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February 06, 2014
Investors Renew Efforts to Improve Fracking Accountability
    by Robert Kropp

Ceres publishes a report on hydraulic fracturing in water-stressed regions, and five shareowner resolutions filed this year address water and other risks associated with fracking.

“The appraisal, selection and use of water resources need to consider sustainability factors (environmental, social and economic) and respect the rights and needs of other local water users and the overall ecosystem requirements,” recently published industry guidelines for shale gas development state.

IPIECA, the industry trade association responsible for the document, includes among its membership 36 companies that account for more than half of the world’s oil production.

Despite the aspirations of the trade association, a recent report from Ceres has found that 47% of recently drilled hydraulic fracturing wells are located in “regions with high or extremely high water stress.” Furthermore, 55% of all wells are in regions experiencing drought, and 36% are located in areas experiencing groundwater depletion.

Ceres recommends that companies engaged in hydraulic fracturing implement operational practices to minimize water use and embed consideration of water risk throughout their business operations.

Both Ceres and IPIECA recognize the importance of meaningful stakeholder engagement. “Members are encouraged to work with appropriate stakeholders to build an understanding of operations, create trust, seek to reduce potential negative impacts and enhance positive impacts,” IPIECA states. And Ceres further recommends that companies provide adequate disclosure to investors and other stakeholders, and engage with stakeholders on water issues.

The Investor Environmental Health Network (IEHN) has published the shareowner resolutions with which it is involved this proxy season, and six of those listed address investor concerns with risks associated with hydraulic fracturing. One of the six resolutions, filed with EQT Corp. by Green Century Capital Management, has been withdrawn in the aftermath of successful engagement.

The five resolutions likely to go to vote at the annual meetings of ExxonMobil, Chevron, EOG Resources, Occidental Petroleum, and Pioneer Resources reflect investors' concern “about the lack of reported progress in mitigating the risks associated with company hydraulic fracturing operations,” a coalition of investors states. The companies targeted by shareowners received failing grades in Disclosing the Facts, a report that “benchmarks 24 companies engaged in hydraulic fracturing against investor needs for disclosure of operational impacts and mitigation efforts.”

“The damaging impacts of hydraulic fracturing on air, water, and local communities have made the public understandably nervous and resistant to permitting this controversial industrial activity,” said Leslie Samuelrich of Green Century, which also co-filed the resolution at EOG Resources. “Companies that fail to demonstrate a public commitment to identifying and mitigating their impacts will fail to earn the public trust, and may put shareholder value at risk.”

In addition to IEHN and Green Century, investors filing the resolutions include As You Sow, the New York State Common Retirement Fund, the New York City Pension Funds, Calvert Investments, and the Sisters of St. Francis of Philadelphia. The resolutions request that companies quantify and disclose the impacts of hydraulic fracturing operations on ground and surface water, air quality, and local communities.

“We are urging companies to move beyond anecdotes and generalizations and provide the data that will help investors identify which companies are reducing hydraulic fracturing risks through minimizing greenhouse gas emissions, lowering water usage and using safer chemicals,” Richard Liroff of IEHN said.

On a more positive note, The New York Times recently reported that shale oil companies operating in North Dakota have committed “to make an all-out effort to capture almost all the natural gas that is being flared in the Bakken shale oil field by the end of the decade.”

A 2013 shareowner resolution from Mercy Investment Services, filed with Continental Resources, cited a 2012 letter from a coalition of investors organized by Ceres. The letter expressed that flaring of natural gas in shale oil production, "because of its impact on air quality and climate change, poses significant risks for the companies involved, and for the industry at large, ultimately threatening the industry's license to operate."

“Reducing flaring will not only save energy and reduce climate-threatening carbon pollution; it will set an important precedent for shale energy production across the US,” Ceres stated in response to the commitment by companies in North Dakota.


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