Exhibit 1.01

 

CLEAN ENERGY FUELS CORP.

Conflict Minerals Report

For the Reporting Period from January 1, 2015 to December 31, 2015

 

This Conflict Minerals Report (the “Report”) of Clean Energy Fuels Corp. (the “Company”) has been prepared pursuant to Rule 13p-1 and Form SD (collectively, the “Rule”) promulgated under the Securities Exchange Act of 1934, as amended, for the reporting period from January 1, 2015 to December 31, 2015 (the “Reporting Period”). As permitted by applicable guidance of the Securities and Exchange Commission, the Company has not obtained an independent private sector audit within the meaning of the Rule.

 

Overview of the Company and the Rule

 

The Company is the leading provider of natural gas as an alternative fuel for vehicle fleets in the United States and Canada, based on the number of stations operated and the amount of gasoline gallon equivalents (“GGEs”) of compressed natural gas (“CNG”), liquefied natural gas (“LNG”) and renewable natural gas (“RNG”) delivered.  The Company’s principal business is supplying CNG, LNG and RNG (RNG can be delivered in the form of CNG or LNG) for light, medium and heavy-duty vehicles and providing operation, repair and maintenance (“O&M”) services for vehicle fleet customer stations. As a comprehensive solution provider, the Company also designs, builds, operates, services, repairs and maintains fueling stations, manufactures, sells and services non-lubricated natural gas fueling compressors and other equipment used in CNG stations and LNG stations, offers assessment, design and modification solutions to provide operators with code-compliant service and maintenance facilities for natural gas vehicle fleets, transports and sells CNG to large industrial and institutional energy users who do not have direct access to natural gas pipelines, processes and sells RNG, sells tradable credits it generates by selling natural gas and RNG as a vehicle fuel, and helps its customers acquire and finance natural gas vehicles and obtain federal, state and local tax credits, grants and incentives.  The Company targets customers in a variety of markets, including heavy-duty trucking, airports, refuse, public transit, industrial and institutional energy users and government fleets. As of December 31, 2015, the Company served approximately 986 fleet customers operating approximately 44,152 natural gas vehicles, and owned, operated or supplied over 570 natural gas fueling stations in 42 states in the U.S. and in British Columbia and Ontario in Canada.

 

The Rule requires disclosure of certain information if a company manufactures or contracts to manufacture products for which the minerals specified in the Rule are necessary to the functionality or production of those products.  The Rule also requires such companies to conduct certain inquiries designed to determine whether such minerals originated in the countries specified in the Rule.  The specified minerals, which are collectively referred to in this Report as the “Conflict Minerals,” are gold, columbite-tantalite (coltan), cassiterite and wolframite, including their derivatives, which are limited to tantalum, tin and tungsten.  The specified countries, which are collectively referred to in this Report as “Covered Countries,” are the Democratic Republic of the Congo, the Republic of the Congo, the Central African Republic, South Sudan, Uganda, Rwanda, Burundi, Tanzania, Zambia and Angola.  As described in this Report, certain of the Company’s operations manufacture, or contract to manufacture, products for which the Conflict Minerals are necessary to the functionality or production of those products.

 

When this Report uses the term “conflict-free,” it means the mines, smelters or refiners have been verified as complying with the Conflict-Free Smelter Program (the “CFSP”) of the Conflict-Free Sourcing Initiative (“CFSI”) or an equivalent third-party audit program.

 

Description of the Company’s Products Covered by this Report

 

This Report covers products: (i) for which Conflict Minerals are necessary to the functionality or production of the product; (ii) that were manufactured, or contracted to be manufactured, by the Company; and (iii) for which the manufacture was completed during the Reporting Period.  These products, which are collectively referred to in this Report as the “Covered Products,” consist of the following:

 

·                  CNG Compressors — products that create CNG by compressing natural gas.  This product category also includes replacement parts for CNG compressors.

