The Securities and Exchange Commission (“Commission”) is proposing for public comment amendments to its rules under the Securities Act of 1933 (“Securities Act”) and Securities Exchange Act of 1934 (“Exchange Act”) that would require registrants to provide certain climate-related information in their registration statements and annual reports. The comment period closed May 22, 2022. 

The proposed rules would require information about a registrant’s climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks would also include disclosure of a registrant’s greenhouse gas emissions, which have become a commonly used metric to assess a registrant’s exposure to such risks. In addition, under the proposed rules, certain climate-related financial metrics would be required in a registrant’s audited financial statements.

The first 465 pages of the document are the SEC response to comments provided during the development phase of the proposed rules last year.  The proposed new rules begin on page 465.  There is some interesting stuff on what SEC is looking for regarding how registrants assess climate related risk (see § 229.1503 (Item 1503) Risk management starting on page 482).

Contact me with any question or comments.

The following is an excerpt from Heck Associates July 1, 2012 Newsletter.  Werner Heck Associates is long time GHG consultant and auditor we have worked with on GHG V&V Body Accreditation audits.

 A federal appeals court on June 26 upheld a finding by the Environmental Protection Agency that heat-trapping gases from industry and vehicles endanger public health, dealing a decisive blow to companies and states that had sued to block agency rules. A three-judge panel of the United States Court of Appeals for the District of Columbia declared that the agency was “unambiguously correct” that the Clean Air Act requires the federal government to impose limits once it has determined that emissions are causing harm. The judges unanimously dismissed arguments from industry that the science of global warming was not well supported and that the agency had based its judgment on unreliable studies. “This is how science works,” they wrote. “The E.P.A. is not required to reprove the existence of the atom every time it approaches a scientific question.” In addition to upholding the E.P.A.’s so-called endangerment finding, the court let stand related rules setting limits on greenhouse gas emissions from cars and limiting emissions from stationary sources. Opponents had also challenged the agency’s timetable for enforcement and its rules singling out big polluters, but the court said the plaintiffs lacked the standing to do so.

During the week of June 25, record temperatures and wildfires have scorched the western United States. The National Climate Data Center reports that 41 heat records have been broken or tied since June 24, mostly in Colorado, Kansas and Nebraska, which is quite unusual for this time of year. Since June 23, a wildfire near Colorado Springs has burned over 18,000 acres, and 34 other large fires are still burning in the country. Scientists taking part in a conference call on June 21 arranged by the nonprofit science outreach group Climate Communication said that while they could not apportion blame to a specific factor, there was agreement that this week’s events fit into a pattern of extreme weather events and catastrophic fires that climate scientists predict will only worsen in decades to come. “What we’re seeing is a window into what global warming really looks like,” said Michael Oppenheimer, a geoscientist at Princeton University. “It looks like heat. It looks like fires. It looks like this type of environmental disaster.”

By ML Juszczak, Project Manager, ECSI GHG Programs

The USEPA has issued its Greenhouse Gas Rule in the form of 40 CFR Part 98.  Companies subject to the rule must begin reporting annual greenhouse gas emissions for the year beginning on January 1, 2010.   Although the rule fills hundreds of pages in the Federal Regiater,  it still leaves important questions unanswered.  For example, what is  the proper way to sample coal for laboratory analysis?

Coal must be analyzed for calorific value to determine the fuel’s high heat value, or HHV, in two of the four CO2 emission calculation methodologies defined in the rule (specifically, Tier 2 and Tier 3).  A facility choosing either of these methodologies must sample and analyze each lot of coal that it receives (a lot being a “shipment or delivery of a single fuel comprised of a shipload, barge load, group of trucks, or group of rail cars”.)   The rule also specifies in §98.34 that ASTM D 5865-

07a – Standard Test Method for Gross Calorific Value of Coal and Coke be used.  If you read no further, you may think this is a fairly simple and straightforward matter.  As is often the case, however, this matter is neither simple nor straightforward.

The difficulty that arises does not concern the analysis of the sample, but rather how to compose a sample, how often to compose it and, how to prepare it prior to analysis.  Two other ASTM standards enter the picture:

• ASTM D 2013-07 – Standard Practice for Preparing Coal Samples for Analysis
• ASTM D2234/D2234M-09a – Standard Practice for Collection of a Gross Sample of Coal

 These are incorporated into the rule by reference in §98.7(e), and they are interrelated as follows:

• ASTM Method D5865-07 references  ASTM D 2013-07, and
• ASTM D 2013-07 in turn references ASTM D2234/D2234M-09a.

