August 16, 2013 — Hydraulic fracturing, sometimes called fracking, has already changed the environmental and energy landscape in the United States. This drilling technology is opening vast new oil and gas resources. But hydraulic fracturing operations have a mixed track record, exposing some communities to serious risks from water contamination, air pollution, and land development.
Green Century is concerned about these risks – for the environment, and for investors, which is why we’re pushing companies to recognize calls for transparency and accountability. In the last four years of co-leading an investor coalition on hydraulic fracturing, we’ve made major progress with shareholder advocacy to engage Ultra Petroleum*, an oil and gas company that specializes in hydraulic fracturing operations.
Read on for a Q&A with Green Century Shareholder Advocate Lucia Von Reusner about Green Century’s approach with Ultra.
Q: Why are investors concerned about hydraulic fracturing?
A: Films like Gasland have heightened public awareness of hydraulic fracturing and its negative environmental and social impacts, and prompted public backlash against the industry. This backlash has led to bans and moratoria, stripping companies of their social license to operate. As one example, in December 2012, Cabot Oil & Gas Corporation* was made to pay a $4.1 million settlement with residents in Dimock, PA over alleged water contamination. That attracted national (and negative!) media attention.
And in 2011, a front-page New York Times article exposed Ultra Petroleum’s spreading over 155,000 gallons of radioactive wastewater over roads across Pennsylvania to suppress dust. The environmental and community impacts are of increasing concern to investors. For four years, Green Century has been working with the Investor Environmental Health Network to lead a coalition, engaging other shareholders to address these risks.
Q: How – and when – did Green Century first get involved with Ultra Petroleum?
A: Green Century filed its first shareholder resolution at Ultra Petroleum in 2009, asking the company to disclose the environmental impacts of the company’s hydraulic fracturing operations, as well as its policies to reduce those impacts. At the time, fracking was still a relatively unknown industry term.
Ultra Petroleum adamantly opposed the shareholder resolution, even requesting that the Securities and Exchange Commission (SEC) reject the resolution on the grounds that the company and “appropriate regulatory authorities had already laid to rest any serious concerns about hydraulic fracturing.” The SEC denied Ultra Petroleum’s request. But when Green Century traveled to Alberta, Canada to present the resolution at the company’s annual meeting, management refused to even give Green Century the standard two minutes to present.
Q: How did Green Century respond to Ultra?
A: Green Century continued filing shareholder resolutions with Ultra Petroleum for the next two years, while Ultra continued to contest that its operations were risk free. Finally, after the company saw that many 2012-2013 resolutions were consistently receiving support from at least 35% of shareholders – far more than most shareholder resolutions – Ultra Petroleum’s behavior and practices dramatically changed course. The company not only stopped denying the risks of hydraulic fracturing, but also took significant steps to reduce the environmental impacts of its fracking operations, while also agreeing to be much more transparent about its operations going forward.
Ultra now reports that it has stopped using fresh water in its current operations, by reusing water that returns to the surface after a well is done being fracked. The company has also removed toxic biocide from the fracturing fluid, is working to reduce the use of other toxic chemicals, and has phased out the use of open pits for waste water storage by instead moving the waste through a closed-loop system of steel pipes and tanks. Finally, it has installed ‘green completions’ on 100% of its wells, to capture leaked natural gas (methane), a potent greenhouse gas dozens of times stronger than carbon dioxide.
Q: Why did Green Century choose Ultra Petroleum?
A: Ultra is not the biggest oil company engaged in hydraulic fracturing. And we didn’t expect its management to react in such an adversarial way when we first filed. At the time of filing, the company was an important player in both the Marcellus [Pennsylvania] and Green River Basin [Wyoming] natural gas fields, and seemed reluctant to acknowledge environmental and community concerns. As we moved forward, our effort became more important, as a test of how the SEC would respond to management’s claims that concerns around hydraulic fracturing were “already laid to rest.”
Q: What’s the outlook for the future?
A: There is definitely more to be done. While we are pleased with this progress, we continue to hold Ultra Petroleum accountable for measuring and reporting on the effectiveness of all the policies and procedures it now has in place.
The risks of fracking are industry-wide, of course. That’s why we continue to push other companies, including EOG*, Noble*, ExxonMobil*, and Chevron* to disclose and reduce environmental risks. Last, we will collaborate with our allies’ efforts to pass stronger policies that reduce risk.
I’m proud that we’ve worked to reduce shareholder risk while protecting communities and our environment. It really demonstrates the power of shareholder advocacy.
Green Century Capital Management, Inc., the administrator of the Green Century Balanced Fund and Equity Fund, occasionally buys positions in various companies that do not meet the Funds’ environmental standards for the purpose of enabling Green Century to advocate for what it considers to be important reforms.
*As of 6/30/13, Ultra Petroleum Corporation comprised 0.00% and 0.05%, EOG Resources, Inc. comprised 0.00% and 0.57%, and Noble Energy, Inc. comprised 0.00% and 0.34% of the Green Century Balanced Fund and the Green Century Equity Fund, respectively. Other securities mentioned were not held in the portfolios as of June 30, 2013. The holdings of the Green Century Funds may change due to ongoing management of the Funds. References to specific investments should not be construed as a recommendation of a security by the Funds, their advisor, administrator, or distributor.
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