Shareholder Resolutions

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Company: EOG Resources
Subject: Natural Gas Hydraulic Fracturing
Year: 2014
Sector: Energy Production
Lead Filer: Green Century Capital Management, New York State Common Retirement Fund
Outcome: Vote: 28%


Quantitative Risk Management Reporting for

Hydraulic Fracturing Operations



Extracting oil and gas from shale formations, using horizontal drilling and hydraulic fracturing technology, has become a controversial public issue.  Leaks, spills, explosions and community impacts have lead to bans and moratoria in the US and around the globe, putting the industry's social license to operate at risk.  

The high volume of water used combined with the toxic nature of some chemicals used in the fracturing fluid increase the industry's risk of impact on both water availability and water quality.  Management of water risks at each stage of drilling and completion is an increasingly controversial facet of oil and gas production that must be a core risk management concern for a company.

Measurement and disclosure of best management practices and impacts is the primary means by which investors can gauge how companies are managing risks and rewards of their operations. The Department of Energy's Shale Gas Production Subcommittee recommended in 2011 that companies "adopt a more visible commitment to using quantitative measures as a means of achieving best practice and demonstrating to the public that there is continuous improvement in reducing the environmental impact of shale gas production." (emphasis in original).

The 2011 report, "Extracting the Facts: An Investor Guide to Disclosing Risks from Hydraulic Fracturing Operations," articulates investor expectations for best management practices and key performance in these areas. It has been publicly supported by investors on three continents representing $1.3 trillion in assets under management and by various companies.

EOG states that it is taking steps to minimize overall water usage and protect drinking water aquifers, yet proponents believe the company fails to disclose metrics and systematic policies necessary to evaluate how the company is minimizing risks associated with water, waste, and toxic chemical management. Absent quantitative reporting and objective metrics, shareholders cannot reliably assess the effectiveness of company policies intended to mitigate the risks of company hydraulic fracturing operations. 

Resolved:   Shareholders request the Board of Directors to report to shareholders via quantitative indicators by December 31, 2014, and annually thereafter, the results of company policies and practices, above and beyond regulatory requirements, to minimize the potential adverse impacts on ground and surface water from the company's hydraulic fracturing operations associated with shale formations. Such reports should be prepared at reasonable cost, omitting confidential information. 

Supporting Statement

Proponents suggest the reports include a breakdown by geographic region, such as each shale play in which the company engages in substantial extraction opeations, addressing at a minimum:

  • Systematic post-drilling groundwater quality assessments;
  • Quantity of fresh water and recycled water used for shale operations by region, including source;
  • percentage of wastewater stored in tanks, lined pits and unlined pits;
  • Goals and quantitative reporting on progress to reduce toxicity of drilling fluids and
  • Percentage of drilling residuals managed in closed-loop systems.