ASTM D2234 requires that 15 “increments” of mechanically cleaned coal, or

35 “increments” of raw coal, be gathered at separate times from each lot to form a “gross sample.”  There are three increment quantities:

1 pound for coal with a top size of ?“

 3 pounds for coal with a top size of 2“

 7 pounds for coal with a top size of 6“

Therefore, a gross sample can be from 15 pounds all the way up to 245 pounds. 

ASTM D2234 also defines a lot as 1,000 tons of coal.  If a true lot is larger than

1,000 tons, sampling increments are either increased proportionately, or the total quantity is subdivided and each sub-lot is sampled individually.  This is a significant difference from the EPA’s definition of a lot found in §98.34.

ASTM D 2013-07 prescribes how the gross sample is to be ground, mixed, and divided using milling and rifling equipment (rifling is a type of sorting process) to yield a quantity that remains representative of the whole, while being suitable in size for analysis.  The test method in ASTM D 5865-07a calls for 0.8 grams to 1.2 grams of material with a particle size of ?250 micrometers. 

The simple matter of gathering a sample of coal and sending it to the laboratory now has become quite an arduous procedure requiring some sophisticated and specialized apparatus—apparatus that many facilities may not have access to.  And, it may need to be done much more frequently than once per shipment.   While

40 CFR Part 98 does not specifically prescribe the above sampling and preparation methods, it names no alternative protocol either.  A valid conclusion would then be that the ASTM standards are intended to be part of the rule, and not adhering to them could result in a violation of the law.  Alternative interpretations will no doubt be made as the regulated community grapples with this new rule.  What procedures a company ultimately uses will need to be supported by sound reason, and tempered by its tolerance for risk. 

A recent conference in Milwaukee held by the U.S. State Department received public comments on the U.S. position on global warming to be presented by the U.S  State Department at the United Nations Framework Convention on Climate Change in Copenhagen, Denmark this December (see http://unfccc.int/2860.php). This is an important convention where the U.S.  along with other nations may commit to reducing global GHG emissions. From the tone of the meeting it sounds like the State Department is more willing to cooperate with global GHG emission reduction initiatives than it was at previous meetings but very few details were provided on what the U.S. was willing to try to negotiate in Copenhagen.

The conference audience was a good mix between manufacturing, business and academic interests. The meeting began with the State Department representatives making a statement to the effect that there was “no longer any reason to doubt the scientific basis for global warming and the role GHG emissions play”. Many in the audience were  quick to challenge this statement insisting that the science was not at all-conclusive and expressing the opinion that there was little evidence that GHG emission cause global warming.  Most in the audience also expressed the concern that cap and trade regulation would seriously damage affected U.S. businesses’ competiveness with developing nations who would not likely adhere to GHG control requirements.

This is the same debate that has persisted for at least the last 30 years and is likely to continue for at least another 30. Personally,  I am not convinced that there is a concrete, demonstrable link between GHG emissions and global warming. I think it is plausible that such a link exists but have not yet seen compelling indisputable evidence of the connection. But I really don’t think that a concrete link is needed for us to want to control GHG emissions, especially those associated with energy use.

There are other strategic issues with potential global warming that I believe should be driving our efforts to reduce these emissions. I believe that the security of our nation, which relies heavily on non-renewable sources of energy to sustain its standard of living,  is not as strong as a nation that is less reliant on non-renewable energy. If the United States continues to delay development of technology to improve our use of renewable energy, and we continue to deplete limited supplies of non-renewable energy, there may come a time when we have reached the  tipping point. A point where we are unable to sustain our standard of living and no longer have the resources to invest in development of alternate renewable energy sources

If cap and trade is able to create additional incentive to limit the use of non-renewable energy in this country I believe that may be a good thing. If we can also hedge our bets about whether or not GHG emissions are causing global warming it seems like a no-lose strategy. It seems there is more to gain than to lose by controlling the use of non-renewable energy and if cap and trade will help us we should look past fears of change and move ahead on reducing GHG emissions here in the U.S. and around the world.