Californias two flat-rolled steel producers have joined
the states campaign to reduce emissions as California
enters its own greenhouse gas cap-and-trade era.
The California Environmental
Protection Agencys Air Resources Board (ARB) has
scheduled its next quarterly auction for greenhouse gas
emissions for Feb. 19, with an auction reserve price of $10.71
per tonne. The first state auction, held in November, resulted
in an average price of $10.09 per tonne, slightly more than the
$10-per-tonne minimum set by the ARB, which administers the
cap-and-trade program (
amm.com, Nov. 26).
Companies whose annual carbon
dioxide emissions exceed 25,000 tonnes qualify for the
mandatory reporting requirements under the states
cap-and-trade regulations. While most of these are in the
utility or energy industries, the states two flat-rolled
steel producers also qualify.
USS-Posco Industries Inc.
decided to "sit out" the first auction in November as it waited
to see how the program develops, the Pittsburg-based company
said at the time. UPI, which produces cold-rolled and
galvanized sheet as well as tinplate from hot coils it
purchases, emphasized that, in the meantime, it would continue
to work on projects that reduce both its energy consumption and
greenhouse gas emissions.
However, California Steel
Industries Inc. (CSI)which converts purchased slabs into
hot-rolled, cold-rolled and galvanized sheet, as well as
pipedid participate in the first auction.
"We were able to make a
purchase" of credits, said Brett Guge, CSIs executive
vice president of finance and administration. He declined to
give any further details but he pointed out that the Fontana,
Calif.-based producer "just wanted to try the system" and "put
a few credits in the bank."
At the start, the cap-and-trade
program provides most of the credits at no charge, Guge said.
But the cap declines over a period of years, raising the
incentive to reduce emissions, he said.
CSIs greenhouse gas
emissions are largely tied to its use of natural gas.
Thats where its most recent major capital projecta
$70-million Tenova Core Inc. reheat furnacecomes in. Guge
noted that while the furnace formally started up in 2010, the
economic downturn and resulting drop in steel demand has made
it "difficult" in the past few years to run it at peak
efficiency. However, as demand improves and the furnace
operates in "a more consistent pattern," CSI expects to achieve
a payoff in greater efficiency, he said.
Although the California
cap-and-trade program is relatively new, CSI has plenty of
experience working under stringent state and local air-quality
regulations that are separate from greenhouse gas legislation,
Guge said. CSI has had "several preliminary meetings" on its
participation with the ARB, which has a reputation as a tough
enforcer, he added.
"They listened to us, which we
appreciate, and they worked with us," he said, describing
CSIs working relationship with the agency as "cordial and
He observed, though, that
cap-and-trade requirements still represent a cost that not all
of CSIs rivals face.
"Certainly its an
additional cost that out-of-state competitors do not bear,"
said Guge, although he declined to quantify that
Greenhouse gas regulations have
been cited by some in the steel business as another factor in a
growing list of the states entry barriers to
"Fortunately, were already here and plan to be here
for the long haul," Guge said, "which means we will comply with