California Governor Gavin Newsom recently pledged to sign two groundbreaking climate disclosure bills into law. These bills will mandate most large U.S. companies to reveal their complete emissions along their value chains and report on their financial risks and adaptation measures related to climate change.
The California Senate bills, SB 253 (“Climate Corporate Data Accountability
As previously reported, California may soon pass the most stringent Environmental, Social, and Governance (“ESG”) disclosure requirements in the nation, surpassing even the current U.S. Securities and Exchange Commission (“SEC”) proposed rules.
Since the California Climate Corporate Data Accountability Act (aka “SB 253”) was introduced by Senator Scott Wiener, it has undergone several changes.
The California Climate Corporate Data Accountability Act (“SB 253”) was recently introduced and passed the state’s Senate Environmental Quality Committee on March 15, 2023. SB 253 aims to broaden Environmental, Social, and Governance (“ESG”) state disclosure requirements, targeting high earning companies. A similar emissions disclosure bill, the Climate Corporate Accountability Act, failed to pass the
The agencies regulating industrial chemical processes are taking a second look at modernizing regulations aimed at preventing chemical accidents in the near future. The Occupational Safety and Health Administration’s (OSHA) Process Safety Management (PSM) standard and the Environmental Protection Agency’s (EPA) Risk Management Program (RMP) rule were practically identical for processes containing threshold levels of
Boron can be found in electric vehicles, vital military hardware, wind turbines, solar panels, satellites, and more. The mineral – already listed as a national strategic mineral – is important for the United States’ economy, climate strategy, and national security. However, the U.S. Geological Survey has yet to include boron on the list of “critical minerals,” which the Energy Act of 2020 defines as a non-fuel mineral or mineral material essential to the economic or national security of the U.S. and which has a supply chain vulnerable to disruption. The lack of critical mineral designation could hamper the domestic production of boron, but that may be changing soon as discussed below.
California’s Mojave Desert is believed to have the world’s largest known new boron deposit. A mine in the region, known as Fort Cady, has an estimated mineral resource of 120 plus million tons of the type of borate, colemanite, which accounts for 90% of the mineral used globally. Fort Cady also has a large source of lithium (see our earlier post on lithium’s potential), which is an important element for batteries and electric vehicles. Fort Cady further benefits from proximity to an interstate highway, railroad, deep-water port, high voltage power line, gas line, and approved water infrastructure.
An industry leader in boron sourcing and processing is set to begin mining at Fort Cady soon, with small scale mining operations set to begin by the end of this year and large scale production by 2025. However, mining boron deposits is very costly and time consuming. Listing boron on the list of critical minerals would help alleviate such issues by giving stakeholders access to extensive government funding, incentives, and partnerships.Continue Reading Boron: Increase in domestic production for important mineral on the horizon
We previously reported on requirements for Scope 3 emissions in the proposed climate disclosure rule released by the U.S. Securities Exchange Commission (“SEC”) on March 21, 2022 (“Proposed Rule”). In addition to Scope 3 emissions, the Proposed Rule would also require a registrant to disclose information about its direct GHG emissions (Scope 1) and indirect emissions from purchased electricity or energy sources (Scope 2). This post focuses on attestation requirements in the Proposed Rule for those Scope 1 and Scope 2 disclosures.
Who is subject to Scope 1 and Scope 2 attestation requirements and when is compliance required?
Section 229.1505 of the Proposed Rule would require a company that is an accelerated filer or large accelerated filer[1] to include an attestation report in its Scope 1 and 2 disclosures. The attestation requirement also applies to foreign private issuers.
The Proposed Rule does not make compliance with Scope 1 and 2 disclosure and attestation requirements immediate. Instead, subject companies are provided a grace period to achieve compliance with Scope 1 and 2 disclosure requirements. The Proposed Rule would also provide a transition period for the assurances required for the Scope 1 and 2 disclosure attestations (see further discussion below). The proposed compliance timeframes are as follows:
| Filer Type | Scopes 1 and 2 GHG Disclosure Compliance Date | Limited Assurance | Reasonable Assurance |
| Accelerated Filer | Fiscal year 2024 (filed in 2025) | Fiscal year 2025 (filed in 2026) | Fiscal year 2027 (filed in 2028) |
| Large Accelerated Filer | Fiscal year 2023 (filed in 2024) | Fiscal year 2024 (filed in 2025) | Fiscal year 2026 (filed in 2027) |
Who prepares the attestation report?
Under the Proposed Rule, a GHG emissions attestation provider would be required to prepare and sign the attestation report. The attestation provider would not need to be a registered public accounting firm. However, the Proposed Rule includes characteristics of acceptable attestation providers including:
According to the agency, the proposed expertise requirement is intended to ensure that the attestation provider is sufficiently competent to perform the attestation engagement. With respect to independence, SEC states that emissions disclosures by independent attestation providers should improve the reliability of the disclosure.Continue Reading Scope 1 and 2 Emissions Attestation Requirements under SEC’s Proposed Climate Disclosure Rule
Rechargeable lithium-ion batteries increasingly power electric vehicles and a wide range of consumer electronics, and are a critical component of President Biden’s national strategy to eliminate carbon dioxide emissions from the US economy. To ramp up the domestic industry, the U.S. Department of Energy (DOE), in coordination with the U.S. Department of Labor and the AFL-CIO, recently announced the launch of a national workforce development strategy for lithium battery manufacturing. While a trained workforce is a necessary component of a lithium manufacturing strategy, the U.S. has historically been dependent upon overseas sources for lithium – but that could change with a new potential lithium source located around California’s Salton Sea.
