♦ Managing Climate Change
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 ammonium nitrate.
In Australia, IPL is a Large Emitter of greenhouse gases (GHG), as
defined by the Australian National Greenhouse and Energy Reporting System (NGERS). In 2018, we reduced our global GHG intensity per
tonne of ammonia by 6 percent against our 2015 baseline, which is a
1 percent improvement from last year. Although our GHG intensity per tonne of nitric acid rose by 2 percent from last year due to an
unexpected maintenance issue, our 2018 intensity was 7 percent less
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 2018, climate change issues, including those relating to financial risks and opportunities, were managed by two positions which report to the Chief Financial Officer, specifically, the Corporate Sustainability Manager and the Chief Risk Officer. Both of these positions also report 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.
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.
During 2018, this integrated risk assessment process was strengthened with the engagement of an expert third party to complete two key actions aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Firstly, a comprehensive assessment of IPL’s physical and transitional (market-based) risks and opportunities associated with climate change was conducted using two future climate related scenarios: a two-degree scenario (2D) and a four-degree scenario (4D). Secondly, IPL’s comprehensive Risk Management process was reviewed in 2018 with a view to including the longer time frames associated with climate change related financial risks, as recommended by the TCFD.
IPL climate related risks, mitigation options and opportunities
In 2018, IPL delivered a strong result with EBIT excluding IMIs up 11 percent to $556.7 million, reflecting the growth across both Explosives businesses, the exceptional operations at the new Waggaman facility in the USA, the solid underlying performance of the Australian Fertilisers business, and a strong operating cash flow of $662.7 million. We have high quality, strategically located assets in our chosen markets and our business is underpinned by strong fundamentals with our customers’ businesses driven by the growth in demand for food across Asia and continued demand for the resources needed to build infrastructure and technology across the globe. Our strong balance sheet and geographical and market diversification supports our overall resilience to climate change risks and enables us to take advantage of climate related opportunities.
The risks and opportunities summarised in the table below are not listed in order of significance and are not meant to be all-inclusive. The table describes the most significant risks and opportunities that were identified during 2018 through an analysis using two different potential future scenarios: one which describes a pathway resulting in less than two degrees of warming (the 2D scenario) and the other which describes a pathway leading to more than two degrees of warming (the 4D scenario). Risks considered to be material to IPL are reported under ‘Principal Risks’ in the 2018 IPL Annual Report.
The table below refers to the risks and opportunities for IPL as described by the 2D and 4D scenarios. Therefore, the descriptions of risks, opportunities and resilience are not forecasts, but describe what could happen if the world’s development progressed as described in either the 2D or 4D scenario. Although global temperature records indicate that, as at 2018, we have already surpassed a global average temperature increase of 1 degree Celsius above pre-industrial average temperatures, indicating that there is an appreciable prospect that the world will experience more than 2 degrees of warming, the transitional risks identified through the use of the 2D scenario could still occur because nations could introduce rapid market, technological and regulatory changes, regardless of the actual degree of warming, to try to reduce emissions as quickly as possible.
|Topic||Risks||Mitigation and Resilience|
Policy and Legal
|IPL has manufacturing facilities across various geographical locations that may be impacted by regulatory changes aimed at reducing the impact of, or otherwise addressing, climate change. Any changed regulation could result in an increase to the cost base or operating cost of these plants, and it may not be possible to alter sales prices to offset these cost increases. This includes, but is not restricted to, any regulations relating to reducing carbon emissions. Alternatively, any such regulatory changes may potentially impact the ability of these plants to continue functioning as currently operated. This risk would be heightened if regulatory changes are implemented inconsistently across regions or countries so that IPL’s facilities (principally located in Australia and North America) are impacted by regulatory changes while manufacturing facilities of competitors operating in other jurisdictions are less impacted.
