Huge Votes for First Time Resolutions on Hydraulic Fracturing

Shareowners at Cabot Oil and Gas Corporation (COG) and EOG Resources, Inc. (EOG) cast about a third of their votes in support of resolutions urging the companies to better disclose the environmental hazards of natural gas production and policies to minimize risks. Of shareowners voting for or against, the 36 percent vote at Cabot Oil & Gas on April 27th and the 31 percent vote at EOG Resources on April 28th demonstrate unusually high support for these resolutions presented for the very first time at corporate meetings. The Securities and Exchange Commission had rejected efforts by both companies to keep the resolutions off their proxy ballots.

Additional resolutions are expected to be voted on in May and June at Chesapeake Energy, ExxonMobil, Williams Companies, Inc. and Ultra Petroleum.

Production from traditional reserves of natural gas has been dwindling, and an increasing number of new wells can  currently only be developed using hydraulic fracturing—a process where water, chemicals and particles such as sand are injected into the ground under extremely high pressure—to unlock vast reserves previously unavailable.  It has been estimated that 60 to 80 percent of new wells will require hydraulic fracturing; investors are concerned that this process carries potentially serious financial and environmental risks.

As use of this process has increased, a catalog of harmful environmental and community impacts allegedly linked to fracturing has emerged, with the potential contamination of water resources being a central concern. Shareowner proposals are asking companies to increase transparency regarding the environmental impact of their operations and encourage companies to mitigate risks by switching to less toxic fracturing fluids and adopting best practices for drilling and managing wastes.

“Investors are requesting increased transparency because we are concerned that shareholder value may be undermined by company actions that fall behind public and regulatory expectations for environmental protection,” said Larisa Ruoff, Director of Shareholder Advocacy for Green Century Capital Management.  “In the absence of meaningful disclosure, investors have no way of fully assessing the risks and rewards from investing in various companies in the energy sector,” she continued. Along with the Green Century Equity Fund, the proposal at EOG was co-filed by the Benedictine Sisters of Mount St. Scholastica, Catholic Health East, MMA Praxis Core Stock Fund, the Sustainability Group at Loring, Wolcott and Coolidge and Trinity Health.

New York State Comptroller Thomas DiNapoli, as Trustee for the New York State Common Retirement Fund, was lead filer of the resolution at Cabot Oil & Gas, and Catholic Healthcare West was co-filer. According to Richard Liroff, Executive Director of the Investor Environmental Health Network:

Hydraulic fracturing operations have been linked to significant environmental concerns that could have financial implications for the companies involved and are leading to increased regulatory scrutiny.  As a result, all companies that employ the process face substantial business risks. These can be reduced through adoption of precautionary best management practices.

As the use of hydraulic fracturing skyrockets, communities, regulators and investors are growing increasingly concerned about the environmental impacts of this process. Regulation at the state or federal level could have dramatic implications for all companies engaged in hydraulic fracturing by subjecting them to EPA oversight, potentially restricting areas in which hydraulic fracturing may be performed, limiting materials that may be used, or otherwise increasing costs.   Consequently, investors are seeking more information about company policies that, by minimizing environmental and associated business risks, will reduce uncertainties associated with possible regulatory changes.

In an effort to learn more about environmental and related business risks faced by companies using hydraulic fracturing for natural gas development, investors and investor advisors including As You Sow, Catholic Health East, Catholic Healthcare West, First Affirmative Financial Network, Green Century Capital Management, MMA Praxis Mutual Funds, the Mercy Investment Program, Miller/Howard Investments, the New York State Common Retirement Fund, Pax World Management, the Shareholder Association for Research & Education, the Sisters of St. Francis of Philadelphia, the Sustainability Group, and Trillium Asset Management have engaged approximately 20 natural gas companies through letters, phone calls, and meetings. Investor engagement has been organized by Green Century Capital Management and the Investor Environmental Health Network.

Now, if we can find out what’s in the oil dispersants being used in the Gulf.