Shareholders Urge Southern Company to Come Clean on Coal Ash
Georgia utility pressed to reduce risk to shareowners in wake of Tennessee disaster
5/24/2010 - In the wake of the 2008 Tennessee Valley Authority (TVA) disaster that spilled a billion gallons of toxic coal ash sludge across hundreds of acres, shareholders are pressing utilities to come clean about how they manage the coal ash produced by their power plants. This week the focus is on Southern Company* (Southern) of Atlanta, which manages over 20 coal ash storage facilities in the Southeastern U.S. through its subsidiaries Georgia Power, Alabama Power, Gulf Power and Mississippi Power. At Southern’s annual meeting Wednesday in Callaway Gardens, Georgia, shareholders will vote on a proposal asking the company to report on its efforts to reduce the environmental and health hazards of coal ash stored in ponds, landfills and mines. The proposal was filed by Green Century Capital Management (Green Century), an environmentally-responsible investment advisory firm.
The nation’s largest proxy advisory firm, RiskMetrics Group, which advises institutional investors how to vote their shares on proposals such as this, has recommended voting FOR the proposal. Similar proposals on coal ash at CMS Energy* and MDU Resources, Inc* this year received over 25% support from shareholders**, remarkably high for first-year environmentally-focused proposals.
“Southern Company produces over 6 million tons of coal ash each year and operates over 20 coal ash storage facilities, but fails to provide investors meaningful information about how it prevents harmful environmental impacts and mitigates coal ash-related risks,” said Emily Stone, Shareholder Advocate at Green Century.
Coal ash is a byproduct of coal-fired power plants that contains arsenic, mercury, lead, and other toxins left after combustion or filtered out of smokestack scrubbers. The health, environmental, and financial risks of managing coal ash came to light in December 2008 when a dam holding back a 1.1 billion gallon coal ash pond belonging to the TVA burst and covered over 300 acres with toxic sludge. TVA has estimated spill-related costs at $1.2 billion and has been the target of over 50 lawsuits since the spill. In response to the TVA disaster, this month the U.S. Environmental Protection Agency opened a comment period on two proposals for regulating coal ash under the Resource Conservation and Recovery Act (RCRA). These new regulations could force Southern to drastically change the way it manages its coal ash.
“The TVA example shows us that compliance with current regulations is not enough to prevent financial risk,” said Stone. “According to company documents, TVA was inspecting its facilities more frequently before its dam breach than Southern currently reports that it conducts inspections. Shareholders want to know what the company is doing to prevent a TVA-like disaster beyond what is required by regulation and how the company is reducing the possibility of groundwater contamination from these large ponds and landfills.”
“Public health concerns have been raised about storing coal ash in both wet and dry forms,” said Amy Galland, Research Director at As You Sow in San Francisco. “Storing and disposing of coal ash as a dry material in secure landfills with synthetic linings and impermeable caps is recognized as a ‘best practice’ for risk mitigation, as it minimizes the possibility of contamination or spills.” This week’s resolution at Southern is the third shareholder proposal on coal ash to be voted upon during the 2010 shareholder meeting season this spring. Last week, As You Sow presented a similar coal ash resolution at a meeting of CMS Energy. A proposal last month at MDU Resources Group, parent of Montana-Dakota Utilities Co., earned a 25.6 percent vote in support**. In Green Century’s experience, first-time environmental resolutions receive 5 to 7 percent of the shareholder vote and shareholder advocates consider a vote of support over 10 percent a success, as that level of support can be enough to change a company’s practices.
Report on Coal Combustion Waste
WHEREAS: Coal combustion waste (CCW) is a by-product of burning coal that contains high concentrations of arsenic, mercury, heavy metals and other toxins filtered out of smokestacks by pollution control equipment. CCW is often stored in landfills, impoundment ponds or abandoned mines. Over 130 million tons of CCW are generated each year in the U.S.