Carbon pricing currently applies in Australia, and under the 2D scenario, rapid action to limit climate change would include a global carbon price by 2020 (short-term risk: 1-3 years). Carbon pricing would increase operational costs as well as costs to transport products, which could impact until 2025, when most shipping options would be retrofitted with zero or low carbon mobility options (e.g. hydrogen). The transition to a global carbon price may give rise to a period of volatility where IPL would not be able to pass through the immediate carbon costs to customers, who may choose to source products more locally where available to avoid these carbon costs.
|IPL has a large, diverse supplier group, which would assist in avoiding carbon pricing pass through in the short-term.
Our customer agreements provide for the pass through of carbon pricing where possible and domestic co-location of critical products will reduce carbon costs associated with transport.
Diversification away from single source suppliers, already being managed, will also assist in managing the potentially volatile/variable costs associated with increased regulation, including carbon pricing, in the period between 2030 and 2040.
Carbon pricing and other policy support for transitioning to the low carbon future described in the 2D scenario may create opportunities for IPL related to funding for investment in new technologies which reduce GHG emissions. IPL is closely monitoring both policy developments and the development of new technologies and has successfully registered one project to earn Australian Carbon Credit Units (ACCUs) under the current Australian Federal Government Emissions Reduction Fund. IPL’s strategic focus on Leading Technology Solutions and Customer Focus as two of our six value drivers also positions us to leverage our premium technology platform throughout all our geographies and sectors, and we continue to develop and provide products and services which reduce our customers’ energy use and GHG emissions.
Under the 2D scenario, transitioning away from fossil fuels is likely to significantly decrease demand for thermal coal, with impacts beginning in the short term (1-3 years). However, the technologies associated with renewable energy such as electric vehicles and largescale batteries are likely to expand dramatically, with World Bank estimates indicating that demand for the metals required for these technologies could grow by 1000% under a 2-degree scenario. While these mining operations (which use explosives) mitigate the loss of revenue from the thermal coal market, ‘new world commodities’ do not require the same quantity of explosives as bulk commodities, which may result in lower overall demand and potentially lead to a supply/demand imbalance.
|We monitor the global environment, conduct detailed assessments of our markets and regularly update our supply and demand forecasts so that we can quickly respond to change. We seek to maintain competitive cost positions in our chosen markets, whilst maintaining quality product and service offerings. This focus on cost and quality positions our business units to compete over the medium to longer term in changing and competitive environments and we prefer to engage in long term customer and supply contractual relationships.
In the 2D scenario the reduction in demand for explosives supplying the thermal coal markets will be partly offset by the mining of new world commodities required for renewable technologies, which could be higher margin activity. In the 4D scenario, the physical impacts of climate change are expected to increase demand for materials, and therefore explosives, in the quarry and construction sector.
|In the 2D scenario, recycling trends are expected to lower the need for primary metals, especially in the steel (iron ore and metallurgical coal) supply chains. Scrap steel may be utilised in electric arc furnaces and this would reduce the demand for virgin iron ore and metallurgical coal. Given the significant increase in the mining of primary metals for ‘new world commodities’ the reduction in the need for primary metals due to recycling will be tempered.|| IPL’s Moranbah manufacturing plant supplies explosives for mines in Queensland’s Bowen Basin. This region produces some of the world’s highest quality metallurgical coal, with low ash content and low/medium volatile matter. These hard-coking coals are recognised by steelworks as prime coking coals used in steel manufacture, and Australian hard-coking coals are regarded as the industry benchmark. Queensland has 3.75 billion tonnes metallurgical coal with volatile matter less than 25 percent, which is enough to sustain production for many years. As IPL’s competitors are likely to see demand drop in line with thermal coal decline, the Moranbah facility will retain the unique competitive advantage of being located close to these metallurgical coal mines.
