Activist shareholders press drilling companies

By FRITZ MAYER

REGION — A group of environmentally conscious investors are applying pressure on some of the leading gas drilling companies to release more information about their hydraulic fracturing or fracking activities. Specifically, the investors want to know the companies’ plan for managing such things as water pollution, possible litigation and other risks that are associated with fracking.

One of the most prominent members of the group is New York State Comptroller Thomas DiNapoli, who controls the state’s pension fund of nearly $130 billion. DiNapoli said in a statement released on January 27, “Oil and gas firms are being too vague about how they will manage the environmental challenges resulting from fracking. The risks associated with unconventional shale gas extraction have the potential to negatively impact shareholder value. I urge companies working in this field to share their risk mitigation and management strategies with investors and the public.”

Mindy S. Lubber, president of Ceres and director of the $9 trillion Investor Network on Climate Risk, echoed DiNapoli’s thought. “Natural gas can play a major role in meeting our nation’s near-term climate and energy challenges, but hydraulic fracturing must be done in a way that protects the environment and public health. Investors believe that companies can profitably minimize fracking’s water contamination, gas leaks and other material risks by adopting best management practices and by phasing out the most toxic chemicals.”

The investors filed resolutions with several of the natural gas industry’s significant players, including ExxonMobil, Chevron, Ultra Petroleum, El Paso, Cabot Oil & Gas, Southwestern Energy, Energen Anadarko and Carrizo Oil & Gas. The resolutions will be voted on by the various company boards in the months ahead.

This is the second year that such resolutions will be filed, in an effort being aided by the Investor Environmental Health Network (IEHN). The network’s executive director, Dr. Richard Liroff, said that while similar resolutions were defeated last year, the network considers the effort a victory.

Liroff said that typically when activist resolutions are first introduced to a company, they receive perhaps six to eight percent of the vote of the shareholders. The fracking resolutions introduced in 2010, however, received very healthy votes; the resolution regarding Cabot Oil & Gas, for instance, received 36% of the vote, and that gets the attention of the industry.

Liroff said, “In the world of shareholder activism, when you get up into the 20s, 30s and 40s you really are sending strong messages to companies.” And he said some drilling companies are responding. “We are seeing much greater disclosure than we did before. There are resolutions we filed last year and decided we’re not going to do again this year because they’ve either published more disclosures or made commitments to do so.”

He pointed to the Williams Companies, which has drilling operations in several shale plays including the Marcellus Shale in Pennsylvania. IEHN filed a resolution with Williams last year, and the companies subsequently produced a corporate responsibility report, which detailed the company’s efforts to increase recycling and reusing water, and what steps they’re taking to reduce their air emissions.