♦ Managing Climate Change
Natural resources and emissions
As discussed in the Environment section, the manufacture of ammonia and ammonia-derived products is energy-intensive, requiring natural gas as both a raw material and an energy source. The intensity of energy use and carbon emissions associated with our two main manufacturing processes is shown in the life cycle assessments for ammonia and nitrate ammonium. In Australia, IPL is a Large Emitter of greenhouse gases (GHG), as defined by the Australian National Greenhouse and Energy Reporting System (NGERS). In 2017, we reduced our global GHG intensity per tonne of ammonia by 5% and per tonne of nitric acid by 9% against 2015 intensities. Our GHG reduction targets and additional efforts to reduce our emissions are further discussed under Energy and Greenhouse Gases.
Large volumes of high quality freshwater are also required for cooling towers during the manufacture of ammonia. In addition to IPL’s comprehensive annual risk management process, the WBCSD Global Water Tool is completed each year for long term projections and reviewed by the Chief Risk Officer. This analysis is used each year to identify sites at which water is a material issue. Water supplies and water management strategies at sites identified by the Water Tool are discussed under Water.
Climate Change Governance
As discussed under How We Operate, the Company’s highest governing body, the Board of Directors, is responsible for charting the direction, policies, strategies and financial objectives of the Company. The Board operates in accordance with the principles set out in its Board Charter. Day-to-day management of Company affairs and the implementation of the corporate strategy and policy initiatives are formally delegated to the Managing Director & CEO, and his/her direct reports form the Executive Team. During 2017, climate change issues, including those relating to financial risks and opportunities, were managed by three positions which report to the Chief Financial Officer, specifically, the Corporate Sustainability Manager, the Group Vice President, Investor Relations & Corporate Development and the Chief Risk Officer. Each of these positions also reports to the Board either directly, or through committees of the Board, such as the HSEC Committee and the Audit and Risk Management Committee.
Climate Change Risks and Opportunities
As previously noted, IPL’s main manufacturing process currently relies on sustainable access to natural gas and water, and is GHG emissions intensive. In addition, our farming and mining customers, and therefore our markets, can be impacted by extreme weather events such as droughts, floods, hurricanes and tropical cyclones, as can our own manufacturing facilities (see 'Case Study: Preparing WALA for future extreme weather events' below). For these reasons, the risks associated with emissions, access to natural gas and water, and the physical impacts of extreme weather events have been integrated into IPL’s existing risk management processes and corporate strategy for many years, with geographical and market diversification remaining a key management strategy. Risks are reported in our Annual Report under ‘Principal Risks’ where they have been identified as such.
In addition to this comprehensive risk assessment process, the longer term physical and transitional risks and opportunities associated with climate change were initially assessed in 2010 by an executive cross functional committee established for this specific purpose as part of IPL’s Sustainability Strategy, which was formed and approved by the Board in that year. Transitional risks identified at that time include, but are not limited to, compliance, regulatory and legal risk, reputational risk, and changing market sentiment impacting on our markets. The opportunities identified are associated with the development of new products, including our enhanced efficiency fertilisers and energy efficient explosives technologies. These risks and opportunities have been monitored, reviewed and reported on annually in our CDP reports.
With the release of the G20 Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD) report, IPL recognised the need to review its processes in assessing and managing climate change related financial risks and opportunities, and in formulating the related disclosures which inform investors. In 2017, we engaged a specialist third party to conduct a high-level assessment of our climate-related financial risks and opportunities as well as an assessment of our current disclosures against the recommendations of the TCFD. This assessment will be completed in early 2018 and will inform a review of our climate change management strategy going forward.
Case Study: Preparing WALA for future extreme weather events
IPL assumed operational management of the newly constructed 800,000 metric tonne per annum Waggaman, Louisiana ammonia plant on 19 October 2016. The plant uses the industry’s leading technology and is among the most efficient plants of its kind in the world, employing gas purifier technology and recapturing steam for reuse. The plant is also fitted with Selective Catalytic Reduction technology to reduce emissions of NOx, and a portion of the CO2 emissions generated during manufacturing are captured and used by a neighbouring plant to make melamine. Cooling water for the plant is sourced sustainably from the Mississippi River, and all wastewater and stormwater streams are treated onsite to meet strict water quality limits. Cooling water is returned as clean water to the river.
Due to its location in a hurricane zone, the plant was built to comply with wind codes set out by the International Building Code Design Standard IBC 20 and Minimum Design Loads for Buildings and Other Structures ASCE 7-05 which include the relevant standards for wind load, occupancy categories, basic wind speed and exposure.
The design was signed off by a Louisiana based certified Professional Engineer with experience in these design standards for the region, where the impacts of future hurricanes must be considered. The required permits also included ensuring that the plant was built at a height above Louisiana’s expected future inundation levels.
As part of its emergency response plan, the facility has a hurricane procedure which details the preparations that are made at various times prior to hurricane strike. The preparations include:
• Management of the hurricane staffing crew;
• Housekeeping checks to remove or tie down materials that could become airborne;
• Ensuring the back-up power generator has adequate fuel;
• Ensuring the site has adequate supplies for the hurricane staff and for recovery post-storm;
• Communication with logistics on the status and coordination of final shipments prior to the event; and
• Internal Company updates on plant status and readiness for the event.
If the expected hurricane is of a high intensity, the plant may be required to shut down. This decision has Zero Harm as the primary goal, and is made in consultation with Cornerstone Chemical, St. Charles and Jefferson Parish Emergency Operations Centers, and with the support of IPL senior management. When this decision is made, a process is followed to shut down the plant in a controlled manner, with steps to cool and purge the system of hydrocarbons, block major reactors in under nitrogen purge and install additional securing of the cooling tower fans to prevent wind damage. Staff remaining on site are required to be housed in the control building which is rated for hurricane-strength winds and was built at an elevation where risk of flooding is negligible. The procedure also calls for the storage of adequate supplies of food and water for the expected duration of the event and the release of staff early to make personal arrangements then return to site 16 hours in advance of the event to make final preparations and begin monitoring. The procedure references emergency evacuation routes which limit direction of travel on the major highways in the New Orleans metropolitan area. Additional safety buddies are required when performing work in the plant and employees are to remain inside when winds rise above 60 miles per hour.
Post storm, the procedure requires an assessment to be conducted prior to start-up to ensure Zero Harm. The assessment targets hazards such as potential chemical loss of containment, downed power lines and compromised structures and, where required, forms the basis of a recovery plan. Once plant repairs are completed, the plant is restarted using procedures which include functional checks of systems.