In the USA the iron ore mines that we supply are mostly across Southern Canada and mid-West America. The recycling market in the USA is already very mature with two-thirds of the iron and steel produced in the USA being made from recycled scrap, rather than virgin iron ore. As the USA is a major importer of steel, the remaining primary iron ore market is likely to remain stable. As a result this risk is not considered to be material.
|Physical Impacts (acute and chronic)||Impacts on Product Demand:
IPL provides products and services to end markets, individual customers and suppliers that may be impacted by changes to weather patterns resulting from climate change. Changes to the number and/or intensity of storms, hurricanes and other extreme weather events may impact IPL’s end markets, primarily mining and agriculture.
The 4D scenario indicates fertiliser demand increasing in the short term, as emerging markets demand more meat, before a significant downturn associated with the economic impacts of acute extreme weather events and chronic changes in climatic conditions impacting the ability to grow crops. IPL’s Asia- Pacific fertiliser revenue from exports may be impacted in the long-term (6+ years) by a decline in offshore market demand with most South-east Asian countries, which currently are IPL’s predominant fertiliser export market, and small island developing states being ranked among the most vulnerable in the world by the Climate Risk Index (CRI).
IPL currently sells up to 15 percent of its Asia Pacific explosives into international markets, with most of these countries considered emerging or developing. Under a 4D scenario, explosives demand in the Asia Pacific region may be impacted in the long term (6+ years) by reduced demand in climate vulnerable nations, as indicated by the CRI.
Fertiliser demand is likely to grow due to restoration of degraded land to meet growing population needs for food and increased meat and dairy consumption. IPL currently exports fertilisers from Australia and may be able to ship to other locations where demand is retained as markets are impacted by chronic changes in climate.
We currently sell fertilisers on the spot market to a geographically diverse group of customers and have no long term reliance on a particular customer segment. We also have the competitive advantage of having manufacturing sites located primarily in Australia and the USA. These are wealthy countries which can afford to rebuild their port infrastructure in the event of rising sea-levels and damage from storm surges and other acute climate changes. For this reason, it is anticipated that IPL will be able to ship to other offshore markets which retain demand in the event that current export regions are impacted.
In the 4D scenario, the physical impacts of climate change mean that the Quarry & Construction sector is likely to assume a portion of the demand for explosives that was previously supplied to mining companies in climate vulnerable nations in the Asia Pacific region. Many new mines are expected to be developed to supply ‘new world commodities’ for batteries, renewables and mobility options, however, these are not expected to require the same quantity of explosives as bulk commodities. IPL’s strategic focus to deliver distinctive value to our customers by leveraging our differentiated technologies to solve our customers challenges on the ground positions us to be increasingly competitive in our markets.
|Impacts on Operations (including supply chain): Some of IPL’s manufacturing plants are located in areas that are susceptible to extreme weather events, such as hurricanes, tropical storms and tornadoes. An increase in the severity and/or frequency of these extreme weather events as a result of climate change may cause more frequent disruption to IPL’s operations directly or as a result of supply chain disruption, which includes
transportation of raw materials and finished product via road, rail and water. Impacts such as these may increase in the short term (1-3 years). Under this scenario, insurance premiums would be expected to increase along with a possibility that some events may be excluded from cover.
|IPL’s own manufacturing facilities are considered resilient to the anticipated acute physical impacts of climate change, with measures currently in place to manage exposure where sites are located in tornado or hurricane zones. Due to its location in a hurricane zone, the Waggaman Louisiana 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. The design was signed off by a Louisiana based certified Professional Engineer with experience in design standards for the region, where the impacts of future hurricanes must be considered.
