Kinder-Morgan’s Environmental, Social, and Governance Report (no regrets predominates)

“… Kinder Morgan rightly emphasizes its self-interested progress in making its operations more efficient and reducing byproduct waste. Presumably, such progress did not hurt consumers and/or stockholders but was a win/win. Such is a no regrets policy toward methane emissions in particular.”

“Kinder Morgan’s “Statement on Climate Change” smartly places the climate-change issue in a global and economic context. But it gives unqualified deference to the notion that CO2 emissions as an inherent bad must be minimized rather than apply an economic standard of good business sense, or profitability.”

“Kinder Morgan … has a natural incentive to capture  methane emissions where economical. It is also in the CO2 business of increasing crude oil recovery. The good news is that there is not a hint of uneconomic action to reduce methane or CO2 emissions in its operations. Such “no regrets” avoids the keep-it-in-the-ground fanaticism of the anti-fossil-fuel lobby and buys time for the crusade of “climate stabilization” to die of its own weight.”

A few months ago, I evaluated a shareholder resolution presented to Kinder Morgan, Inc. (KMI) to begin issuing periodic reports of environmental sustainability. I advised against playing in the keep-it-in-the-ground sandbox where anything and everything will be used a fossil-fuel company, even one centered on natural gas and tucked  in the midstream of the oil and gas industry.

By way of background, KMI is a leading US infrastructure company with ownership in 84,000 miles of pipelines and 152 terminals, primarily handling natural gas but also refined petroleum products, crude oil, condensate, CO2 and other products. The midstream company trans-loads and stores petroleum products, ethanol, chemicals, and bulk products including coke, metals and ores.

Founder Richard Kinder left Enron in 1996, building a company on acquisitions advantaged by the MLP (master limited partnership) tax-reduction model. He also cut costs in a way that previous owners did not to create significant shareholder value in the twenty-year history of the company.

No Regrets Climate Policy

Back in 1999, I published an essay in Public Utilities Fortnightly on corporate social responsibility. “Corporate policy makers entering the fray should be guided by two principles, both reflecting the balance of evidence at the intersection of climate science and climate economics,” I began.

First, mandatory GHG programs should be rejected in favor of voluntary approaches. Businesses should oppose the Kyoto Protocol, and they should work against lesser regulatory regimes that are costly, ineffectual, or both. Second, voluntary actions by corporations should not go beyond win-win “no regrets” initiatives.  Control practices that are uneconomic penalize either consumers or stockholders and politicize the issue of corporate responsibility.  Few will be satisfied, and the ineffectual measures will eventually have to be abandoned.

I also recommended corporations to take the high ground:

Corporations working with environmental groups on various climate change initiatives should make these twin principles an understanding of the collaboration. This will ensure that real quality-of-life environmental improvements drive the process rather than hidden agendas at odds with economic growth, globalization, energy abundance, and progressive change.

Given KMI’s decision to engage the enemy, a free marketeer would have liked the report to emphasize the open nature of the debate from the science to the economics to the politics. The report could have also emphasized that corporations are not governments and should not do what public authorities cannot, will not, and should not do.

Kinder Morgan rightly emphasizes in its report its self-interested progress in making its operations more efficient and reducing byproduct waste. Presumably, such progress did not hurt consumers and/or stockholders but was a win/win/win. Such is a no regrets policy toward methane emissions in particular.

Highlights of the KMI report follow:

On Methane (verbatim):

  • For more than 20 years we have been committed to reducing methane emissions from our natural
    gas transportation and storage assets. Over the past three years, our emission reductions totaled
    over 5 million metric tons of CO2e. With respect to our natural gas transmission and storage
    assets, we have committed to achieving an intensity target of 0.31% of methane emissions per
    volume of throughput by 2025. We have worked collaboratively with industry peers, agencies, and
    EDF to develop methane emission measurement and reduction technologies and best practices.
    We have several energy management programs to reduce our electricity usage and Scope 2 GHG
    emissions across our business.
  • We integrate a culture of safety and emergency preparedness throughout our organization.
    Over the past three years, our employee health and safety incident rates improved from 1.2
    to 1.0 total recordable injuries per 100 employees and our contractor rates improved from
    0.9 to 0.8.
  • Pipelines are the safest and most efficient method of transporting natural gas and petroleum
    products; safer than rail, barge, or truck. We use state-of-the-art technology to monitor and
    maintain the integrity of our pipelines. We have extensive public awareness, emergency
    preparedness, business continuity planning, and pipeline inspection programs. Both our
    reportable pipeline incidents and significant pipeline incidents have steadily improved over
    the past three years.
  • To identify, assess, and manage ESG regulatory risks we maintain a process for identifying,
    communicating, and verifying compliance with changes in applicable regulatory requirements.
    Over each of the last three years, we evaluated on average over 1,200 proposed and 480 final new
    regulations, interpretations, and guidance.

We are working to expand our ESG reporting infrastructure to make additional disclosures and report
additional metrics in future years. In 2019, we expect to conduct an assessment of our business strategy
under a 2°C scenario. We are currently developing the necessary processes, procedures, information
technology systems, personnel, and controls to expand our emissions reporting infrastructure to meet the
SASB GHG reporting standards company-wide. We report gross global Scope 1 and 2 emissions for our
Canadian assets in this report and currently anticipate reporting our company-wide Scope 1 and 2 GHG
emissions by 2021.

On Climate Change

Kinder Morgan’s “Statement on Climate Change” smartly places the climate-change issue in a global and economic context. But it gives unqualified deference to the notion that CO2 emissions as an inherent bad must be minimized rather than apply an economic standard of good business sense, or profitability.

It is a matter that requires the cooperation and contributions of citizens, industry, the environmental community and governments nationally and globally to advance the broad alignment of environmental responsibility and economic opportunity for all…. Specifically, 

We are expanding our natural gas transmission business to make access to lower carbon and renewable energy more feasible.

We are reducing emissions of methane and other greenhouse gases from our operations.

We are pursuing opportunities with our producing partners to increase energy efficiency along the value chain.

We are making energy efficiency improvements in our operations and exploring new low-carbon technologies and business models.

We include reasonably anticipated policy directions and regulatory decisions into our business models and projects.

Kinder Morgan does not produce but handles natural gas and petroleum products. It has a natural incentive to capture  methane emissions where economical. It is also in the CO2 business for increased crude oil recovery. The good news is that there is not a hint of uneconomic action to reduce methane or CO2 emissions in its operations.

Such “no regrets” avoids the keep-it-in-the-ground fanaticism of the anti-fossil-fuel lobby and buys time for the crusade of “climate stabilization” to die of its own weight.

The post Kinder-Morgan’s Environmental, Social, and Governance Report (no regrets predominates) appeared first on Master Resource.

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December 6, 2018 at 01:04AM

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