Most of the world’s lithium supply is either mined from open pit mines, which are common in China and Australia, or extracted from salt lake flats (evaporative ponds) in South America. Both of these methods have serious environmental issues associated with them, or in the case of the evaporative ponds, are slow and economically inefficient. Extensive lithium deposits have been identified in Afghanistan and in parts of Africa, but those resources are limited for either geopolitical or environmental, social and governance (“ESG”) reasons.
The US has its own sources of lithium, but they too come with developmental concerns. New lithium mine proposals in the United States, including a site located on federal land in Nevada and a site outside Death Valley National Park, have triggered opposition from conservationists and Native American tribes.
But could the U.S. find an untapped source somewhere else that has far less environmental concerns? Enter California’s Imperial Valley and its troubled Salton Sea region.Continue Reading Lithium Mining Around the Salton Sea: The Case for a “Win-Win” Outcome for Energy and the Environment
The Securities and Exchange Commission recently proposed amendments to their existing disclosure policy that would require publicly traded corporations to disclose more information regarding climate change related risks, and how those risks may impact the company’s business and outlook (read, “bottom line and stock value”). While the SEC regulates publicly traded corporations, privately held companies need to also track these proposed rule amendments:
This last bullet is far-reaching and likely to be controversial due to its impact on upstream privately held companies that sell products or services to publicly traded companies. Should this proposal be promulgated:
Continue Reading The SEC’s proposed climate change rule: impact on private companies
On March 21, 2022, the U.S. Securities Exchange Commission (“SEC”) approved and released a proposed rulemaking package (the “Proposed Rule”) that would enact sweeping changes to climate-related disclosures. One key component of the Proposed Rule is a reporting requirement for certain Scope 3 emissions.
What are Scope 3 Emissions
Scope 3 emissions are “all other indirect emissions not accounted for in Scope 2 emissions.” These emissions relate to emissions from sources outside a company’s control – for example, Scope 1 emissions are direct emissions from sources owned or controlled by a company, and Scope 2 emissions are emissions primarily resulting from the generation of electricity consumed by the company. While companies generally can calculate Scope 1 and 2 emissions without significant difficulty, estimating Scope 3 emissions presents additional challenges, as Scope 3 emissions occur from other entities not owned or controlled by the company that serve the company’s value chain.
Who Must Report
The Proposed Rule requires non-smaller-reporting-company (“SRC”) registrants to disclose Scope 3 emissions and intensity: (i) if material or (ii) if the registrant set a GHG emissions reduction target or goal that includes Scope 3 emissions. Thus, the Proposed Rule does not require reporting of all Scope 3 emissions, and a company’s obligation to report would depend on company-specific factors, discussed below.
First, the Proposed Rule exempts SRCs from disclosing Scope 3 emissions. The SEC defines SRCs as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that: (1) had a public float of less than $250 million; or (2) had annual revenues of less than $100 million and either: (i) no public float; or (ii) a public float of less than $700 million.[1]
Second, the Proposed Rule applies a materiality qualifier to Scope 3 emissions that companies must report. SEC regulations and Supreme Court precedent define “material” emission as emissions with a “substantial likelihood that a reasonable investor would consider them important when making an investment or voting decision.”[2] The SEC provides several examples of material Scope 3 emissions. Generally, the SEC advises that Scope 3 emissions may be material where they assist investors to understand transaction risks. Companies with significant Scope 3 emissions could face disruptions in cash flow and business models to the extent new laws or policies encourage changes to products, suppliers, distributors, or other commercial providers in a company’s value chain. Moreover, consumer demand could influence a shift to less carbon-intensive products and services. Conversely, companies sourcing materials and products with lower emissions compared to competitors may see cost savings and higher demand from consumers. Thus, the SEC’s materiality approach is quite broad and requires companies to understand their company’s value, risks, and opportunities in deciding whether to report Scope 3 emissions.
Third, even if Scope 3 emissions do not represent material emissions, a company must report Scope 3 emissions if it adopted emissions targets. The Proposed Rule requires a company to disclose whether its emissions targets include Scope 3 emissions, and if they do, report such emissions. This requirement allows investors to track a company’s compliance with its emissions targets and gauge what potential additional investments a company might need to implement to meet its targets.Continue Reading Understanding the Scope of the SEC’s Proposed Scope 3 Emissions Reporting Mandate
On March 14, 2022, the U.S. Environmental Protection Agency (“EPA”) published (1) a direct final rule and (2) a proposed rule that would update the standard that consultants follow to ensure Phase I reports satisfy the All Appropriate Inquiry standard (“AAI”).
To qualify for certain defenses under the Comprehensive Environmental Response, Compensation, and Liability (“CERCLA”)