Safety and evacuation plans are in place for all personnel and sites. We endeavour to include force majeure clauses in agreements where relevant and insurance policies are in place across the Group. The location of the Moranbah facility close to high quality metallurgical coal producers would provide IPL with a strategic advantage over its competitors in the event of supply chain disruption due to extreme weather events. Domestic co-location of critical products and diversification away from single source suppliers, already being managed, will assist in managing supply chain interruption.
|Interruptions to logistics from extreme weather events could result in financial loss if product cannot be stored effectively and degrades.||IPL is developing technology solutions to increase the shelf life of our products. Were IPL required to build additional storage to stockpile raw materials and product for temporary interruptions to logistics, and to protect product quality from humidity, flooding, heat extremes and other physical impacts, the total aggregate cost would be immaterial. Additional storage, both onsite and at strategic locations along transport routes may be necessary, along with contingency plans to use alternative forms of transport to access these. This would allow IPL to create resilience in the event of volatility created by more extreme weather.|
|Water is a key raw material for manufacturing, with the majority used for cooling purposes. In the 4D scenario, it is predicted that average annual rainfall will be reduced and longer periods of prolonged drought will be created, especially in Eastern Australia. While this may be offset somewhat by increased 1 in 20-year flooding events at some locations, and up to 15% more rainfall than historical averages in each single rain event, water restrictions may become more frequent in some areas. In addition, the possibility of less frequent, higher intensity rainfall events may lead to the risk of storm water pond overflows. These impacts could occur in the short-term (1-3 years), with very low dam levels being recorded near some sites in the recent past.||Water scarcity concerns could prompt the need for additional storage. The cost of creating additional storage (dams) in these locations is considered immaterial. Water restrictions as a result of longer periods of drought and therefore increased regulation, may also prompt IPL to seek alternative water sources. At present, no operations have been identified where sourcing of new water is considered to be too costly or unavailable. Ongoing and long-term water management strategies are in place to ensure overflows of storm water ponds due to higher intensity rainfall events are avoided, with water balance projects begun in 2018 at three manufacturing sites in Australia using predictive rainfall models.|
|Several manufacturing sites are located on coasts and are very close to sea level. A significant rise in sea level combined with a king tide may cause flooding events at these sites from 2030 onwards (considered a long-term risk) particularly with increased storm activity causing storm surges to become more intense.||The construction of sea-level management infrastructure (levies, etc.) will be considered in the long-term where required for the identified manufacturing sites to manage the risk of flooding due to storm surges and sea level rise.|
Both the 2D and 4D scenarios describe conditions in which demand for explosives in the Quarrying and Construction sector will increase. In the 2D scenario, steady urbanisation rates and enough global wealth to support stable development will likely lead to the building, reinforcing and repairing of roads, buildings and other infrastructure. As only 1 percent of all residential buildings and commercial buildings in the USA are certified ‘green’, an enormous opportunity presents itself for retrofitting of buildings in a future which addresses climate change. Although not as severe as in the 4D scenario, physical impacts occur and rebuilding is required. While this will be completed in a resource efficient way, the scale of the transition is large and generates increased demand for aggregate, even though the use of recycled aggregate and re-use of building materials occurs.
The 4D scenario describes a future in which natural disasters severely impact on cities, towns and infrastructure, particularly along coasts due to sea level rise. An immense quantity of aggregate and other quarried materials is required in this scenario to rebuild, and to build new climate resilient infrastructure. This scenario describes the Quarrying and Construction sector expanding between 2020 and 2040 as the world (and the USA in particular) seeks to rebuild and protect itself from the physical impacts of climate change. From 2035, the scenario describes decreasing demand from many emerging and developing economies which cannot afford to rebuild after the cumulative losses from both the acute and chronic physical impacts of climate change.
Our Dyno Nobel business is the second largest industrial explosives distributor in North America by volume, providing ammonium nitrate, initiating systems and services to the Quarry & Construction sector in the southern US, northeast midwest US and Canada. In 2018, 40 percent of Dyno Nobel Americas Explosives revenue was generated from this sector with strong growth due to both market and share growth.
We have a leading position in this end market, which benefits from a favourable mix of our high grade explosives, proprietary initiating systems and services. We continue to leverage our premium technology platform throughout and beyond the sector, including our proprietary Differential Energy offering. DeltaE has been in operation across the USA over the last three years and is well established in the quarry and construction and hard rock segments where customers value its safety, environmental, and efficiency benefits, including reduced GHG emissions due to reduced energy use. This technology is now being rolled out in the Asia Pacific business with trials being completed during 2018.