 

·                  CNG Dispensers — products that dispense CNG into vehicles.  This product category also includes replacement parts for CNG dispensers.

 

 

·                  CNG Pressure Reduction Systems — systems that reduce the pressure of the natural gas that is supplied to a location.  This product category also includes replacement parts for CNG pressure reduction systems.

 

·                  LNG Pumps — products that offload LNG from cryogenic tanker trailers into storage tanks at LNG fueling stations.  LNG pumps also deliver LNG to dispensers from storage tanks.  This product category also includes replacement parts for LNG pumps.

 

·                  LNG Dispensers — products that dispense LNG into vehicles.  This product category also includes replacement parts for LNG dispensers.

 

·                  Fueling Station Support Panels — electrical storage panels used in natural gas fueling stations.  A fueling station support panel houses the point of sale system that tracks dispenser transactions, the communications system, purge fans, a digital video recorder and camera to record activities at the station and power circuits for station lighting and electrical control. This product category also includes replacement parts for fueling station support panels.

 

Third-party products that the Company retails but does not manufacture or contract to manufacture are outside the scope of this Report.

 

Overview of the Company’s Supply Chain

 

The Company’s supply chain with respect to the Covered Products is complex, and there are many third parties in the supply chain between the original sources of Conflict Minerals and the ultimate manufacture of the Covered Products.  In this regard, the Company does not purchase Conflict Minerals directly from mines, smelters or refiners.  The Company must therefore rely on its suppliers to provide information regarding the origin of Conflict Minerals that are necessary to the functionality or production of the Covered Products.  Moreover, the Company believes that the mines, smelters and refiners of the Conflict Minerals are best situated to identify the sources of Conflict Minerals, and therefore has sought to identify the applicable mines, smelters and refiners of Conflict Minerals in the Company’s supply chain.

 

The Company’s Conflict Minerals Policy

 

The Company maintains a policy relating to the Conflict Minerals (the “Company Policy”) that provides as follows:

 

·                  The Company is guided by its core beliefs and values as stated in the Company’s Code of Ethics.  The Company is committed to ethical practices and compliance with applicable laws and regulations wherever it does business.  The Company believes that its commitment to integrity and citizenship extends to its worldwide supply base.  The Company is committed to sourcing its products responsibly, and it expects its suppliers to also source materials from responsible suppliers.

 

·                  The Company expects its suppliers to partner with it to comply with the Rule.  The Company expects its suppliers to:

 

·                  Complete the Company’s Conflict Minerals survey, identifying whether any Conflict Mineral is present in the material that they sell to the Company and the smelter, refiner or mine that provided it (for this purpose, the Company’s direct suppliers may have to require successive upstream suppliers to complete the Company’s Conflict Minerals survey until the applicable smelter, refiner or mine is identified);

 

·                  Agree to cooperate fully with the Company in connection with any due diligence that the Company chooses to perform with respect to its inquiries; and

 

·                  When the Company deems it necessary, to provide reasonable proof of the due diligence performed by the supplier to support the information provided by the supplier to the Company.

 

·                  The Company evaluates its relationships with its suppliers on an ongoing basis, and reserves the right to consider the extent to which a supplier has failed to reasonably comply with the Company Policy in the course of such evaluation.

 

The Company has designed its Conflict Minerals reporting efforts to align and comply with the Rule.  The full text of the Company Policy is available at: http://investors.cleanenergyfuels.com/corporate-governance.cfm.  The foregoing website reference is intended to be an inactive textual reference and the contents of the Company’s website are not intended to be incorporated into this Report.

 

 

The Company’s Reasonable Country of Origin Inquiry and Due Diligence Process

 

The Company has conducted a good faith reasonable country of origin inquiry regarding the Conflict Minerals.  This good faith reasonable country of origin inquiry was reasonably designed to determine whether any of the Conflict Minerals originated in the Covered Countries and whether any of the Conflict Minerals may be from recycled or scrap sources.  The Company also exercised due diligence on the source and chain of custody of the Conflict Minerals as described below.

