BOSTON, Massachusetts, May 17, 2012 (ENS) – Institutional investors in the United States, Europe and Australia with nearly $1 trillion in assets under management have united to support a set of best practices for the hydraulic fracturing of shale rock to harvest natural gas.
Hydraulic fracturing, or fracking, involves the injection of a mixture of chemicals, sand and water under high pressure into shale thousands of feet underground, fracturing it to release hydrocarbons.
Fracking rig, Texas, April 4, 2012 (Photo by lovethyearth)
Energy companies engaged in shale gas fracking face growing regulatory uncertainty and increasing opposition from shareholders concerned about health and environmental problems resulting from air, soil and groundwater contaminated by fracking.
Boston Common Asset Management, the Investor Environmental Health Network and the Interfaith Center on Corporate Responsibility announced Wednesday that 55 major investors are part of their growing coalition seeking industry action to reduce and disclose all chemicals used in fracking, among other practices.
Steven Heim, managing director and director of Boston Common’s environmental, social and governance research and shareholder engagement division, said, “Assuming that hydraulic fracturing is going to continue to be used in some form, investors need to have greater certainty in the marketplace as to industry practices and government regulation. Currently there is no such certainty and that is really why investors are speaking up.”
In December 2011, two of the coalition organizations published “Extracting the Facts: An Investor Guide to Disclosing Risks from Hydraulic Fracturing Operations.”
The guide is organized around 12 core goals and supporting practices and indicators:
- Manage risks transparently and at board level
- Reduce surface footprint
- Assure well integrity
- Reduce and disclose all toxic chemicals
- Protect water quality by rigorous monitoring
- Minimize fresh water use
- Prevent contamination from waste water
- Minimize and disclose air emissions
- Prevent contamination from solid waste and sludge residuals
- Assure best in class contractor performance
- Secure community consent
- Disclose fines, penalties and litigation
Heim said that investors associated with the coalition want to put their money into energy companies that use these practices.
“The marketplace has spoken,” said Heim. “The best course here for investors, the environment and human health will be if all shale gas extractors wake up, get the message, and use these tools to do it right.”
Ban fracking rally in New York, June 2011 (Photo by NYAgainstFracking)
Investors are seeking action from the industry due to the increasing level of uncertainty about the impacts of fracking on human health and the environment.
Spreading moratoria and bans are compromising development prospects. Recent restrictions on the industry include a moratorium on fracking in New York State. Shell has estimated that two-fifths of its New York State acreage could be off-limits due to pending rules on fracking in that state.
The Delaware River Basin Commission has a moratorium in place and has proposed regulations to protect water resources during the development and operation of natural gas projects. The Marcellus Shale formation underlies about 36 percent of the Delaware River Basin, which includes portions of New York, New Jersey, Pennsylvania and Delaware.
The province of Quebec, Canada has imposed a fracking moratorium. Outright bans in France and Bulgaria. Chevron’s exploration license in Bulgaria has been cancelled.
The investors’s coalition says inconsistent practices are making it impossible for investors to make informed choices. While some companies have voluntarily increased disclosures, particularly around chemicals used in fracking, there is no systematic reporting on risk management and reduction steps, which means investors may lack information critical to fully evaluating energy companies engaged in shale gas extraction.
Investor concern is evident in the high levels of shareholder votes supporting requests for more fracking disclosure.
In the 2010 and 2011 proxy seasons, 21 shareholder resolutions at 16 companies received strong support, averaging 30 percent votes on six resolutions going to votes in 2010, and an average 40 percent votes on five resolutions voted on in 2011.
Most of the remaining resolutions were withdrawn in the course of discussions with companies, which either took positive action or pledged that they would do so in the near future.
“We’re encouraging a corporate race to the top in adopting best practices,” said Richard Liroff, PhD, executive director, Investor Environmental Health Network, one of the two organizations that published “Extracting the Facts,” the best practices guide.
“The best-practices guide backed by major investors offers both currently achievable goals, such as minimizing fresh water use, and more aspirational goals, such as virtually eliminating toxic chemicals from fracturing operations,” Liroff said. “The guide cites practices that are already used by 17 companies. Many companies will save money and lower risks; providing business, environmental, and community benefits.”
Sister Nora Nash is director of corporate social responsibility with Sisters of St. Francis of Philadelphia, a member of the Interfaith Center on Corporate Responsibility, the other organization behind the guide.
“Local communities have been seriously impacted by lifecycle of shale gas fracturing,” she told reporters. “What is not known is whether impacts are being adequately addressed by gas companies.”
“We’ve heard all sorts of horror stories, but we’re still woefully under educated about this process. When adequate protections are not in place, communities on the front lines clearly suffer.”
“Shale gas companies must earn their social license by operating in a more responsible manner,” said Nash. “Companies must address the community and environmental concerns prompting bans and moratoria. They must listen closely, respond sensitively, and account to both investors and communities for their actions. Otherwise, this is an uncharted process of unwanted development that deprives communities of their rights and leads to litigation and loss of investor confidence.”
“As shareholders we ask our companies to extract all the facts before they drill,” she said.
Heim said, “The investments we do want to make are in companies that have the better practices. We need more information from companies about what they’re doing. These guidelines lay out the facts that we need to know to invest.”