Dyno Nobel Americas also operates a Quarry Academy training centre for stone quarry operators.
|Fertiliser demand grows in both the 2D and 4D scenarios, although domestic demand becomes more important as the physical impacts of climate change impact on international trade. The 2D scenario describes a rise in fertiliser use overall from 2025 due to increased focus on restoring the large proportion of the world’s degraded agricultural land and unused land close to urban centres in order to provide food and fibre for a growing population. Artificial growing environments may be developed to meet growing demand while avoiding additional land clearing. Higher yields will need to be obtained from smaller land plots. New farms are expected to be built around urban centres, using highly controlled environments (i.e. vertical and high density farms with unique soil mixes). Products that are lower carbon and environmentally friendly (e.g. slow release fertilisers) will have a significant competitive advantage in this scenario.||During 2018, IPL reviewed its strategy, governance and funding of research and development. The position of Chief Technology Officer was added to the IPL Executive Leadership Team and six core technology programs were identified to advance IPL’s ability to strategically partner with customers to improve their productivity and safety, and reduce their environmental and social impacts. Collaborative research and product development, both with our customers and with recognised research bodies, is a core strategy and we aim to be well placed to meet any changed growing conditions which emerge, such as those described by the 2D and 4D scenarios. Projects in 2018 included our continued work on the Australia-China Joint Research Centre of Healthy Soils for Sustainable Food Production and Environmental Quality. We also actively promote the best practice use of our fertilisersand explosives products.|
|In the 4D scenario, climate change is expected to result in landscape level changes to existing agricultural zones. This scenario describes a change in current soil temperatures in almost all agricultural zones, as well as changes in water content, resulting in changed growing seasons and a change in the suitability of regions for certain crops. On average, the scenario describes most regions having more days above 35 degrees and a lower proportion of minimum temperature days, relative to historical averages. The 4D scenario also indicates an increase in humidity, with longer periods of drought and more intense rainfall events impacting on the areas that are suitable for agricultural use.||IPL currently operates in all four major climatic zones in Australia, including far North Queensland where some conditions are similar to those which may be experienced further south in the very long-term. This presents an opportunity for IPL to produce new suitable products that match the kinds of volatility that is likely to be experienced by farmers. IPL also has a strong competitive advantage in its existing distribution networks, enabling it to roll out new products quickly and easily to a range of affected customers. Our currently marketed high-efficiency, slow release fertilisers, which have been shown to increase yields and reduce GHG emissions from agriculture, are likely to be in high demand in the conditions described in the 4D scenario.|
IPL is currently highly dependent on the availability of affordable natural gas, both as a feedstock for hydrogen and as a fuel source. IPL continues to monitor developments in the renewables and low carbon energy space, including solar hydrogen (making use of solar energy to manufacture hydrogen from water) production.
IPL has a core competency in the manufacture, storage and transportation of ammonia and is well placed to play a role in the ‘green hydrogen’ (and therefore green ammonia) and low carbon economy. Feedstock and energy options such as solar hydrogen are constantly assessed for viability as part of IPL’s overall capital management framework, supported by two of our strategic values drivers, Leading Technology Solutions and Manufacturing Excellence.
IPL Climate Change Scenario Methodology
IPL recognises the need to understand the impact climate change could have on our business as well as our people, communities and shareholders. As noted in the G20 Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD) recommendations, the exact timing and severity of physical risks (such increased extreme weather events and changes to rainfall patterns) associated with climate change are difficult to estimate. In addition, market changes may occur as a result of governments and businesses acting to limit greenhouse gas emissions. These are known as transition risks and may also present financial risks for companies. For these reasons the TCFD guidelines recommend that companies identify and strategically consider their climate change-related financial risks and opportunities by assessing them against at least two future climate change scenarios, with one being a scenario in which climate change is limited to 2° Celsius or lower.
