You may remember it took the SoCal Gas Company nearly four months to plug the methane leak from its decaying natural gas storage facility just north of Los Angeles. By the time it fixed the problem, 96,000 tons of methane had leaked, thousands of residents of the Porter Ranch development had reported ill effects, 6,000 had moved into temporary accommodations away from the methane plume, and a substantial amount of a highly potent greenhouse gas had been added to our already overburdened atmosphere.
If this had happened in Japan, the CEO of SoCal Gas’s owner, Sempra, would have offered at the very least a public apology with a deep bow of contrition and, quite possibly, resigned. But as Mike Hiltzik reported Monday, that’s not what Sempra CEO and chairwoman Debra L. Reed did. Instead, she collected a $3.17 million bonus, bringing her total compensation for 2015 to $16.1 million.
Oh, sure, the company penalized her $130,000 for the mess at the Aliso Canyon facility. Eight-tenths of 1 percent of her compensation. Four other Sempra executives were also given a financial tsk-tsk totaling $157,000, but together they collected $3.9 in compensation. Why did they get off so easy?
As Hiltzik notes:
How does this happen? It's the result of a daisy-chain culture among corporate executives who sit on each others' boards and judge each others' performance in a near-vacuum. Among the five members of the Sempra board's compensation committee are three ex-corporate CEOs; Reed herself is a board member of Caterpillar Inc., where she's a member of the compensation committee, and of Halliburton Co. (Does this leave her enough time to run Sempra?) [...]
Yet the board's deliberations seemed to minimize the Porter Ranch leak. That suggests that safety and customer satisfaction is not even secondary as a consideration of Reed's performance—these factors are not even mentioned among the CEO's seven goals for 2015. Yet the leak was the defining event in the year's performance. One would think that operating safely is Job One at a gas utility and a major debacle that lands in the record books would be a major black mark for corporate management.
And while doling out this fat compensation package to Reed and the others, KPCC public radio reports that SoCalGas is now scrimping on its Feb. 18 pledge “plan to mitigate the leak's greenhouse gas emissions at our expense, not at the expense of our customers." It’s fighting with state regulators on how to measure the environmental damage it caused, a fight that if it succeeds, would save the company more than $64 million.
KPCC’s Sharon McNary writes:
In a draft of a greenhouse gas emissions reduction plan it wants the gas company to follow, the California Air Resources Board calls on the company to offset a volume of gas that approximates the heat-trapping potential of methane over 20 years. In a written response to that plan, SoCal Gas argues for a 100-year timeline — it essentially wants to be on the hook for capturing 30 percent of the amount ARB has proposed. [...]
"Any proposed mitigation program from the ARB does not itself impose any legal obligations on SoCalGas," company vice president George Minter wrote to the air board. He said the draft plan "does however, provide ideas as to how the company might mitigate the actual greenhouse gas emissions that were released as a result of the leak."
Ideas on how to mitigate. No mandate? No requirement? California Gov. Jerry Brown said in January that the company would have to “fully mitigate” the emissions from the leak. But “fully” has definitional issues.
Mitigation can be achieved by reducing future emissions of methane or an equal amount of “carbon dioxide equivalent.” But SoCal Gas and the Air Resources Board don’t agree on what that amounts to. And the difference is huge.
Over a period of 20 years, methane has 84 times the potency of carbon dioxide as a greenhouse gas, (86 times as much when carbon-cycle feedbacks are included). This is called its “global warming potential.” Over 100 years, the GWP of methane drops to 28 times the potency of CO2 (34 times when carbon-cycle feedbacks are included). The figure is lower over the longer time span because methane leaves the atmosphere far more quickly than CO2 does.
If the 20-year calculation that the ARB wants is used, then SoCal Gas would have to reduce future emissions by 7.8 million metric tons of carbon dioxide equivalent. But if the 100-year calculation is used, it would require reductions adding up to only 2.4 million metric tons of carbon dioxide equivalent.
The company is right when it argues that the 100-year calculation is the standard approach. However, the fact that methane is most damaging in the first years after it is emitted presents a very good reason to abandon that standard.
The financial difference is not small. Based on ARB auctions of credits on the cap-and-trade market at $12 a ton, using the 20-year calculation would cost SoCal Gas $93.6 million. But using the 100-year calculation would cut that to $29 million.
Knowing what such savings means when executive bonuses are handed out, we can expect the company to fight fang and claw for its own definition of “fully mitigate.”