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Investor Coalition Sees Progress in Fracking Transparency

An investment manager organization that leads a coalition of shareholder advocacy groups for social and environmental issues says progress has been made in the third year of its quest to convince natural gas operators to be more forthcoming over how they are managing the risks associated with hydraulic fracturing (fracking).

Richard Liroff, executive director of the Investor Environmental Health Network (IEHN), told NGI's Shale Daily that two companies -- EOG Resources Inc. and Penn Virginia Corp. -- agreed to make additional disclosures on fracking after coalition members (Green Century Capital Management and Miller/Howard Investments, respectively) introduced resolutions to do so. The resolutions have since been withdrawn.

"We don't always file resolutions," Liroff said Tuesday, adding that conversations with investors "frequently end up in increased disclosures and the world is none the wiser that we've been talking with the company and they're responding to what we've asked. [But] I'm pleased that so many companies have increased their disclosure in response to our resolutions. I've got a lot of confidence that this track record of withdrawing resolutions is going to continue."

Eight additional operators -- Anadarko Petroleum Corp., Chesapeake Energy Corp., Chevron Corp., ExxonMobil Corp., Noble Energy Inc., Range Resources Corp., Stone Energy Corp. and Ultra Petroleum Corp. -- received resolutions as early as November. The last was submitted in January.

"EOG has increased its disclosure in many areas," Larisa Ruoff, director of shareholder advocacy for Green Century, told NGI's Shale Daily on Tuesday. "They've provided some clarity on many of the steps they're taking to mitigate the risks and environmental impacts of their fracturing operations."

Ruoff said those steps include addressing well construction issues, especially wellbore integrity, casing and cementing, minimizing the amount and number of chemicals used in fracking, and minimizing the impact operations have on water quality.

"They're taking some innovative steps to minimize the amount of water used and to increase their recycling operations," Ruoff said of EOG. "We're very pleased to see that since water has emerged as a major limiting factor."

Meanwhile, Liroff said Penn Virginia has made significant changes to its website with regard to disclosures. "They're saying some really good things about the care that they're taking to reduce risks from their operations," he said.

Liroff said conversations were continuing with "most" of the remaining eight operators that received resolutions and said there was a chance that resolutions could ultimately be withdrawn at two companies after they agree to perform additional disclosures. Ruoff declined to predict how many withdrawals may occur but did say it was "highly likely" there would be some.

"We are in discussion with a number of companies," Liroff said. "We already see prospects for more withdrawals at additional companies because of how much information they have been sharing informally and what is likely to be made public on the web in the future. [So] there might be more, but the conversations aren't far enough along [to confirm]."

Asked why some companies may be reluctant to change, Liroff said, "It's a mixed bag. Some companies fully understand the general trend toward increased transparency on a whole range of issues. They're accustomed to being pretty forthcoming. These tend to be the bigger companies and they've got sustainability reports and pretty sophisticated investor relations operations.

"Then there are other companies which are smaller and their corporate culture is just not to say very much, even if they do have good procedures in place."

But Liroff said IEHN has made significant headway during its three-year campaign, thanks largely to the fact that very little disclosure was going on at first and public awareness of fracking has increased.

"If you look back at the three-year history of this campaign, you'll find that in the first year we were averaging 30% votes on the resolutions we were filing," Liroff said. "That's a truly remarkable, high level of shareholder support for a resolution on a new issue introduced for the first time at a company. The second year the resolutions averaged 40%.

"If you look at the history of resolutions asking for greater disclosure on management of risks related to global climate change, it's taken 10 or more years for those resolutions to get up to the levels of shareholder support that we got in the first two years."

IEHN and the Interfaith Center on Corporate Responsibility (ICCR) made a similar appeal for transparency last December (see Shale Daily, Dec. 15, 2011). According to IEHN's website, its members managed more than $41 billion in assets in 2008.

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