CalSTRS Pressures ONEOK to Report on Greenhouse Gases
Pension fund seeks risk reporting on climate change gases from the pipeline company.
SACRAMENTO, CA – The California State Teachers’ Retirement System (CalSTRS) is pressing natural gas pipeline company ONEOK to report on its greenhouse gas emissions through shareowner Proposal 8, scheduled for a vote at the May 15, 2008 annual meeting.
CalSTRS, which owns more than 1,940,000 shares, is asking the other approximately 105,000 ONEOK shareholders to support its call for reporting on the feasibility of setting goals for reducing greenhouse gas emissions. The report would be submitted to shareholders by Dec. 31, 2008.
“As a shareholder, we believe it is in our mutual interests for ONEOK to take the necessary first step in addressing the issue of greenhouse gas emissions,” said CalSTRS Chief Executive Officer, Jack Ehnes. “The business risks from climate change are very real and are confronting us today, so taking this step is vital, because protecting the environment means protecting the bottom line.”
Utility companies such as ONEOK lead all business sectors in the production of greenhouse gases, accounting for 25 percent of total emissions worldwide. The “Electric Utilities Report,” published in 2006 by the Carbon Disclosure Project and funded jointly by CalSTRS and CalPERS, found that the true value of utilities was significantly reduced when environmental risks were factored into the valuation.
“It’s time for ONEOK to change its corporate climate to meet the challenges posed by climate change risk – challenges that can and will impact the performance of the company,” said CalSTRS Chief Investment Officer, Christopher J. Ailman. “We consider Proposal 8 a reasonable and forward-thinking standard. More importantly, we consider ONEOK’s continued good performance, vital to the ongoing health of our investment portfolio.”
Earlier this month, a separate report by the professional services organization KPMG put the oil and gas industry sector in particular danger from climate change risk.
Titled “Climate Changes Your Business,” the report examined 18 industry sectors and placed oil and gas among six industries in the “danger zone” by their analysis of risk-versus-preparation.
Established 95 years ago, the California State Teachers’ Retirement System, with a $165 billion portfolio, is the second-largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California’s 813,000 public school educators and their families from the state’s 1,400 school districts, county offices of education and community college districts.
Proposal #8 for ONEOK Annual Meeting
May 15, 2008
by California State Teachers’ Retirement System
The American Geophysical Union, the world’s largest organization of earth, ocean and climate scientists, states that it is now “virtually certain” that global warming is caused by emissions of greenhouse gases (GHG) and that the warming will continue.
The Intergovernmental Panel on Climate Change recently concluded that warming of the climate system is unequivocal and that human activity is the main cause. Regulations addressing GHG emissions already exist in 28 states and Congress is presently debating the best way to address the problem.
The 2006 Stern Review on the Economics of Climate Change, lead by the former chief economist at the World Bank, “… estimates that if we don’t act, the overall (worldwide) costs and risks of climate change will be equivalent to losing at least 5 percent of global GDP each year, now and forever.”
Analysts at firms such as Goldman Sachs, McKinsey and JPMorgan Chase have publicly recognized the possible financial implications of climate change and have raised concerns about companies that do not adequately disclose them.
ONEOK, Inc. is the General Partner and 46 percent owner of ONEOK Partners L.P., which owns and operates over 6,970 miles of natural gas pipelines in the U.S., including 5,700 miles of interstate natural gas gathering and state-regulated intrastate transmission pipelines in Oklahoma, Texas and California.
Unaccounted for line loss of natural gas from intrastate pipelines and gathering systems may be a significant source of raw methane emissions into the surrounding soils and the atmosphere. While federal regulations cap the allowable amount of unaccounted for or lost natural gas in interstate pipelines at 1.5 percent, other states, including Texas (the largest producer and consumer of natural gas among the states) has no cap. Natural gas producers in Texas and the state itself (through the General Land Office and the University Land System) have seen claims of unaccounted for or lost natural gas as high as 20 percent with the average around 12 percent.
As natural gas contains over 95 percent methane, a greenhouse gas more than 20 times more effective in trapping heat in the atmosphere than carbon dioxide, those kinds of losses may have a significant and negative impact on the environment and could have a significant impact on the health and safety of local residents and pipeline employees.
Shareholders request that the Board of Directors prepare a report concerning the feasibility of adopting quantitative goals, based on current and emerging technologies, for reducing total greenhouse gas emissions from the company’s operations; and that the company should submit this report to shareholders by December 31, 2008. Such a report will omit proprietary information and be prepared at reasonable cost
We believe that management best serves shareholders by carefully assessing and disclosing all pertinent information on its response to climate change. We believe taking early action to reduce emissions and prepare for standards could provide competitive advantages, while inaction and opposition to climate change mitigation efforts could leave companies unprepared to deal with the realities of a carbon-constrained economy.