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Published: August 28, 2006

 
 

Unrecognized Assets

Environmental liabilities — even abandoned oil platforms and polluted wetlands — are hidden sources of value.

Illustration by Lars Leetaru
Within Eglin Air Force Base, managed by the United States Air Force in northwest Florida, are 400,000 acres of longleaf pine forest. The longleaf pine is the official tree of two states in the region, North Carolina and Alabama; it has long been known for its resistance to fire, its relatively slow growth and long lifespan (typically 300 years), and its valuable lumber and resin. Over the years, longleaf pine has been logged almost to extinction and rarely replanted, and Eglin Air Force Base’s stand represents about 72 percent of the remaining old-growth (naturally occurring) population of this species in the world.

Is there any value to these forests, beyond the support and buffer they provide for military training exercises? The United States Air Force thinks so. A series of studies, conducted for the Air Force beginning early in 2004, has attempted to assess the potential value of the forests for the environment, economy, and surrounding communities. For instance, traditional timber sales currently generate about $1.2 million per year at Eglin. With 280,000 acres of woodlands open to the public, Eglin also offers recreational opportunities, including hunting, fishing, and camping. If the base charged for these, they could be worth $8 million to $12 million per year. And Eglin’s forests provide valuable carbon sequestration, removing carbon  gas from the atmosphere and thus potentially helping to mitigate climate change. If carbon emission trading markets develop in the United States, as many observers believe, then the forests could be worth significantly more. In short, the option of managing an old-growth forest, once seen as a responsibility and expense, is now worth a great deal to the Air Force.

“These assets have military, ecological, and economic value,” says Colonel Rod Croslen, who directed the initial studies for the Office of the Deputy Assistant Secretary of the Air Force for Environment, Safety, and Occupational Health.

Similar stories could be told about airports, shipping ports, and many other government assets; and about factories, distribution centers, oil wells, and large industrial sites in the private sector. In all of these arenas, enterprises have found ways to turn even seemingly hazardous environmental liabilities into assets. For example, BP is investing about $1 billion in its Carson Refinery in the Los Angeles area to build a new power plant capable of providing electricity for about half a million homes. Designed in partnership with the local power utility (the Edison Mission Group, formerly Southern California Edison), the facility will take carbon created as a waste by-product of the petroleum refining process and separate it into hydrogen and carbon dioxide. The hydrogen will be used to generate electricity. The CO2 will be injected into underground oil reserves thousands of feet below the surface, flushing the petroleum closer to the surface and rendering it more accessible, while the greenhouse gas remains sequestered away from the atmosphere. (To see BP's animation depicting the process click here.)

In the state of Georgia, International Paper turned more than 5,000 acres of unused land into a conservation bank, or habitat, for the endangered red-cockaded woodpecker. In addition to fostering valuable public goodwill, the conservation bank allows International Paper to legally expand operations into other forests. The company can also sell its credits for endangered species protection — recently valued at $250,000 — to other developers. Another case is Talisman Energy, an independent oil company that is spending $58 million to put two energy-generating windmills on one of its North Sea gas platforms. The Economist reported that for now, the company intends to use the energy to power the platform’s operations; in the future, the company may use the platform as a generating station to send power ashore. With the North Sea oil and gas industry in decline, Talisman could succeed in turning liabilities — abandoned oil platforms — into assets.

 
 
 
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