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Friday, November 8, 2013

Fracking report card: Industry gets an “F” on risk disclosure to investors

How is the industry doing on the latter point?  According to a new analysis, not so well.

Four investor groups have released a superb analysis of 24 oil and gas companies which finds that they are failing to adequately report on their efforts to reduce environmental and community impacts from hydraulic fracturing operations.

The report says: 
Since 2009, institutional investors have been pressing oil and gas companies to be more transparent in reporting how they manage and mitigate the environmental risks and community impacts of their hydraulic fracturing operations. Measurement and disclosure of best management practices and impacts are the primary means by which investors gauge how companies are addressing the business risks of their operations. The results of the scorecard demonstrate a widespread industry trend of underperformance in disclosure of key performance metrics. Companies, nearly across the board, are failing to provide investors and the public with sufficient quantitative information to adequately understand and compare the risks and opportunities these companies present within their hydraulic fracturing operations. 
The report’s four key findings: 
  1. Company disclosures remain mostly qualitative and narrative in form, making it difficult for investors to rigorously assess and compare company performance…(N)arrative reporting does not give investors and other stakeholders the information necessary to determine if individual companies are sufficiently managing the risks inherent to their operations across their multiple plays.
  2. The highest scoring company in this review…provided disclosures on only 14 of the [recommended] 32 indicators. [The lowest-scoring company] provided disclosures on only 1 of 32 indicators…
  3. The most commonly reported survey indicators were: executive compensation tied to health, environment, and safety performance (71% of companies surveyed); the use of pipelines to transport water in lieu of diesel trucks to lower air emissions (62%); and company policy on the use of non-potable versus fresh water (46%).
  4. Companies scored worst on their disclosure of how community concerns are tracked and responded to…While certain companies may be addressing local community impacts, no company is systematically reporting company successes and failures in accommodating community concerns...
These four investor groups are calling on the industry to heed an old adage in business: “You can’t manage what you don’t measure.”  Pretty sage advice, in my view.

The report concludes: 
At the time of this publication, company disclosures are insufficient to meet the needs of investors seeking to evaluate how companies are reducing the potential health and environmental risks of natural gas and oil operations using hydraulic fracturing in the United States and Canada. We believe companies implementing current best practices in operations and providing thoroughly transparent information will reduce regulatory and reputational risks; enhance their likelihood of securing and maintaining their social license to operate; reduce liabilities associated with poor performance, spills, contamination, and lawsuits; and thereby increase their access to capital. [Emphasis mine.] Although companies still have a long way to go, disclosure in the oil and gas industry has improved during the four years since investor engagements began. Increased disclosure has been driven not only by companies’ constructive conversations with investors and community members, but also by their own recognition that repeated assurances of safe operations are not sufficient to address the high-profile environmental and social challenges associated with hydraulic fracturing operations. Where companies are implementing but not disclosing their own use of best management practices and how they learn from on-the-ground failures, they are missing an opportunity to publicly demonstrate industry leadership and address investor and community concerns. [Emphasis again mine.] 
If oil and gas companies have a positive story to tell about their environmental and community impacts, they are not telling it. They need to in order to ensure their social license to operate.  If they don't have a positive story to tell, that obviously demands a much stronger investor – and regulatory – response.

Thursday, November 7, 2013

EPA schedules teleconference of its fracking research advisory panel

Just received this in my Inbox:
EPA’s Science Advisory Board (SAB) released a Federal Register Notice announcing a public teleconference of the Hydraulic Fracturing Research Advisory Panel. The Panel will receive written and oral comments from the public on new and emerging information related to hydraulic fracturing and drinking water resources. The teleconference is scheduled for Wednesday, November 20, 2013 from 12:00-5:00pm ESTTo participate please email Ed Hanlon and see the Federal Register Notice for more information.
I continue to be impressed with EPA's transparency on its study of the potential impacts of fracking on drinking water.

Tuesday, November 5, 2013

PwC: world carbon budget will be blown in 21 years

There is a limit to how much more carbon can be put into the atmosphere by 2100 before warming beyond 2 degrees Centigrade above pre-Industrial levels is locked-in. Think of it as the world's carbon budget. 

Global consulting giant PricewaterhouseCoopers (PwC), in another searing report on climate change, has found that the world is on pace to blow through this carbon budget in 21 years. This threatens to cause global warming of more than double the threshold deemed safe by the United Nations.

Busting the Carbon Budget
a number of the technological silver bullets - the big bets banked on for heavy duty decarbonisation - appear to be failing. Nuclear power, despite the UK’s announcement of its first new plant in twenty years, is in retreat in Japan and Germany. The deployment of carbon capture and storage appears to have stalled, with no commercial scale projects integrating CCS with power generation. Shale gas has displaced coal in the US, but cheaper coal contributed to higher coal consumption in Europe last year.
This situation raises:
real questions about the viability of our vast fossil fuel reserves, and the way we power our economy. The 2-degrees carbon budget is simply not big enough to cope with the unmitigated exploitation of these reserves. 
The sobering bottom-line: 
Our model shows we now need to reduce carbon intensity by 6% every year from now till 2100. This is over eight times our current rate of decarbonisation. Even doubling the current 0.7% rate of decarbonisation puts us on a path consistent with the most extreme scenario presented by the IPCC, and potential warming of around 4°C by 2100. On current trends we will use up this century’s carbon budget by 2034 – sixty six years early. Put simply, we are busting the carbon budget.

Monday, November 4, 2013

Top climate scientists: renewables can't scale in time to save climate; nuclear power needed to slow warming

The Associated Press reported yesterday that four of the world's most respected climate scientists have written a letter urging environmental organizations and political leaders to support the development of safer nuclear power technology to combat global climate disruption.

James Hansen, a former top NASA scientist; Ken Caldeira, of the Carnegie Institution; Kerry Emanuel, of the Massachusetts Institute of Technology; and Tom Wigley, of the University of Adelaide in Australia signed the letter.

AP reported that the four addressed the idea that renewable energy alone is all that's needed - or that should be used - to stop climate change:
“Those energy sources cannot scale up fast enough” to deliver the amount of cheap and reliable power the world needs, and “with the planet warming and carbon dioxide emissions rising faster than ever, we cannot afford to turn away from any technology” that has the potential to reduce greenhouse gases.
[The scientists] aren’t opposed to renewable energy sources but want environmentalists to understand that “realistically, they cannot on their own solve the world’s energy problems.” 
The New York Times' Andy Revkin has posted this excellent blog post containing the text of the scientists' letter and further thoughts, including the "tough realities" facing nuclear power - and alternative energy sources.

These four scientists have long shown courage in their work, and in raising the nuclear power taboo, they have done so again. The world is facing climate disaster, and it's "five minutes to midnight." Yet globally over 1.3 billion people are without access to electricity and 2.6 billion people are still without clean cooking facilities.  

Are we capable of developing and implementing non-ideological, fact-based, realistic, and pragmatic strategies to meet the world's energy needs and cut carbon emissions by at least 80% by the middle of this century?  It starts with a fearless asking of all the questions that need to be considered.

Nov. 12 Update: Read this excellent blog post by the Union of Concerned Scientists' Steve Clemmer that comes down solidly on the side of renewables.