Group of Investment Managers Target Drilling Companies Who Use Hydraulic Fracturing

godfatherA group of investment managers who belong to an organization called The Investor Environmental Health Network have banded together (some might call it collusion) to put pressure on energy companies who engage in natural gas drilling by using hydraulic fracturing. Their aim? To stop fracking of course, but that’s not what they say in their press statement. They’re just little ‘ole investors encouraging companies to “do the right thing” …

“Oil and gas firms are being too vague about how they will manage the environmental challenges resulting from fracking,” said New York State Comptroller Thomas DiNapoli, whose office filed a resolution with Cabot Oil & Gas asking for a specific plan to reduce or eliminate the hazards. “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.”*

Their specific concerns:

Environmental risks stem largely from poor well-construction practices, which can lead to drinking water contamination, well blowouts and gas leaks, and from inadequate wastewater recycling and management practices. Concerns about water contamination incidents are growing as operations expand, creating reputational and litigation liabilities for companies.*

The resolutions sent to the companies include this request:

The shareholder proposals ask companies to disclose their policies and strategies for reducing environmental and financial risks from chemicals use, water impacts and a host of other issues. The resolutions also request adoption of best management practices, such as:

  • recycling and reusing waste waters;
  • reducing the volumes and toxicity of chemicals;
  • disclosing the chemicals used in fracturing operations; and
  • assuring the integrity of well cementing through pressure testing and other methods.*

Nothing wrong with “best practices” listed above. Most drilling companies already follow them.

All of this would be so much hot air except for the investment funds represented, which include the New York State Common Retirement Fund, managed by State Comptroller Thomas DiNapoli. The fund has some $132 billion invested, so when DiNapoli throws his weight around, people listen (or ignore him at their own peril).

This is the list of six investors filing the resolutions, along with the nine energy companies they targeted:

  • The New York State Comptroller (Cabot Oil & Gas, Carrizo Oil & Gas)
  • Domini Social Investments (Southwestern Energy)
  • As You Sow (ExxonMobil and Ultra Petroleum)
  • Trillium Asset Management (Anadarko)
  • Miller/Howard Investments (El Paso and Energen)
  • The Sisters of St. Francis of Philadelphia (Chevron)

How will the energy companies respond? We’ll keep an eye out.

*Investor Environmental Health Network Press Release (Jan 21) – Investors challenge nine oil and gas companies on hydraulic fracturing practices