 

Due diligence process design

 

The Company’s due diligence measures have been designed to conform, in all material respects, to the framework in the Organisation for Economic Co-operation and Development Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High Risk Areas: Second Edition (2013), including the related supplements on gold, tin, tantalum and tungsten (the “OECD Guidance”).

 

Due diligence performed

 

Below is a summary of the Company’s due diligence process performed for the Covered Products for the Reporting Period.  The measures described below are not all of the measures that the Company took in respect of the Reporting Period in furtherance of the Company Policy or pursuant to the Rule and the OECD Guidance.

 

OECD Guidance Step 1: Maintain a management system

 

·                  The Company continued to make the Company Policy publicly available.

 

·                  The Company maintained a working group that oversaw its due diligence process (“Working Group”).  The Working Group was led by the Company’s General Counsel, the Company’s Manager, Supply Chain, and the Director of Supply Chain Management and Manufacturing of the Company’s Clean Energy Compression subsidiary.  The Working Group also included a Clean Energy Compression Supplier Development Specialist, the Director of LNG Engineering and the Supply Chain Manager of the Company’s Clean Energy Cryogenics subsidiary, and the Company’s Director, Legal Affairs.  The Company also engaged an external service provider to support the due diligence process.

 

·                  The Company continued to use CFSI’s Conflict Minerals Reporting Template (the “Template”) as a means for the collection of information relating to the use and origin of Conflict Minerals (including smelter data) in the Company’s supply chain.

 

OECD Guidance Step 2: Identify and assess risks

 

·                  The Company contacted its 82 identified in-scope suppliers and provided them with a summary of the Rule, links to the Template and the Company Policy, and contact information for the Company.

 

·                  To aid in the identification and assessment of potentially adverse impacts, the Company defined several “Red Flags,” or indicators that one or more items in a response are worthy of further action by the Company.  The Red Flags were designed to ensure that the Template has been completely filled out and capture (i) reasonableness of responses using logic checks; (ii) whether a supplier has initiated its own due diligence on minerals sourcing; (iii) whether any Conflict Minerals are sourced from a Covered County, and if sourced from a Covered Country, whether the identified mines, smelters or refiners are conflict-free; and (iv) whether the mines, smelters or refiners identified by suppliers are “certified” or “active” under the CFSI.

 

·                  Suppliers that did not submit the Template by the requested deadline or presented Red Flags were contacted by members of the Working Group.

 

OECD Guidance Step 3: Design and implement strategy to respond to risk

 

·                  The Working Group reported the findings of the due diligence program to the Company’s senior management and Board of Directors.

 

 

·                  The Company maintained a risk management plan that establishes supplier risk management strategies, and followed up with suppliers as needed in accordance with such plan.

 

OECD Guidance Step 4: Carry out independent third-party audits of the supply chain

 

·                  The Company relied on the CFSI and that organization’s CFSP for independent third-party audits of the mines, smelters and refiners in its supply chain.

 

OECD Guidance Step 5: Report on supply chain due diligence

 

·                  The Company is reporting the results of the due diligence it performed by providing this Report as Exhibit 1.01 to a Form SD filed with the Securities and Exchange Commission.  The Company also has made this Report publicly available on its website.

 

Results of Due Diligence Performed

 

The Company’s efforts to determine the mine or location of origin of the Conflict Minerals contained in the Covered Products with the greatest possible specificity consisted primarily of the due diligence measures described in this Report.  Due to the efforts of the Working Group to identify and solicit responses from in-scope suppliers, the Company received responses from 85% of its identified in-scope suppliers.  This level of supplier response constituted a 22% increase over 2014 and a 37% increase over 2013.

