Outcome: Successfully Withdrawn. The company agreed to expand and improve its public reporting on hydraulic fracturing.
Whereas: Hydraulic fracturing in natural gas drilling has become highly controversial. The resolution proponents are concerned about regulatory, legal, reputational and financial risks associated with the environmental, health, and social impacts of fracturing operations.
Concern about water sources, toxic chemicals and wastewater has led to new regulations in several states and proposed federal legislation. Explosions, contamination incidents, and millions of dollars in fines demonstrate that things can and do go wrong. For example, in Pennsylvania, officials have cited energy companies for 2,500+ violations associated with fracturing practices and collected $25.7 million in fines since 2008.
More than 250 health care professionals and medical societies warned New York Governor Cuomo that the state failed to analyze public health impacts of hydraulic fracturing in its rush to approve permits for drilling. They cited evidence in Texas, Wyoming, Louisiana, North Dakota and Pennsylvania that found worsening health metrics among neighbors of gas wells and related infrastructure. The onset of symptoms and drilling frequently coincided.
Negative local impacts are straining community resources and generating opposition to fracturing operations. According to the investor research and advisory firm MSCI, “the expansion of oil gas activities into areas previously untouched by the industry will continue to face fierce opposition …unless companies adequately manage environmental impacts and community health concerns through communication and adoption of best environmental practice.”
In this climate, companies risk increased regulatory and legal risks or bans on fracturing operations outright. Pittsburgh banned natural gas drilling within city limits. New York State and Maryland imposed moratoriums. France completely banned the practice.
Resolved: Shareholders request that the Board of Directors prepare a report to investors by September 2012, at reasonable cost and excluding confidential or legally prejudicial data, on the short-term and long-term risks to the company’s operations, finances and gas exploration associated with community concerns, known regulatory impacts, moratoriums, and public opposition to hydraulic fracturing and related natural gas development.
Supporting statement: Such report should, at a minimum, summarize for the prior two fiscal years, with regard to hydraulic fracturing and related infrastructure:
- Any substantial community opposition to the company’s maintenance or expansion of particular operations, such as permitting and drilling;
- Government enforcement actions, including allegations of violations;
- Total aggregate government fines on an annual basis;