Investors Weigh in on a New Range War: Natural Gas Drilling(A)

“Home, home on the range,Where the deer and the antelope play,Where seldom is heard a discouraging word,And the skies are not cloudy all day.”–“Home on the Range”
These days there are lots of discouraging words being heard on the range, most of them about the impacts of a new boom in natural gas drilling called coalbed methane extraction. The process involves pumping away groundwater to allow trapped natural gas to flow up to wells. In the gas-rich Powder River Basin of Wyoming alone, drillers are projected to pump out 3.2 million acre-feet of water — as much as New York City uses in two and a half years. This can lower the water tables that local ranchers depend on, and the runoff of highly salty groundwater in the area threatens fish, wildlife, rangeland, and crops.
As the New York Times reports, “coalbed methane extraction can turn ranches and prairies into sprawling industrial zones, laced with wells, access roads, power lines, compressor stations, and wastewater pits.” That can happen to ranches whether the owners want to grant drillers access or not. Complex laws often allow energy companies to own mineral rights under private land, and to build their wells and other infrastructure like access roads and wastewater pits on that land whether or not they have permission from local landowners.
Bush Administration policies and a new energy bill pending in Congress promote a dramatic expansion in coalbed methane extraction throughout the Rocky Mountain West. Concerned about the impacts of irresponsible gas development, Trillium Asset Management, Calvert Group Ltd., and the non-profit group the Common Assets Defense Fund are working together to build a coalition of investors to weigh in on the issue. We will shortly be releasing an open letter to the natural gas industry that proposes a set of measures to foster more responsible coalbed methane extraction. These recommendations were largely developed by local groups in the Rocky Mountain states that have been fighting to protect their communities from the impacts of natural gas exploration. The letter asks companies involved in coalbed methane extraction to report their activities on five key issues:
1. Surface owner consent. Industry should use best efforts to secure surface use agreements with local property owners.2. Use of best available technologies. Industry should employ techniques such as aquifer recharge, clustered development, mufflers for compressor stations, and other low-impact technologies to minimize impacts on underground water reserves, rivers and streams, and surface resources.3. Collection of thorough fish, wildlife, and plant inventories before development proceeds to protect habitat, followed by phased-in development to diffuse impacts over time.4. Full and fair representation of affected people and communities in the decision-making process.5. Complete reclamation of all disturbed areas and bonding at a level that will guarantee clean-up of all new and existing wells.
We are asking institutional investors to encourage natural gas companies in their holdings to take these steps and seek to promote adoption of these practices across the natural gas industry.
Interestingly, Raymond Plank, the chairman and CEO of Apache Corporation, a natural gas and oil drilling company that is among our holdings, has been an outspoken critic of the current pace of coalbed methane development. Mr. Plank told the New York Times, “I don’t happen to think that this gas here is probably economically viable with responsible land and water practices.” He owned a 20,000 acre ranch in the heart of the Powder River Basin that he recently donated to a non-profit foundation to preserve the land, but that hasn’t protected it from damage from coalbed methane drilling. At his lead, Apache has initiated research into the long-term environmental effects of coalbed methane extraction. We hope that our coalition encourages CEOs of other natural gas companies to take a similarly responsible view.