Investors press Dominion to come clean on biomass power risks
Bioenergy “greenwashing” is epidemic in the biomass industry – companies frequently claim that biomass is “clean,” carbon neutral, and climate friendly. However, a publicly traded company that makes such claims is not only being deceptive to the public – it is actually putting its shareholders at risk, as bioenergy and its greenhouse gas emissions become increasingly regulated. Dominion Resources Inc has put a lot of eggs in the bioenergy basket, with 75% of its renewable energy slated to be produced by biomass power by 2020. Not surprisingly, Dominion has resisted explaining to its shareholders the risks associated with investment in bioenergy, but this year, a shareholder resolution will give investors a chance to weigh in.
The resolution (text at the bottom of this post, and downloadable here) simply requests that the company prepare a report “evaluating the environmental and climate change impacts of the company using biomass as a key renewable energy and climate mitigation strategy, including an assessment of risks to the company's finances and operations posed by emerging public policies on biomass energy and climate change.” It was filed by a shareholder of Dominion who is concerned about the company's focus on biomass power to meet renewable energy obligations.
Policy makers are increasingly recognizing that biomass energy increases greenhouse gas emissions just when it is most important we reduce them. For instance, the Vermont Public Service Board just denied a certificate of public good to the proposed 35 MW North Springfield Sustainable Energy biomass plant because the plant would increase CO2 emissions, and offsetting those emissions with forest regrowth would take decades.
Publicly traded companies have an obligation to tell their shareholders about known risks to their investments. Dominion knows that biomass power increases CO2 emissions, and they know that their substantial investments in biomass power – converting three coal plants to burn biomass (150 MW), and operating other wood burning plants like the 80 MW Pittsylvania plant – will be at risk if and when biomass CO2 emissions are regulated. As the recent report and shareholder complaint letter to the Securities and Exchange Commission points out, Dominion has admitted as much in state-level legal filings – they just haven’t admitted it to shareholders.
Dominion opposed the shareholder resolution asking for a study of bioenergy risks, but the SEC overruled the company, stating that the resolution should be allowed to go to a vote because “the proposal focuses on the significant policy issue of climate change.”
Of course Dominion will advise its shareholders to vote against the resolution, but all the resolution asks for is a study. If the company believes their investments in bioenergy are solid and defensible, then they shouldn’t be afraid of a study!
We urge Dominion shareholders to vote for this resolution.
Text of the resolution:
The latest report from the Intergovernmental Panel on Climate Change affirms that atmospheric greenhouse gas concentrations are the highest in 800,000 years, and a National Academy of Sciences report has warned “each additional ton of greenhouse gases emitted commits us to further [climate] change and greater risks”;
Dominion is increasing its biopower holdings with conversion of the Hopewell, Altavista, and Southampton coal plants to biomass (~153 MW) and up to 60 MW co-firing wood at the Virginia Hybrid Energy Center, alongside the existing 83 MW Pittsylvania plant. Greenhouse gas emissions from wood burned at these facilities will be millions of tons per year. Dominion projects that in 2020, wood-burning in power plants will provide about 75% of the renewable power generated by the Company, while wind will provide 0% and solar 3%;[i]
Dominion has acknowledged in testimony before the Virginia State Corporation Commission that biomass power plants actually emit more carbon dioxide (CO2) per megawatt-hour than coal-fired power plants, on a day-to-day basis;[ii]
Economic viability for the three coal-to-biomass conversions depends on a regulatory assumption of carbon neutrality, without which Dominion has stated that the net present value of operation is less than if the plants continued to burn coal;[iii]
The Environmental Protection Agency (EPA) panel convened to advise on regulation of biogenic CO2 under the Clean Air Act concluded that biomass, including forest residues (the purported fuel for Altavista, Hopewell, and Southampton), cannot be presumed automatically carbon neutral,[iv] and
Public policies and regulations addressing climate change may negatively affect Dominion’s biopower investments. A Federal Court found EPA’s deferral of biogenic CO2 regulation under the Clean Air Act illegal, and EPA’s deferral of regulation in any case lapses in 2014. New policy developments may threaten continued subsidies for biopower as renewable energy; legislation has been introduced in Maryland and Washington, DC that would eliminate certain renewable energy subsidies for Dominion’s bioenergy holdings.
RESOLVED: Shareholders request that the Board of Directors prepare a report by November 1, 2014, at reasonable cost and excluding proprietary information, evaluating the environmental and climate change impacts of the company using biomass as a key renewable energy and climate mitigation strategy, including an assessment of risks to the company's finances and operations posed by emerging public policies on biomass energy and climate change.
Supporting Statement: Among other things, the report should consider the impact that potential State or federal rejection of “carbon neutral” status for particular biomass energy facilities, fuel sources or categories of operations could have on subsidies, permitting processes, or existing facilities.
[i] Dominion Virginia Power Annual Report to SCC on Renewable Energy, Nov. 1, 2012.
[ii] SCC Case No. PUE-2011-00073. Vol. III 01-12-2011.
[iii] Id. Direct Testimony of Glenn A. Kelly, Director of Generation System Planning for Dominion. Vol. II 06-27-2011, p. 13, Figure 7.
[iv] “Science Advisory Board Review of EPA’s Accounting Framework for Biogenic CO2 Emissions from Stationary Sources”, September 2011.