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Index > Environment > United States of America > Investors Warn Energy Companies of Risks in Flaring Gas

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Shale Gas


Major Investors Warn Energy Companies of Business Risks in Flaring Gas at Shale Oil Wells

March 27, 2012

To Whom It May Concern:

We are a group of 37 investors, representing $500 billion in total assets, who are concerned about the financial risks associated with the flaring of natural gas that has accompanied fast-proliferating oil production from shale formations in North Dakota, Texas and elsewhere in the U.S.

We are concerned that excessive flaring, because of its impact on air quality and climate change, poses significant risks for the companies involved, and for the industry at large, ultimately threatening the industry’s license to operate.

As you know, shale oil production, made possible by hydraulic fracturing technology, is positioned for dramatic growth in the U.S. Goldman Sachs forecasted recently that the U.S. is poised to become the world’s largest oil producer in the next five years, with nearly all of this projected growth coming from shale oil.

Given the considerable controversy that already surrounds natural gas hydraulic fracturing, which has led to moratoria in places like New York State, Quebec and France, operational restrictions for shale oil are a very real risk.

A lack of aggressive industry action also invites potentially inhibiting regulatory responses.

In addition, as long-term investors, we are concerned that flaring of natural gas wastes a valuable product.

Even at today’s depressed wellhead price of under $3.00 per thousand cubic feet, the 100 million cubic feet of natural gas that were flared each day in North Dakota last year1 represents approximately $110 million in lost revenue.

It also represents annual emissions of at least 2 million tons of carbon dioxide, as much as adding 384,000 cars to the road.

On a lifecycle basis, emissions from oil produced with high flaring rates may be comparable to those from Canada’s vast oil sands region.2

This could make it subject to penalties under clean fuel standards, like those adopted by California, and being actively considered by the 13 northeast states that are members of the Regional Greenhouse Gas Initiative. Such standards reduce the carbon intensity of fuel over time and limit the market for more carbon-intensive sources.

While flaring has been most prevalent and controversial in North Dakota’s Bakken shale region, it is also a growing concern in the Eagle Ford shale region in Texas, as well as in emerging production markets like Colorado’s Niobrara shale region and Ohio’s Utica shale region.

We understand that the industry has plans to invest in additional pipeline and processing infrastructure in North Dakota to utilize natural gas, but the plans announced to date appear insufficient to prevent growth in associated gas production from continuing to significantly outpace infrastructure capacity.

This is a major concern given the sharp increase in shale oil production projected for the coming decade – a trend that is being accelerated in part by a recent industry shift from shale gas to shale oil due to natural gas prices being at a 10-year low.3

We therefore are writing to request information about the amount your company is currently flaring, as well as details about your plans to reduce flaring at existing wells and prevent it at future wells.

We would appreciate a response to the above questions, as well as any additional information that the Company believes would be helpful to investors on this subject, by May 1, 2012.

We would also welcome the opportunity to meet with the Company to discuss these issues in more detail.

Please direct responses, as well as any questions and concerns, to Andrew Logan, Oil Industry Program Director at Ceres, at Logan@ceres.org or 617-247-0700 x133.

Sincerely,

(See list of investor signatories, representing ~$500 billion in assets, on next page.)

As You Sow

Bâtirente

Boston Common Asset Management, LLC

Calvert Investments, Inc.

Christian Brothers Investment Services, Inc.

Christopher Reynolds Foundation

Compton Foundation

Dexia Asset Management

Dignity Health

Diocese of Springfield, IL

Domini Social Investments, LLC

Dominican Sisters of Springfield, IL

F&C Asset Management Ltd.

First Affirmative Financial Network

Green Century Capital Management

Impax Asset Management

Joseph Rowntree Charitable Trust

Local Authority Pension Fund Forum

The Sustainability Group of Loring,

Wolcott & Coolidge Trust, LLC

 

Maryknoll Sisters

Mercy Investment Services, Inc.

Miller/Howard Investments, Inc.

Northwest Coalition for Responsible Investment

PaxWorld Management LLC

Portfolio 21 Investments

Praxis Mutual Funds

Presbyterian Church (USA)

Rathbone Greenbank Investments

Region VI Coalition for Responsible Investment

Sisters of Charity of Cincinnati,

Corporate Responsibility Committee

Sisters of Charity of Nazareth Corporate

Responsibility Committee

Sisters of the Presentation of Aberdeen, SD

Swift Foundation

Trillium Asset Management

Turner Investments

Walden Asset Management

Zevin Asset Management, LLC

 


1 The New York Times, In North Dakota, Flames of Wasted Natural Gas Light the Prairie, September 26, 2011:

http://www.nytimes.com/2011/09/27/business/energy-environment/in-north-dakota-wasted-natural-gas-flickers-against-thesky.html?pagewanted=all

2 U.S. Department of State, Keystone XL Pipeline Project, Final Environmental Impact Statement, Appendix: Life-Cycle Greenhouse

Gas Emissions of Petroleum Products from WCSP Oil Sands Crudes Compared with Reference Crudes, July 13, 2011

3 E.g. Chesapeake Energy, Chesapeake Energy Corporation Updates its 2012 Operating Plan in Response to Low Natural Gas Prices,

January 23, 2012

 

 

 

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