CCES News For You

May 23 2010
Special thanks to Dennis Shelly of Apex Companies (www.apexcos.com), leader in due diligence assessments for his contributions to this article.

As I’ve written a number of times, climate change has moved in the last year from being a voluntary program for companies that’s good for the bottom line and the Earth to a program tied to regulation. There will likely be federal legislation in the next few years as Sens. Kerry and Lieberman released draft climate/energy legislation that they believe can win bipartisan support. In the meantime, a number of states and even cities and counties have or are seriously planning climate change or greenhouse gas (GHG) emission reduction rules, some written as changes to energy and building codes. They will impact how facilities operate and can result in penalties for noncompliance.

Therefore, when you are performing an environmental compliance audit or a compliance assessment as part of due diligence for a proposed merger or acquisition, an understanding of the potential obligations associated with climate change rules may be a material consideration. Certainly an assessment is vital to understanding whether significant actions will be required on the part of the operation to respond to this growing issue. In addition, the SEC has recently required companies to disclose the potential impacts of climate change on their business as part of the annual reporting process.

Here are some questions to consider involving GHGs and energy that can be incorporated into the data collection stage of an audit or due diligence exercise:
• Has a facility carbon footprint been performed? Is it subject to 40CFR Pt 98? What contributes to GHG emissions (fuel usage, electricity, mobile sources)?
• What state and/or local climate change and energy conservation rules exist? Do any potentially apply to the facility?
• For the previous three years, what were the facility’s electrical, gas and water usage and costs? Are there usage trends? What rates does the facility pay? Are they discounted compared to other similar local industries or buildings?
• Does the facility operate within any voluntary climate change or energy goals, such as USEPA Climate Leaders, Energy Star, or LEED? If so, under what operating and monitoring requirements must the facility continue to operate?
• Has an audit to identify potential reductions in energy, water consumption, and waste generation been performed at the facility? What were the results? Were actions taken on audit recommendations and if so, what gains were made?
• What are the sources of the facility’s electricity, fuel, and water? Are there options (i.e., renewable sources)? What fuel do the facility’s boilers and other equipment use? Is a cheaper or “cleaner” fuel available (e.g., are there natural gas lines that can reach the facility)? Does the region have abundant or limited fresh water sources? Does the facility own Renewable Energy Credits (RECs)?

Answers to these questions provide valuable information regarding energy, sustainability, and climate change issues affecting facilities and their monetary impacts. With more climate change rules on the way, this is important information to consider.