheapest and most reliable source of “new energy” available today and one of the easiest, cheapest ways to reduce (greenhouse gas) emissions,” according to Chevron’s Web site.

Chevron, for example, is 27 percent more energy-efficient now than it was in 1992. In late 2005, Shell Exploration and Production began evaluating and identifying opportunities for energy efficiency on its facilities off the Louisiana coast, a company spokesman said.

Entergy has invested $14.8 million in products such as turbine upgrades and computerized control systems that allowed the company to produce more power without using more energy.

One efficiency that could have the biggest impact on climate change is reducing the amount of gas that is flared or vented during oil production. Flaring or venting natural gas that is recovered when oil is produced has been a standard practice in the oil industry. The practice wastes enough natural gas to fuel France and Germany for a year, according to the World Bank.

The practice is still common in developing countries, though many companies, including Shell, have committed to ending such activity.

A transfer effect

Beyond steps toward boosting their own energy efficiency, companies are involved in projects that offset their greenhouse gas emissions by getting rid of the gases in other ways.

Few such efforts occur in Louisiana, however. While some pollutants, such as sulfur dioxide, are site-specific and must be mitigated locally, greenhouse gas emissions are a global issue.

Entergy, for example, has offset projects in Iowa and in the Northwest.

One of the most common offsets, and one that occurs most frequently in Louisiana, is the planting of trees.

Entergy and Chevron, among others, have helped reforest Tensas River National Wildlife Refuge by planting hundreds of thousands of trees.

And even CLECO, which is more conservative in its approach to climate change, has acquired 3,600 acres of land in central Louisiana that it is planting to help offset carbon emissions.

While planting a tree is “never a bad thing to do,” there are questions about the real benefit these projects have, said Robert Kaufmann, an energy and environment professor at the University of Pennsylvania.

Planting trees isn’t really offsetting carbon dioxide generated by burning fossil fuels; it’s simply offsetting the original deforestation of the land, he said.

A growing number of companies are participating in more exotic means of sequestering carbon dioxide, such as injecting it deep into the earth.

Oil companies have been doing this for a number of years to enhance the recovery of oil. By taking carbon dioxide and injecting it back into an oil well, companies can retrieve oil from a marginal well.

Taking it one step further, some companies are capturing their carbon dioxide emissions and permanently injecting them into geological formations.

BP, for instance, every year is reinjecting about one million tons of carbon dioxide about 6,000 feet below the Algerian desert.

Entergy is also investigating the concept.

“We’re trying to find where you can put the carbon dioxide for a long period of time where it will stay,” Dorsey said.

API is also interested in the potential of such storage.

But until the measures are proven the projects could be a potential liability, Hayden said.

Other kinds of power

Oil companies are also looking at alternative fuels as part of the answer to climate change.

BP has said it will invest $8 billion over 10 years in solar, wind, hydrogen and natural gas power. Shell has also invested more than $1 billion in alternative fuels since 2000, and Entergy has invested in wind power.

The API, though, says that such alternative fuels won’t replace fossil fuels. With a growing population and growing demand for energy, all sources of power will be required to meet demand.

“Coal, clean coal, nuclear, ethanol, we’re going to need all forms of energy,” Hayden said.

Environmentalists say that the oil companies and the government should be doing more to encourage alternative forms of energy. The investments being made are just a small fraction of what the companies are investing in oil and gas exploration and production.

“Oil companies should really shift their attention away from fossil fuels to more renewable energy. It’s time that happened,” said Micah Walker Parkin, program director of the Alliance for Affordable Energy. “Certainly the leading source of greenhouse gas emissions are from cars and power plants.”

Putting teeth in it

A growing number of groups and businesses say voluntary measures aren’t enough to curb greenhouse gas emissions.

“While the efforts are very real and important, they are limited,” said William Pizer, an economist and a lead author of the United Nations-sponsored Intergovernmental Panel on Climate Change Report.

Federal legislation is needed to “level the playing field,” said Mark Brownstein, director of business partnerships for Environmental Defense.

Late last month, a group of businesses called the U.S. Climate Action Partnership, including BP, DuPont, General Electric and Alcoa, along with leading environmental organizations including Environmental Defenses and the Pew Center on Global Climate Change, called on Congress to adopt greenhouse gas legislation.

The group is seeking mandatory reductions of greenhouse gas emissions from major emitting sources, using a cap and trade program.

Such a program, similar to what is used to reduce emissions that cause acid rain, would set limits for greenhouse gas emissions. If companies exceed those limits, they could buy offsets.

Entergy too is pushing for mandatory caps in Congress, but only for power companies.

“You don’t want to put the entire economy at risk,” Dorsey said. Utilities should respond better to such a program because they are used to being regulated, he said.

CLECO, though, disagrees.

Any legislation “needs to involve all sectors of the economy, not just focus on power, and not just the energy sector,” said Robbie Laborde, general manager of environmental services for CLECO.

Putting a price on carbon dioxide emissions is likely to result in higher prices for fossil fuels and should encourage innovation and new technologies, Dorsey said.

Same across the board
About a dozen states have enacted greenhouse gas regulations, and more are considering such legislation. Rather than a patchwork of laws, companies want a consistent federal policy, Pizer said.

“They are afraid of what’s going on right now,” Pizer said. “They would rather see a very well-defined federal program.”

Entergy and other companies would benefit if the legislation that they are pushing is adopted. The programs, as they envision them, would give credit to companies that took action early and have a portfolio of power that is not fossil-fuel-generated.

Entergy, for instance, produces about 50 percent of its power through its nuclear plants, which emit no greenhouse gases.

In a recent Senate committee meeting, Sen. James Inhofe, R-Okla., who disputes the connection between fossil fuels and climate change, called those pushing for mandatory legislation “climate profiteers.”

“These companies will gain market share against their competitors while the economy flattens and jobs are sent to China,” Inhofe said.

Inhofe, though, seems to be in the dwindling minority as a growing number of companies join the debate.

“You’re going to see a lot of ideas out there,” Pizer said. “The disagreement isn’t whether to act, but what to do. It’s in (a company’s) interest to be involved in the debate.”

Pam Radtke Russell can be reached at [email protected] or (504) 826-3351.

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