In 2018 IPL engaged a specialist third party to construct two future climate change scenarios: a 2 degree (2D) scenario, in which global average temperatures are limited to less than two degrees Celsius of warming above average pre-industrial levels; and a 4 degree (4D) scenario where global average temperatures increase to 4 degrees Celsius above pre-industrial levels. The 2D and 4D future scenarios were developed specifically for IPL using the following:
• The International Energy Agency World Energy Outlook 2017 and 2018 and associated scenarios;
• The Bloomberg New Energy Finance New Energy Outlook 2018 (BNEF NEO);
• The Climate Futures Tool developed by the CSIRO and the Australian Bureau of Meteorology;
• The Climate Explorer Tool developed by the National Oceanographic and Atmospheric Association (NOAA), the WRI Aqueduct Tool developed by the World Resources Institute;
• Inputs from the Intergovernmental Panel on Climate Change (IPCC AR5);
• Inputs from the Louisiana Coastal Protection and Restoration Authority; and
• Inputs from peer reviewed scientific journals from sources including the Proceedings of the National Academy of Sciences of the United States of America (PNAS).
The scenarios each describe how physical climate change and efforts to reduce emissions would impact on areas including carbon pricing and carbon market development, the overall economy, the development of technology, people’s consumption patters and social structures, the physical environment, energy and power, agriculture, mining, infrastructure and transport, with the risk assessments considering the financial risks and opportunities for IPL in these areas under each scenario. The scenario based risk assessments also considered the physical and transitional impacts on IPL’s 13 major manufacturing operations on an individual and detailed basis. The scenarios are described in summary below.
The 2 degree (2D) climate change scenario describes a future in which rapid action is taken globally to reduce carbon emissions and limit the degree of global warming to 2 degrees Celsius above pre-industrial levels.
• Climate change mitigation and adaptation policies, including carbon pricing, are introduced in order to rapidly reduce emissions.
• Extreme weather events occur and many countries invest in rebuilding and adaptation activities, ensuring that economic activity continues and the economies grow where this is possible.
• No and low carbon technologies are developed, including those used in transport, energy, agriculture and new infrastructure builds, as well as hydrogen made from renewable sources.
• New crop varieties and more intense farming aims to increase agricultural output without increasing the amount of land or water used.
• Bulk commodities (metallurgical coal, thermal coal and iron ore) decline overall, while demand for ‘new world commodities’ increases.
Both physical risks and transition risks were identified by the analysis using the 2D scenario. However, the greatest risks and opportunities for IPL in this scenario relate to transition impacts arising from the rapid global response that would need to be made by governments, sectors, businesses and communities to reduce emissions and limit average global temperature increases to 2 degrees.
The 4 degree climate change scenario assumes limited and/or ineffective policy and action to limit carbon emissions, resulting in ‘run-away’ climate change and an average increase in temperature of between 2.6°C and 4.8°C by 2100.
• A global carbon price never emerges and limited action to reduce GHG emissions results in severe physical impacts including higher global temperatures, more severe and more frequent extreme weather events such as hurricanes, drought and flooding, significant sea level rise and associated coastal flooding and storm surges.
• Damage to infrastructure occurs, including ports and ships, which causes delays to shipping and contributes to volatile global trade.
• Many regions start to focus on adaptation technologies, especially related to food and water security, and as global demand for food and fibre increases, there is a trend towards conflict between nations over increasingly scarce resources.
• Demand for fertiliser shifts to new locations globally. Australian and USA domestic markets are expected to be more resilient than export markets.
• Mining continues to extract metals and minerals, and in nations that can afford to rebuild after extreme physical impacts, steel (and therefore iron ore and metallurgical coal) and quarry and construction output demand also increases.
While market transition risks (such as risks from changed consumption patterns) occur in this 4D scenario, the material risks identified for IPL were associated with physical risks described above.
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.