Sustainabilchemy (pt. 1)

Part 1 - Looks Can Be Deceiving

“Deep within the heart of every evangelist lies the wreck of a car salesman” – H.L. Mencken

Smoke & Mirrors

In spring of 2010, we were invited to present at a conference of engineers in the program’s environmental track. Our choice of topic was easy: “Sustainability - Materiality vs. Greenwashing”.

A few weeks before the conference, on April 20, 2010, a BP offshore oil well in the Macondo field blew out in the Gulf of Mexico.  We could not pass up the opportunity to use what became known as the “Deepwater Horizon” tragedy to help make our point.

We used the following slide as the conclusion of our presentation:

• In 2002, BP began running TV ads positioning the company as “Beyond Petroleum”

• In 2003, BP was named leading (most sustainable) oil/gas sector firm in the Dow Jones Sustainability Index

• BP was ranked one of top two overall Corporate Sustainability Reporting (CSR) performers in Innovest’s 2004 rankings of oil/gas companies

• BP was ranked “Top 3 for Superior Sustainability Excellence” in a 2005 list of the “Global 100 Most Sustainable Corporations in the World” by Corporate Knights (a Canadian CSR publication) at the World Economic Forum in Davos

• BP was ranked highest among 23 oil/gas companies in a 2006 report from socially responsible investing firm Jantzi Research. Also in 2006, BP was named #2 in Business Week’s top “Green Companies”.

• BP was awarded 1^st runner up in the category “relevance and materiality”, 1^st runner up in “openness and honesty”, and 2^nd in “credibility through assurance” for their 2007 Sustainability report by Corporate Register.com

• BP was awarded 1^st place in the annual Accountability Rating in 2007 by CSR consultancy AccountAbility

• BP was awarded 3^rd place for Best Report – As judged by All Stakeholder Groups at the 2008 Global Reporting Initiative (GRI) Reader’s Choice Awards

• Greenopia ranked BP #1 “for sustainability among oil companies” in 2009; also in 2009, BP led all major oils in a ranking of “environmental, sustainability, and social” impacts according to the Tomorrow’s Value ranking.

• As of April 1, 2010, BP was the 6^th largest single holding in the Dow Jones Sustainability Index, representing 1.95% of DJSI holdings.

• On May 31, 2010, BP was removed from Dow Jones Sustainability Index

After concluding with this slide, we read a quote from a speech given by former BP CEO Tony Hayward at Stanford Business School in summer 2009.  He was speaking about the problems facing the company at the time he became CEO (emphasis ours):

“…A company that was too top down, too directive and not good at listening. We had too many shallow generalists. We had too many people that were working to save the world.”

We then informed the audience about the size and scope of BP’s legacy environmental remediation and toxic tort liabilities at sites across the U.S.  Some of these sites pose serious and imminent threats to human health and the environment from soil, groundwater, surface water and sediment contamination. Several were on the U.S. EPA National Priority List (NPL) under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA, aka “Superfund”) and remain so at this writing.  These range from mining sites to refineries to chemical plants and other heavy industrial sites BP acquired through acquisitions of Amoco, Atlantic Richfield Company (ARCO), Anaconda Copper Mining Company and other industrial corporations.  The video below is from the infamous Berkeley Pit at the Silver Bow Creek/Butte Superfund site, near Butte, Montana (an ARCO legacy mining site).

At the time of the Deepwater Horizon tragedy, BP was carrying more than $2 billion in reserves for known legacy environmental liabilities on its balance sheet. Environmental cleanup and litigation obligations of this magnitude had been on BP’s balance sheet the entire period the company was winning the “Sustainability” awards we outlined.  The snapshot below shows those liabilities as of January 1, 2010, about 100 days prior to the Deepwater Horizon spill:

Source: BP SEC Form 20-F, Note 37 | March 2021

We have unique insights from working with large industrials about how they quantify, disclose and record contingent environmental liabilities under applicable Financial Accounting Standards Board (FASB) provisions. For large industrials, “Statement of Financial Accounting Standard No. 5, Accounting for Contingencies” (FAS5) and “FASB Interpretation No. 47” (FIN47, an interpretation of rule FAS143 dealing with conditional asset retirement obligations) are of particular importance.  One of our friends is a leading expert who published the definitive book on the subject of financial reporting of environmental liabilities under FAS5 and FIN47. We have been focused on this subject for over 20 years.

