Shareholder Resolutions

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Company: SM Energy Company
Subject: Natural Gas Hydraulic Fracturing
Year: 2015
Sector: Energy Production
Lead Filer: Calvert Investments
Outcome: Withdrawn in response to corporate commitments


Quantitative Risk Management Reporting for

Hydraulic Fracturing Operations

WHEREAS: The Department of Energy secretary's shale advisory panel 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." 

In SM Energy's 10-K filed on February 19, 2014, the company acknowledges areas where environmental considerations, including management of water management, are material to its operations.

Crude oil and natural gas operations are subject to many risks, including . . . migration of fracture fluids into surrounding groundwater, spills or releases from facilities and equipment used to deliver these materials, spills or releases of brine or other produced or flowback water . . . and other environmental risks and hazards. If any of these types of events occurs, we could sustain substantial losses.

Furthermore, if we experience any of the problems with well stimulation and completion activities referenced above, such as hydraulic fracturing, our ability to explore for and produce crude oil, natural gas, or NGLs may be adversely affected. We could incur substantial losses or otherwise fail to realize reserves in particular formations as a result of the need to shutdown, abandon and relocate drilling operations, the need to sample, test and monitor drinking water in particular areas and to provide filtration or other drinking water supplies to users of water supplies that may have been impacted or threatened by potential contamination from fracturing fluids, the need to modify drill sites to ensure there are no spills or releases off-site and to investigate and/or remediate any spills or releases that might have occurred, and suspension of our operations.

However, SM Energy's disclosures do not indicate what policies, programs and performance data the company uses to address these material issues.

Investors require quantifiable information about how companies manage onshore unconventional oil and gas development. The report, "Extracting the Facts: An Investor Guide to Disclosing Risks from Hydraulic Fracturing Operations" outlines 12 goals and indicators that provide such information. Supported by a broad group of investors, companies and environmental organizations, the guide stresses the importance of quantitative performance reporting

RESOLVED: Shareholders request that SM Energy issue a report to shareholders, using quantitative and qualitative measures to describe how the Company manages the environmental and social issues associated with hydraulic fracturing with emphasis water and emissions management. The report should be available by December 1, 2015, be prepared at reasonable cost, and omit proprietary information.

SUPPORTING STATEMENT:  In 2012, the International Energy Agency (IEA) advised energy companies to "measure, disclose, and engage" in its report "Golden Rules for a Golden Age of Gas." The IEA recommends establishing environmental indicator baselines; disclosing emissions targets; and securing certification of performance.

Proponents concur and believe additional indicators could include safety performance data; measurement of water sourcing and waste water management by project; and emissions reductions.