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Friday, December 12, 2014

Report: oil and gas industry has a long way to go on disclosure to investors

As regular readers of this blog know, the need for better disclosure of the chemicals used and risks associated with hydraulic fracturing is a frequent topic. Disclosure serves the public interest - and the industry's social license to operate

Demands for thorough disclosure by investors is a movement that merits close watching, if for no other reason than the weak industry response to it, according to a report issued last year.  Has it gotten any better since?

According to a just-released analysis, there's been some dramatic improvements at some companies, but the oil and gas industry as a whole has a long way to go.

Disclosing the Facts 2014 is a joint effort of As You Sow, Boston Common Asset Management, Green Century Capital Management, and The Investor Environmental Health Network. Using publicly available information that the companies provide on their websites or in financial statements or other reports linked from their websites, the report benchmarks the public disclosures of 30 oil and gas companies on 35 key performance indicators and assesses five areas of environmental, social, and governance metrics:
  1. toxic chemicals; 
  2. water and waste management; 
  3. air emissions; 
  4. community impacts; and 
  5. management accountability, emphasizing quantitative disclosure
The findings for 2014:
As was the case with the 2013 scorecard, the results of this year’s scorecard demonstrate a widespread industry trend of underperformance in disclosing key performance metrics. Across the board, companies are failing to provide investors and the public with sufficient quantitative information to adequately understand and compare the risks and opportunities these companies present regarding their shale play operations.
Although industry-wide performance continues to lag investor expectations, several companies have significantly improved their disclosures over the past year. This change is consistent with continued close investor, public, and regulatory scrutiny of hydraulic fracturing activities as well as broader patterns of innovation within the industry, where companies deploy better practices and other companies follow in what we hope is a race to the top for best performance. Investors plan to continue pressing companies to adopt effective practices for managing the risks and impacts, and thus capturing the full value, of their hydraulic fracturing operations.
Companies should report data associated with their operational impacts using quantitative metrics, on a play-by-play basis, in order for investors to be able to rigorously assess company practices...
The report's conclusion is - or at least should be - self-evident: 
We believe companies implementing current best practices in operations and providing thoroughly transparent information about these efforts will: enhance the likelihood of securing and maintaining their social license to operate; reduce regulatory and reputational risks; reduce liabilities associated with poor performance, spills, contamination, and lawsuits; and thereby increase their access to capital.

Wednesday, December 10, 2014

Studies identify big targets for methane emissions reductions

Two new studies focus on big targets for substantially reducing methane emissions resulting from oil and gas drilling.

The first is a study of methane emissions from abandoned wells in Pennsylvania – a draft of which I blogged about here. The now-completed study has been published in the Proceedings of the National Academy of Sciences.

Direct measurements of methane emissions from abandoned oil and gas wells in Pennsylvania finds significant methane emissions from 19 wells studied.  Scaling those results suggests that abandoned wells may account for between four and seven percent of methane emissions in Pennsylvania. 

More importantly, when the results are scaled up further to the estimated 3 million abandoned wells nationally, as lead researcher Mary Kang of Stanford University writes,  “the cumulative emissions from abandoned wells may be significantly larger than the cumulative leakage associated with oil and gas production, which has a shorter lifetime of operation.”

The paper calls for additional research to quantify these emissions nationally.  And while we’re at it, these wells must be systematically found and plugged.  

The second study, Methane Emissions from Process Equipment at Natural Gas Production Sites in the United States: Pneumatic Controllers, was published in the Environmental Science and Technology journal. It was funded by the Environmental Defense Fund, which is doing superb work on the methane issue, along with ten oil and gas producers. 

According to this report, the study:
says two parts of the production process should be targeted for reduced methane emissions. Researchers…concluded that pneumatic devices and liquid unloadings pose the most risk to fugitive methane. And just a small percentage of each device tested account for the bulk of emissions.
More about the study, which supports the regulatory action of states like Colorado - and the case for strong, simple, and cost-effective Federal methane emissions regulations - here.

The two reports identify big targets for reducing methane emissions beyond EPA's green completion requirements that go into effect next year. Will regulators hit those targets?