We saw Kerr McGee’s spinoff of its Chemical division’s liabilities into hopelessly underfunded, insolvent-at-birth Initial Public Offering Tronox in 2006 ending badly  more than five years before the Tronox bankruptcy court concluded the same thing: that the spinoff was executed to (attempt to) segregate the billions of dollars of environmental remediation liabilities of its Chemical division so Kerr McGee’s valuable Oil and Gas division assets could be acquired by Anadarko “clean”.  The Tronox bankruptcy court saw through the ruse as a “fraudulent conveyance” and pinned the responsibility on Anadarko.  The result was the largest environmental bankruptcy award in U.S. history.  Grupo Mexico acquired the stock of U.S. mining and smelting company Asarco, sent the assets to Mexico for a permanent vacation, and left U.S. taxpayers to deal with the orphaned smelter and mining cleanup sites. Readers can rest comfortably knowing the cover picture on Grupo Mexico’s 2021 “Sustainability” Report is not one of those Asarco sites.

Referring to the unresolved legacy environmental liabilities on BP’s balance, we asked our audience a simple question: “while BP repositioned itself as “Beyond Petroleum” with touchy-feely commercials about wind, solar and biofuels, while it was winning “Sustainability” awards year after year, $2 billion+ worth of unresolved environmental liabilities, many involving serious risks to human health and the environment sat on its balance sheet.  Is this “Sustainability” or is it “Greenwashing”? 

This week, more than twenty years after the original “Beyond Petroleum” campaign, twelve years after our presentation, and two years after pledging to reduce BP’s CO2 emissions from oil and gas production 40% by 2030, BP CEO Bernard Looney had a major announcement. BP will be investing ~$1 billion per year in new oil and gas development and will not meet its CO2 emissions reduction pledge.

“Back to Petroleum”.

This is not “Sustainability”.

This is “Sustainabilchemy™”.

Deepwater Horizon | Wikipedia Commons

Heavy Metal

Professor Simon Michaux is an Australian geometallurgist, mining industry veteran, and Associate Professor at Geological Survey of Finland (Geologian Tutkimuskeskus or “GTK”).  He is the author of a study  titled “Assessment of the Extra Capacity Required of Alternative Energy Electrical Power Systems to Completely Replace Fossil Fuels”. It is the most exhaustive analysis we’ve seen yet of the resource requirements necessary to replace fossil fuels globally across the spectrum of services they provide (electricity, transport, process heat, etc.).

We summarize one of his key findings from a presentation Professor Michaux gave at University of Queensland’s Sustainable Minerals Institute last summer in the table below. It is instructive to note that the figures below only apply to ONE SINGLE GENERATION OF renewable energy infrastructure necessary to replace fossil fuels. (Wind turbines and solar arrays have average estimated lives of ~25 years).

Source: “Assessment of the Extra Capacity Required of Alternative Energy Electrical Power Systems to Completely Replace Fossil Fuels”

We note here that the table above is from an early pre-print of the study. We understand the study is undergoing final peer review, and the figures above are changing.

Because of the threat that Michaux’s work poses to monied and highly vested interests, the study has been the subject of no shortage of critique.  Once Michaux’s work began to go viral, a flurry of new studies by Defenders of Green Science™ quickly arrived to counter his findings. While we find some of the critique legitimate, we find most of it sorely lacking. Many of the studies are models.

Michaux points out that his findings are an engineering estimate, using published data and specifications of existing technologies. Directionally, we find Professor Michaux’s work compelling. We don’t find mudwrestling over dueling studies productive. Or even necessary.

Let’s assume Michaux’s calculations are off by an order of magnitude (factor of 10). Global production in some key metals has increased since his 2019 data and likely to increase more, for example. To make the conversion, the world would still need to mine and completely consume (leaving essentially none for any other purpose):

• 19 years of current copper production

• 40 years of current nickel production

• 992 years of current lithium production

• 173 years of current cobalt production

• 329 years of current graphite production

Go ahead and try to square the resulting figures with what renewable energy promoters are promising and Charlaticians™ are committing to by 2030, 2040, or 2050. The overwhelming majority of primary energy consumed in hard rock mining is provided by fossil fuels. Diesel is the workhorse of giant excavating equipment and haul trucks. Despite protestations (and studies!) to the contrary, it is not obvious to us that the 2 degrees Celsius Paris Agreement warming target wouldn’t be mostly or completely jeopardized by the attempt to even try to convert most of the world’s primary energy to wind, solar, EV’s and battery storage.

