On Thursday, a coalition of leading investment advisory firms and advocacy organizations issued a report scoring 30 major oil and gas companies operating across the United States on their disclosure transparency around the risks associated with hydraulic fracturing operations.
“Disclosing the Facts 2014: Transparency and Risk in Hydraulic Fracturing Operations” was released by the group known as the Sustainable Investing Coalition. The organization held a phone-based news conference where they graded a collection of oil and gas producing companies based on their disclosure relationship with investors. The grading coalition is made up of As You Sow, Boston Common Asset Management, Green Century Capital Management and the Investor Environmental Health Network.
Big players such as ExxonMobil, Chevron, and BP were included in the scoring. Additionally, companies more known for activity in particular shale plays, such as Whiting Petroleum and Continental Resources in the Bakken, were included as well.
This is the second year that the coalition is ranking over two dozen oil and gas companies involved in hydraulic fracturing. The act of disclosing risk is vital to investors who claim that information is necessary to evaluate how, or even whether, companies are managing key environmental risks and community impacts.
However, the majority of oil and gas companies continue to receive failing scores. Some crucial risks of fracking that investors are obligated to understand include the use of toxic chemicals, water consumption and water quality, waste management and air emissions. This year’s fracking scorecard was updated to contain questions about how companies are managing methane leakage, a controversial issue which has tarnished the natural gas industry’s image as cleaner fossil fuel.
The scorecard assesses five areas of environmental, social, and governance-related risks. The categories included: (1) toxic chemicals; (2) water and waste management; (3) air emissions; (4) community impacts; and (5) management accountability. The DTF 2014 analysis relies solely on publicly available information that companies disclose on their websites or in financial statements or other reports linked from their websites. The report notes that quantitative disclosure of impacts and best management practices is the primary means by which investors can assess how companies are managing the risks associated with the impacts of their hydraulic fracturing operations on communities and the environment.
The results of the 2014 DTF show that many energy companies are still largely failing to rigorously disclose the impacts of their hydraulic fracturing operations on communities and the environment,” said Richard Liroff, executive director of IEHN. “We are encouraged by a handful of companies that have clearly risen to our challenge with the DTF scorecard, but data on key metrics remain largely absent for most companies, making it difficult for investors and the public to assess and compare companies’ performance.”
Lucia von Reusner, shareholder advocate for Green Century Capital Management, noticed that many companies relied too heavily on aired statements’ empty assurances that fracking is safe while failing to include substantial data to back the claims. “Public controversy about fracking will continue unless companies can prove that they are actively working to reduce toxic chemical use, water consumption, methane leakage, and the other negative impacts of fracking that damage the environment and local communities.” Reusner stated.
Some companies made huge improvements from their previous scores. BHP Billiton, who scored nearly last in 2013, won the scorecard ranking this year. Other companies such as Hess and EQT also changed their disclosure tactics substantially. Out of all the corporations that were included in the 2013 list, only Ultra Petroleum scored worse in 2014.
“It is encouraging to see some major companies turning the corner on disclosure, but we need to see a bigger commitment,” said Danielle Fugere, president of As You Sow. “The oil and gas industry’s hydraulic fracturing operations are under intense scrutiny for potential harm to neighboring communities and the environment. It’s difficult to show investors, regulators, or the public that the problems are being avoided or resolved when companies are not transparent about the operational practices they have in place.”