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Big Bakken E&P Hit by Investor Unit for Flaring
A socially focused investor group has submitted a shareholder resolution aimed at reducing volumes of flared natural gas at oil wellheads. Mercy Investment Services has targeted Oklahoma-based Continental Resources Inc., the leading exploration and production (E&P) operator in North Dakota’s Bakken Shale and Three Forks plays.
The resolution seeks board action and a report to shareholders by Dec. 2.
Citing environmental and financial risks associated with flaring gas — for which North Dakota has an aggressive program — Mercy’s resolution in part cited earlier warnings from large investors to major E&P companies tied to flaring in North Dakota and at least three other states, along with calling out “considerable controversy already surrounding gas hydraulic fracturing [fracking]” that could worsen the reaction of state and federal officials to continued flaring.
“A lack of aggressive industry action invites potentially inhibiting regulatory responses,” said the Mercy resolution filed with Continental. “Reducing gas flaring can help companies meet other objectives, such as reducing greenhouse gas emissions and managing risks associated with low-carbon fuel standards.”
Flaring remains problematic in North Dakota where soaring oil production has been accompanied by production of large quantities of associated gas, and the percentage of the associated gas flared has crept back up to 30% after falling from a peak in late 2011 of 36% (see Shale Daily, Nov. 26, 2012).
An arm of the nonprofit Sisters of Mercy of the Americas charitable organization, Mercy Investment Services’ resolution cited “leading companies,” such as Hess and Whiting Petroleum, also big players in the Bakken, for disclosing the amounts of gas flared in their respective operations, and for setting reduction goals. The resolution said Whiting has set a goal in the Bakken of eliminating all flaring in its operations.
On a recent conference call, North Dakota’s top official overseeing oil/gas operations, Lynn Helms, said there were several programs under way by the industry and state to cut into the stubbornly high flaring percentages (see Shale Daily, Dec. 3, 2012).
Three operators — Continental, Whiting and Hess — are experimenting at wellpads with multiple wells with the use of wellhead gas to run the drilling rigs, lowering diesel use and the amount of flared gas. “When they have large pads with multiple wells, they are able to pipe the gas from one wellhead to another for use in powering the drilling,” said Helms, director of North Dakota’s Department of Mineral Resources. “You can’t totally replace the need for diesel fuel, but you can reduce your diesel consumption about 60%-70%.”
Pat Zerega, director of shareholder advocacy at Mercy, called gas flaring “a tremendous economic waste” that threatens E&P companies’ “license to operate, as well as the environment.” He urged Continental to “focus on eliminating this wasteful practice.”
The latest shareholder activist movement at Continental comes nine months after a letter sent in March 2012 by 36 investors representing what Mercy characterized as $500 billion in assets went to all the companies allegedly flaring gas in North Dakota, Texas, Colorado and Ohio. That communication cited concerns about impacts on air quality and climate change, saying it eventually would hurt the companies financial standing at a time when fracking was already making life uneasy for E&P companies.
Mercy’s resolution would have shareholders request that Continental’s board of directors adopt “quantitative, company-wide goals” that are based on current technologies for reducing/eliminating flaring in all operations and facilities under the company’s control.
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