ExxonMobil Corp. gave a signal to oilfield services companies this week to begin disclosing the chemicals used in hydraulic fracturing operations at drilling sites.

In a Securities and Exchange Commission (SEC) proxy filing concerning the company’s annual meeting set for May, the Irving, TX-based major said it wanted the chemicals used in fracturing fluids to be disclosed.

“While we understand the intellectual property concerns of service companies when it comes to disclosing the proprietary formulations in their exact amounts, we believe the concerns of community members can be alleviated by the disclosure of all ingredients used in these fluids,” ExxonMobil stated in the SEC proxy.

The recommendation concerning the fracturing fluid chemicals came in response to a shareholder proposal published in the proxy filing asking that ExxonMobil find ways to “reduce or eliminate hazards to air, water and soil quality from fracturing.” The proposal is offered by The Park Foundation, based in San Francisco. It will be among several proposals voted on at the annual shareholder meeting on May 26.

The foundation requested that ExxonMobil’s board of directors prepare a report by Oct. 1 that summarizes the environmental impact of the company’s fracturing operations, and “potential policies for the company to adopt, above and beyond regulatory requirements, to reduce or eliminate hazards to air, water, and soil quality from fracturing.” The report is to omit proprietary information.

In the proponents’ opinion, “emerging technologies to track ‘chemical signatures’ from drilling activities increase the potential for reputational damage and vulnerability to litigation,” said the proposal. “Furthermore, we believe uneven regulatory controls and reported contamination incidents compel companies to protect their long-term financial interests by taking measures beyond regulatory requirements to reduce environmental hazards.”

The shareholders’ supporting statement said they believe ExxonMobil’s report on fracing fluids “should include, among other things, use of less toxic fracturing fluids, recycling or reuse of waste fluids, and other structural or procedural strategies to reduce fracturing hazards.”

ExxonMobil recommended in the proxy that the proposal be rejected.

“ExxonMobil’s environmental policy states that we will comply with all applicable laws and regulations and apply responsible standards where laws do not exist, including precautions specific to hydraulic fracturing,” the proxy statement said. “The board believes the minimal environmental impacts of hydraulic fracturing have been well documented and regulatory protections are well established; therefore, an additional report is not necessary…

“ExxonMobil has had detailed guidelines in place since 1998 for the assessment and mitigation of potential environmental impacts. In the case of hydraulic fracturing, these assessments inform drilling plans, well design and permit applications…We understand that some communities and homeowners new to drilling operations may have concerns. We are committed to working with them to demonstrate that we can address environmental concerns they may have, while providing good jobs and income associated with the safe and efficient production of natural gas.”

When asked about the fracturing proposal and ExxonMobil’s response in the proxy, a spokeswoman noted that CEO Rex Tillerson had answered questions before Congress in January about hydraulic fracturing (hydrofracing) (see Daily GPI, Jan. 21). Tillerson at the time told members of the House Energy and Commerce subcommittee that his company’s pending $41 billion merger with XTO Energy Inc. would be called off if Congress limited or restricted the use of hydrofracing in U.S. shale gas plays. The merger is scheduled to be completed by the end of June (see Daily GPI, Dec. 15, 2009).

At the hearing Tillerson also stated that ExxonMobil “wouldn’t object to any disclosure on the contents of what’s in the frac fluid. And, in fact, today on these [drilling] locations, in order to comply with other regulations, there are Material Safety Data Sheets [MSDS] on chemicals that are on location…that’s primarily if there’s either a surface spill or an exposure to a human that could be harmed by the exposure…Those Material Safety Data Sheets are available so that people know exactly what’s on that site. So there’s already some level of disclosure.”

Tillerson went on to say that his company understood “the concern of some of the service providers who formulate the frac fluids, that they are concerned about [a] loss of competitive advantage. We would work with them and see if we couldn’t find a way to accommodate full disclosure, or full disclosure of the contents of the frac fluid. Based on our knowledge of what’s in those fluids, there is nothing that gives us great concern…”

In related news the Wyoming Oil and Gas Conservation Commission on Tuesday tabled several proposed rules, including one to enact more stringent reporting requirements for chemicals used in hydrofracing operations. Commission members include Gov. Dave Freudenthal.

Following three hours of testimony, the commission said it would table the issue for 15 days and consider a work session to review the draft rule changes with commission staff. A final decision on the rules is expected in June. Freudenthal, a Democrat who’s been a strong supporter of the state’s energy industry, said he doesn’t believe the state collects enough information from the industry about fracing fluids.

Similar to Tillerson’s statement to Congress, Halliburton attorney Thomas Jackson, who testified at the hearing this week, said state regulators already have access to the main chemical constituents through the MSDSs, which are required by the U.S. Occupational Safety and Health Administration to protect workers in the event of an emergency. However, if a fluid mixture contains carcinogens at levels below 1%, those carcinogens are not required to be listed on the MSDS.

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