Tuesday, May 29, 2012

55 Big Investors Challenge Shale Gas Industry & Will Compare Environmental Performance of Companies

Intense regulatory and media focus on shale gas production is being joined by investor pressure to improve environmental performance of the industry and individual companies.  Not everyday do 55 investors, with one trillion dollars under management, band together to push operational goals for an industry and say they will be comparing companies by their environmental risk levels. Yet, that is what happened last week.

Led by Boston Common Asset Management, Investor Environmental Health Network, and Interfaith Center on Corporate Responsibility, 55 investors issued 12 goals designed to insure that shale gas production's risks and impacts are minimized. www.bostoncommonasset.com/news/shale-fracking.php.  The 12 goals cover air emissions, water handling, gas well construction, and more. 

Entitled "Extracting The Facts: An Investor Guide To Disclosing Risks From Hydraulic Fracturing Operations," the full report can be seen at:  www.iehn.org/documents/frackguidance.pdf. Each goal comes with a description of general best practices and possible metrics for measurement of performance.

Investors are seeking information to guide investments, to decide where to place capital and where not to do so. The report states at page 3 of the Executive Summary: "Investors require relevant, reliable, and comparable information about companies' natural gas operations to make investment judgments based on a robust assessment of companies' environmental, social, and governance policies, practices and performance."

The key word in the foregoing is "comparable."  These investors are seeking to differentiate between companies and put pressure on the whole industry to lower environmental risks.   These 55 investors argue that lowering environmental risks and differentiating companies has growing importance as a result of moratoria in New York, the Delaware River Basin, France, South Africa, parts of Canada, and Bulgaria.

Steve Heim of Boston Common Asset Management reported in December 2011 that 21 shareholder resolutions about shale gas production had been filed at 16 companies and often had drawn substantial shareholder support.  Last week's announcement that 55 investors have banded together indicates investor interest and concern still grows about the operating practices of the industry and companies.

Informed investor focus on the environmental performance of gas production is a good thing, as investors have a unique role and real leverage in a market economy. Hopefully, investors, however, will focus as intensely as they do in "Extracting The Facts" on lowering the environmental risks of all energy sources, including those with more risk and impacts than shale gas production.

Indeed, it must not be forgotten that the increased use of gas made possible by shale gas production in the USA has slashed carbon emissions (as well as other pollutants), according to the International Energy Agency and my own work.  More attention to lessening methane leakage and other environmental impacts in gas production, as the 55 investors seek, will increase still further the environmental benefits of natural gas.  That is something that everyone should welcome.

3 comments:

  1. In order to lower risks it must first be acknowledged that there are risks..and most importantly, accept that there have been faulty drilling, casing/cement, fracking fluids spilled, leaks, not " JUST A HARMLESS LUBRICANT MRS. SWITZER" Gas companies must accept responsibility-stop the denial! I mean accept, not just pay the fine. How can you improve practices that are not faulty?? "We didn't do anything wrong according to our records but we will pay a fine so we can keep drilling". Also self reporting? I remember quite clearly, when a DEP person told me he was afraid if they were fined too much or fined, period, they would be less likely to report a spill or "incident". It all sounds good John but you know as long as they smile and cross their fingers behind their backs it will just look good on paper. From my experience the gas company sneers at you, dares you to prove they did anything wrong and then reminds you that they have lots of money to spend on lots of lawyers. "Sue us, you'll lose". That threat seems to work- remember the 5 law firms that lined up against our water line? I just can't wait to see where Cabot falls in the list. Methane leakage? I just heard another roar of gas from the Dimock Gasfield-more gas spewed into the air around us. What year did I hear they were going to stop flaring and venting? Let them make billions before they have to spend a little of their profit on doing it better...

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  2. Concerned ScientistMay 29, 2012 at 4:22 PM

    Kudos to the investors. This is a powerful way to get companies to behave responsibly. It can always be done better and pressure of this kind will help to force improvements.

    I also agree that they need to get a comparison between the footprints of all energy sources, not just shale gas. Once you stack them up gas compares favorably to all energy sources when you compare what you get to the footprint.

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