 

As compared to 2014, more of the suppliers contacted by the Company provided the names of the facilities from which they source Conflict Minerals; however, the suppliers that identify such facilities continue to constitute a small portion of the Company’s identified in-scope suppliers.  Some suppliers responded that they were not requesting mine, smelter or refiner names from their suppliers and/or had not implemented due diligence procedures to determine the origin of Conflict Minerals in their respective supply chains.

 

Based on the information provided by the Company’s suppliers, and taking into account the supplier responses described in the preceding paragraph, the Company believes that the facilities that may have been used to process the Conflict Minerals in the Covered Products include the facilities listed in Tables 1, 2 and 3 at the end of this Report.  Of the 368 processing facilities identified for the Reporting Period by the Company’s suppliers, 204 were validated as conflict-free, 46 have agreed to participate in the CFSP but have not yet completed the program and 118 have not been validated as conflict-free.

 

Many of the supplier responses represented their supply chain at a company-level rather than being product-specific.  As such, the list of processing facilities disclosed in this Report may contain more facilities than those that actually process the Conflict Minerals contained in the Covered Products.

 

Based on its due diligence efforts, the Company does not have sufficient information to conclusively determine the countries of origin of the Conflict Minerals in the Covered Products.  However, based on the information provided by the Company’s suppliers, the Company has reason to believe that some of the Conflict Minerals contained in the Covered Products may have originated from Covered Countries or may not be from recycled or scrap sources.

 

Steps To Be Taken

 

The Company aims to take the following steps, among others, to improve its due diligence measures and to further mitigate the risk that the necessary Conflict Minerals contained in the Covered Products finance or benefit armed groups (perpetrator of serious human rights abuses) in the Covered Countries:

 

·                  Enhancing its employee training relating to the Rule, the Company Policy and the Company’s procedures to identify and work with in-scope suppliers.

 

·                  Continuing to engage with suppliers to help them better understand the Rule and the Company Policy and to obtain accurate and complete information about the origin of Conflict Minerals in the Company’s supply chain, including improving the quality of the processing facility data provided by suppliers.

 

 

·                  Seeking opportunities to assist suppliers in building capabilities with a view to improving due diligence performance.

 

·                  Continuing its initiative to include language in its new supply contracts that requires suppliers to comply with the Company Policy.

 

·                  Engaging in industry initiatives encouraging conflict-free supply chains.

 

Forward-Looking Statements

 

This Report contains forward-looking statements regarding the Company’s business, products and Conflict Minerals efforts, including steps the Company intends to take to mitigate the risk that Conflict Minerals in its products finance or benefit armed groups in the Covered Countires.  Words such as “expects,” “believes,” “aims” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Report.  Additionally, statements concerning future matters that are not historical are forward-looking statements.  Although forward-looking statements in this Report reflect the Company’s good faith judgment, such statements can only be based on facts and assumptions currently known by the Company.  Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements.  Factors that could cause or contribute to such differences in results and outcomes include, among others: the risk that information reported to the Company by its suppliers, or industry information used by the Company, may be inaccurate; the risk that mines, smelters or refiners may not participate in the CFSP, which is a voluntary initiative; as well as risks discussed under the heading “Risk Factors” in the Company’s most recent Quarterly Report on Form 10-Q related to the Company’s compliance with government regulations and policies.  Readers are urged not to place undue reliance on forward-looking statements, which speak only as of the date of this Report.  The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Report.

 

 

Tables of Our Conflict Minerals Processing Facilities

 

Table 1.  CFSP-compliant processing facilities as of March 21, 2016.

 

Processing facilities reported in the Company’s supply chain validated as compliant according to the CFSP.

 

 

 

 

 

 

 

 

 

 

 

 

Table 2.  CFSP participating processing facilities as of March 21, 2016.

 

Processing facilities reported in the Company’s supply chain that have agreed to participate in the CFSP but have not yet completed the program.

 

 

 

 

Table 3.  No known CFSP participating as of March 21, 2016.

 

Processing facilities reported in the Company’s supply chain that have not been validated as CFSP-compliant.