Since most readers will have never seen what happens to a metal shovel left for a few days in (extremely low pH) acid mine drainage (AMD) at some former hard rock mines, or what AMD has done to pristine trout waters, you’ll forgive us for the quip: Are we about to try to save earth to death?

Professor Michaux’s work makes it clear the present plans are imprudent, practically impossible and intellectually dishonest. We see no realistic scenario in which environmentalists in the U.S. and western Europe magically reverse their long-standing opposition to mining and the use (sometimes rising to weaponization) of environmental laws, regulations and the court system to stop their permitting, development, and operation.  This is an example of western environmental elites outsourcing the dirty work of mining and the production of oil and gas, basic commodities, and industrial environmental impacts to the developing world in order to pretend to be more “sustainable” in their own back yard.

This is not “Sustainability”.

This is Sustainabilchemy™.

Getting Wood

Drax is an electricity generation complex in Selby, England. Its generation capacity of over 3,900 megawatts (MW) is the largest in the country and annually supplies ~6% of UK electricity. Drax receives over $1 billion annually in subsidies from the UK government.

Originally constructed as a coal-fired power generation station, most of the generation units were converted to burn biomass over the last decade.  Those units now combust wood pellets supplied mostly from forests in North America (~60%) and Canada (~ 23%).  The U.S. wood pellets are sourced mostly from southern Pine trees. 

Under UK, EU and UN CO2 emissions rules, burning trees from U.S., Canadian and Baltic forests for (“biomass”!) electricity in the UK counts as “renewable” energy.  The Drax complex generates ~12% of UK “renewable” electricity annually.

Enviva is the world’s largest industrial producer of wood pellets. The Enviva plants in North Carolina (750,000 metric tons/year), Virginia (760,000 metric tons/year) and Georgia (750,000 metric tons/year) are the largest U.S. sources of Enviva wood pellets destined for the Drax biomass power complex. The Drax biomass units burn ~7.5 million tons of wood pellets annually.

Drax Power Station biomass infrastructure | Wikimedia Commons

Virtually all of the wood harvesting is performed using diesel and gasoline.  All of the transportation to pelletizing plants uses diesel. Based on the location of these three Enviva plants, something on the order of 90% of the primary energy used to pelletize the trees and wood waste comes from fossil fuels and nuclear energy. As if this weren’t enough, the pelletized US trees that are being cut and incinerated for “renewable” energy in the Drax plant are then transported across the Atlantic ocean by ships burning bunker oil, a refined crude oil product dirtier than diesel.

According to Biomass Magazine, these three plants combined make up 20% of total U.S. wood pellet manufacturing capacity.  In a 2021 article titled “The ‘Green Energy’ That Might Be Ruining The Planet” Politico exposes some of the ugly facts about Drax, UK and EU  “biomass” “renewable energy” and U.S. tree incineration. 

Drax is another example of wealthy Europeans pretending they are “green” and “sustainable” by outsourcing the dirty work of extracting resources and commodities like energy, food and metals to countries outside the EU’s borders.  England, in plain sight and with the blessing of the EU and the UN Framework Convention on Climate Change (UN FCCC), justifies incinerating trees in a converted coal-fired power plant using buzzwords like “biomass”, “renewable energy”, “CO2 emissions reduction”, and “taking action on climate change”.

This is not “Sustainability”.

This is Sustainabilchemy™.

As environmental professionals who’ve spent a combined 200+ years reducing risks to human health and the environment at some of America’s most impaired industrial sites, we do not suggest all “Sustainability” = “Sustainabilchemy”. We know of many actions and work with many people that embody sustainability’s highest standards and best examples. We are conservationists, life-long and highly passionate outdoor enthusiasts, and awed by the natural world. We have worked hard for many years to protect and improve it and are proud of that work. We have kids, too.

We simply know the difference between that which is actually “sustainable” and that which only carries the label. And we say so.

Looks can be deceiving.

In Part 2 of Sustainabilchemy, we look at more examples, including a major European consumer products company whose sustainability reports belie its involvement in a troublesome supply chain and deforestation, the U.S. train wreck of Gas Booze™ (corn ethanol), and how Wall Street is in on the game in a big way. We also expose how the “S” in “ESG” has a child and slave labor problem hiding in plain sight for which the “progressive” “green” movement bears increasing responsibility.