Outcome: Successfully withdrawn based on a commitment from EOG to set both qualitative and quantitative methane emissions reduction targets in the coming years.
Resolved: Shareholders request EOG Resources, Inc. (EOG) adopt quantitative targets for reducing methane emissions, and issue a report (at reasonable cost, in a reasonable time, and omitting proprietary information) discussing its plans and progress towards achieving these targets.
Supporting Statement: In 2014 a shareholder proposal focusing on methane emission targets at EOG received a 28% vote. An almost identical proposal earned a 31.5% vote in 2015.
Whereas: The Paris Climate Agreement of 2015, agreed to by 195 countries, established a target to limit global temperature increases to 2-degrees Celsius above pre-industrial levels. To meet the 2-degree goal and mitigate the most severe impacts of climate change, climate scientists estimate it is necessary to reduce global emissions 55 percent by 2050 (relative to 2010 levels), entailing a US reduction target of 80 percent.
Methane is the primary component of natural gas and is a greenhouse gas 84 times more potent than CO2 over a 20-year period. Methane accounts for 25% of the world’s warming today, and the oil and gas industry is the largest source of methane emissions in the U.S.
EOG provides two years of data on methane emissions showing improvement in 2017 over 2016. However, two data points does not constitute a trend; investors believe setting methane reduction goals would help ensure EOG achieves continued reductions going forward. Proponents believe establishing quantitative methane emissions reduction targets would serve to align new and existing initiatives, spur innovation to drive further emissions reductions, lower costs through enhanced efficiency, mitigate risk, and enhance shareholder value.
Many other oil and gas companies are setting meaningful methane reduction targets while simultaneously adjusting operational strategies to respond to a variety of factors. The Oil and Gas Climate Initiative, whose members include BP, Chevron, ExxonMobil, Occidental Petroleum, and Shell recently announced a target to reduce the methane intensity of member’s upstream oil and gas operations to below 0.25% of gas sold. Hess, Apache, Kinder Morgan, and Southwestern are among EOG’s peers that have set quantitative methane emissions reduction targets. Over half of EOG’s fellow S&P 500 companies have set GHG emissions reduction targets.
Investors are concerned with methane leaking from EOG’s operations not only because of the climate impacts, but also because it represents lost saleable product.
Climate Action 100+, an organization supported by 310 investors with $32 trillion in assets under management, including PIMCO, Northern Trust Asset Management, Deutsche Asset Management, Manulife Asset Management, and HSBC Global Asset Management, is actively engaging the world’s 100 largest GHG emitters. This group requests the companies publicly disclose their GHG emissions reduction targets and plans to utilize existing technology solutions to meet such targets.
One of the recommendations of the Task Force on Climate-related Financial Disclosures, whose members include JPMorgan Chase, UBS Asset Management, Generation Investment Management, and BlackRock, is: “Describe the targets used by the organization to manage climate-related risks and opportunities and performance against these targets.”