"Shish Kebab" is our light fare of environmental news, risks and financial solutions. Contact us if you have an appetite for more.
January 2011
GE Reserves Additional $500m
GE has already spent an estimated $830m on its clean-up of the Hudson River, so what's an additional $500m? Good timing for tax relief, it appears. With 2010 total cash flow from operating activities of $14.7b, GE took an after-tax charge of $500m and stated that it will proceed with the next (presumed final) phase of Hudson River dredging.
After a decades-long battle with regulators over a 200-mile stretch of river impacted with PCBs, this reserve represents GE's hope for final financial resolution of this matter, and an opportunity to reduce effective tax rates during "a really good [4th] quarter for the Company" described by Chairman & CEO Jeff Immelt on its January 21 earnings conference. Coincidentally, the company reached "favorable tax settlements" with the IRS in Q4, further reducing its effective tax rate. Now that's "ecomagination" at work.
Green Chemistry: Paralysis of Analysis?
Regulations originally scheduled for adoption by January 1, 2011, have been postponed while the DTSC’s Green Ribbon Science Panel reconsiders its approach under Gov. Brown’s administration and future budget. Meanwhile, resources for voluntary chemical alternatives assessments continue to develop, such as Clean Production Action’s Green Screen and EPA’s Design for the Environment (DfE) January 2011 draft Alternatives Assessment Criteria for Hazard Evaluation.
How far can or will DTSC proceed with a multiyear process of ranking priority chemicals and priority products, followed by AA notification and reporting by responsible entities and regulatory responses, as contemplated in some form of the draft 2010 rules? Green Chemistry is one element of the Science, Pollution Prevention and Technology Program for which the Governor’s proposed 2011-12 budget is $19m, which is about 10% of the DTSC budget, or between 1- and 2-hundredths of a percent of the State budget. Will California discover a catalyst to move from paralysis of analysis to benign by design?
Crowded Insurance Marketplace
Not long ago, just a handful of companies dominated the environmental liability insurance market. Today there are more than 30 insurers offering various forms of environmental coverage. Although that may be reminiscent of the earliest days of environmental insurance in the 1980s, this crowded marketplace pits experienced underwriting teams against each other. Insurers are aggressively pursuing liability coverage while generally avoiding cost over-run coverage and policy terms beyond 10 years.
Since 2008, when Chartis (formerly AIG) expanded coverage and slashed rates in half to retain business, vigorous price competition has led to widespread price reductions and broader coverage. In efforts to differentiate themselves, insurers have adopted strategies from packaging risk management services with policies to promoting combined general and environmental liability coverage or focusing on specific types of clients.
The result is that most environmental liability insurance premiums and coverage are at all-time favorable levels for buyers. For example, common enhancements to environmental site liability insurance now include blanket non-owned disposal site (NODS) coverage, illicit abandonment defined as a pollution condition, emergency response costs explicitly included without requiring prior insurer approval, civil fines & penalties included, excess of indemnity coverage for known conditions, and more.
DISCLAIMER: This does not provide environmental risk management advice. In fact, it does not provide any advice. We hope it is sometimes entertaining and maybe even informative.