Coal combustion comprises a significant portion (68%) of Southern Company’s generation capacity.
The toxins in CCW have been linked to cancer, organ failure, and other serious health problems. In October 2009, the U.S. Environmental Protection Agency (EPA) published a report finding that “Pollutants in coal combustion wastewater are of particular concern because they can occur in large quantities (i.e., total pounds) and at high concentrations …in discharges and leachate to groundwater and surface waters.”
The EPA has found evidence at over 60 sites in the U.S. that CCW has polluted ground and surface waters.
Recent reports by the New York Times and others have drawn attention to CCW’s impact on the nation’s waterways, as a result of leaking CCW storage sites or direct discharge into surrounding rivers and streams.
The Tennessee Valley Authority’s (TVA) 1.1 billion gallon CCW spill in December 2008 that covered over 300 acres in eastern Tennessee with toxic sludge highlights the serious environmental risks associated with CCW. TVA estimates a total cleanup cost of $1.2 billion. This figure does not include the legal claims that have arisen in the spill’s aftermath.
Our company also re-uses a significant portion of its CCW. While dry CCW has several beneficial re-uses, such as in concrete and pavement, it can also pose public health and environmental risks in the dry form.The EPA plans to determine by the end of 2009 whether certain power plant by-products such as coal ash should be treated as hazardous waste, which would subject CCW to stricter regulations.
The EPA has identified over 580 CCW impoundment facilities around the country. At least 49 of these have been rated by the National Inventory of Dams (NID) as “high hazard potential” sites, where a dam breach would likely result in a loss of human life and significant environmental consequences. According to our company’s filings with the EPA, our company operates at least 18 CCW impoundments. One of these ponds, operated by Georgia Power, has been labeled “high hazard potential” by the NID.
Our company has withheld information about inspections and size of its ponds as confidential, despite disclosure of inspection information by all other responding companies, keeping shareholders in the dark about possible risks.
RESOLVED: Shareholders request that the Board prepare a report on the company’s efforts, above and beyond current compliance, to reduce environmental and health hazards associated with coal combustion waste, and how those efforts may reduce legal, reputational and other risks to the company’s finances and operations. This report should be available to shareholders by August 2010, be prepared at reasonable cost, and omit confidential information such as proprietary data or legal strategy.
Green Century Capital Management is an investment advisory firm focused on environmentally responsible investing. Founded by a partnership of non-profit environmental advocacy organizations in 1991, Green Century's mission is to provide people who care about a clean, healthy planet the opportunity to use the clout of their investment dollars to encourage environmentally responsible corporate behavior. Green Century believes that shareholder advocacy is a critical component of responsible investing and actively advocates for greater corporate environmental accountability. Green Century manages two environmentally responsible mutual funds, the Green Century Balanced Fund and the Green Century Equity Fund.
*As of March 31, 2010, Southern Company was not held by the Green Century Balanced Fund or the Green Century Equity Fund; CMS Energy was not held by the Green Century Balanced Fund or the Green Century Equity Fund; and MDU Resources, Inc. was not held by the Green Century Balanced Fund or the Green Century Equity Fund. Portfolio composition will change due to ongoing management of the Funds. Please refer to the Green Century Funds website for current information regarding the Funds' portfolio holdings. These holdings are subject to risk as described in the Funds' prospectus. References to specific investments should not be construed as a recommendation of the securities by the Funds, their administrator, or their distributor.
** The percentage in favor was calculated by (i) dividing the number of votes in support of the proposal by (ii) the sum of the number of votes voted in support of and against the proposal. Abstentions and broker non-votes were not included in the calculation.
You should consider the Funds' investment objectives, risks, charges, and expenses carefully before investing. For a prospectus that contains this and other information about the Funds, call 1-800-93-GREEN, visit www.greencentury.com or email firstname.lastname@example.org. Please read the prospectus carefully before investing. Investments are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
The Green Century Funds are distributed by UMB Distribution Services, LLC. 5/10
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