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Investors Call on E&Ps Once Again to Disclose Drilling Risks

Investor groups for the fourth year in a row are urging some of the largest natural gas and oil producers in the United States to disclose information about how the risks involved with unconventional drilling operations are managed and measured. Some explorers also have been called on to disclose fugitive emissions from natural gas transmission.

Resolutions to quantifiably measure and reduce environmental and societal impacts were filed with nine top gas producers: ExxonMobil Corp., Chevron Corp., EOG Resources Inc., Range Resources Corp., Ultra Petroleum Corp., Spectra Energy, Oneok Inc. and Pioneer Natural Resources Corp. Last year the groups filed resolutions with twice as many exploration and production (E&P) companies (see Shale Daily, Feb. 13, 2012).

Ceres, which leads a national coalition of investors and public interest groups interested in environmental risk reporting, is coordinating the various resolutions with the Investor Environmental Health Network (IEHN), as they have in the previous three years.

"Now is the time for companies to measure up -- literally," said Green Century Capital Management Senior Vice President Leslie Samuelrich. Green Century filed resolutions with EOG and Ultra. "Transparency is the first step, but oil and gas companies must now implement quantifiable plans to reduce the impact of their operations on the environment."

Most of the resolutions filed focus on quantitative risk reporting and urge operators to report specific data, such as:

Many independents on their own and in response to the shareholder requests, have agreed to more disclosures regarding drilling risks. However, ExxonMobil last year attempted to block the resolution on its proxy statement, which the Securities and Exchange Commission denied (see Shale Daily, April 12, 2012).

At their 2012 annual meetings, the resolution was rejected by 70.4% of ExxonMobil's shareholders, while only 27% of Chevron's shareholders affirmed it (see Shale Daily, May 31, 2012). Two years ago about 29% of ExxonMobil shareholders supported the resolution, while 41% of Chevron's were in support (see Shale Daily, May 27, 2011).

Following the latest shareholder request, Cabot on Tuesday agreed to disclose its policy and procedures to eliminate or minimize the use of toxic substances in its hydraulic fracturing fluids, said New York State Comptroller Thomas DiNapoli. In response, the comptroller withdrew his proposal to Cabot. DiNapoli is the trustee of the $150.1 billion New York State common retirement fund. In years past the trustee has filed resolutions with E&Ps calling for more drilling disclosures.

IEHN Executive Director Richard Liroff said the gas producers' "clear environmental and business risks, and general assurances of safety and anecdotes about site-specific actions are not sufficient for investors. Shareholders want to know how companies are systematically tackling environmental risk and community impact concerns and the measurable results of these efforts."

Resolutions also were filed with Range, Oneok and Spectra to limit fugitive methane emissions and to disclose the measurements.

"Given the high short-term climate impact of methane emissions, it is now an open question whether natural gas can serve as a bridge fuel to a more sustainable energy future," said Trillium Asset Management's Natasha Lamb, vice president of Shareholder Advocacy & Corporate Engagement. Her firm filed the methane resolutions. "Companies can and should reduce their emissions using new technologies with positive return on investment."

Ceres President Mindy Lubber said the industry needed to "account for its impact on natural resources, the climate and communities. The environmental risks of fracking have bottom-line impacts, and investors are right to be demanding better performance from oil and gas firms."

The shareholder proposals filed this week were by, among others, As You Sow, Calvert Investments and The Sisters of St. Francis of Philadelphia. Last year IEHN was part of a coalition that called on operators to use "best practices" for unconventional drilling using fracking (see Shale Daily, May 21, 2012). For the 2013 proxy season, investors working with Ceres said it has filed 85 resolutions with 73 companies.

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