Southern Company, CMS Energy and MDU Resources Targeted on Coal Ash
Shareholders press coal utilities to mitigate ash-related risks after TVA disaster
March 4, 2010 - Companies that engage in potentially harmful coal ash storage practices and fail to disclose critical information about the ways they manage the material are targets of a new shareholder campaign, according to participating investors.
Coal ash is a by-product of burning coal that contains arsenic, mercury, lead and other toxins filtered out of smokestacks by pollution control equipment. The toxins in coal ash have been linked to cancer, organ failure, and other serious health problems. Coal ash is generally stored in enormous quantities in landfills, impoundment ponds or abandoned mines. Currently, coal ash ponds and landfills are subject to less regulation than landfills accepting household trash.
Investors including Green Century Capital Management (Green Century) and As You Sow filed shareholder resolutions at Southern Company,* CMS Energy* and MDU Resources* asking the companies to report on efforts to reduce environmental and health hazards associated with coal ash – and how those efforts may reduce related financial risks. The resolutions will be voted on at each company’s annual shareholder meeting this spring. Green Century recently withdrew a similar resolution that it had filed at FirstEnergy Corporation* after the company publicly committed to stop disposing of coal ash in large ponds.
A December 2008 dam breach at a Tennessee Valley Authority (TVA) coal ash pond, which unleashed 1.1 billion gallons of coal ash sludge that covered over 300 acres in eastern Tennessee, highlights some of the serious environmental and financial risks associated with coal ash. TVA has estimated a total cleanup cost for the spill of up to $1.2 billion, not including the extensive legal claims that have arisen in its aftermath.
“The disastrous TVA spill of 2008 shows us that basic compliance with existing regulations on coal ash simply isn’t enough to prevent environmental and financial risks,” says Emily Stone of Green Century, lead shareholder on the proposal facing Southern Company. “It is critical for utilities to demonstrate to their shareholders that they are aware of potential coal ash-related risks and are taking steps to reduce their exposure.”
“Shareholders are concerned about the lack of disclosure on this issue – we don’t see much evidence that companies are actively managing coal ash-related risks,” notes Amy Galland of As You Sow, lead filer on proposals at MDU Resources and CMS Energy. “We urge all utilities to increase disclosure and take steps to mitigate risks associated with coal ash.”
The U.S. Environmental Protection Agency (EPA) is planning to propose new rules to govern coal ash practices this spring. Upcoming regulations could have a significant impact on the utility sector, potentially requiring that companies spend billions of dollars on system and facility upgrades. According to these shareholders, Southern Company, CMS Energy and MDU Resources may be exposed to substantial regulatory risk from the pending new rules.
Beyond the costs associated with coal ash spills, shareholders argue there are additional financial risks related to the contamination of groundwater supplies from toxins leaching out of coal ash ponds, landfills or mines. The EPA found proven or potential environmental damage at approximately 80% of the sites it tested in a 2007 assessment. While public health concerns have been raised about both wet and dry storage, storing and disposing of dry coal ash in secure landfills with synthetic linings and impermeable caps is a “best practice” for risk mitigation as it minimizes the possibility of contamination or spills.
*As of December 31, 2009, neither the Green Century Balanced Fund nor the Green Century Equity Fund held Southern Company, CMS Energy, MDU Resources or FirstEnergy Corporation. 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 holding. 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.
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 the no-load environmentally responsible Green Century mutual funds.
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 info@greencentury.com. 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 3/10
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