Investors Press Natural Gas Industry on Gas Drilling(A)
Institutional Investors Voice Concerns About Natural Gas DevelopmentCall on Industry to Adopt Best Practices
San Francisco — On the eve of a major energy investment conference in San Francisco, over a dozen institutional investors representing more than $15 billion in assets today raised concerns about growing problems with the natural gas industry’s environmental impacts in the Rocky Mountain states.
In a letter to the Independent Petroleum Association of America (IPAA), which represents gas producers, the investors and financial advisors called on the industry to adopt a set of best practices in the development of coalbed methane (CBM), a form of natural gas. The proposed practices are designed to protect local communities and long-term shareholder value.
Many of the investors hold shares of natural gas firms, “in recognition of the reduced emissions from combustion of natural gas compared to combustion of other fossil fuels,” the letter states. However, the investors warn that the “rush to develop coalbed methane as a new energy source in the United States raises significant environmental and social concerns.”
As an example, the investors cite data from the U.S. Bureau of Land Management that shows that current plans for coalbed methane extraction in Wyoming’s Powder River Basin will result in the pumping and discharge of 700 million gallons of potentially contaminated groundwater per day, posing threats to both underground aquifers and local streams and rivers.
Steve Lippman, Senior Social Research Analyst with Boston-based Trillium Asset Management Corporation, said, “We feel that the best practices we’ve outlined represent a win-win situation for both the gas industry and the people who live in areas impacted by coalbed methane development.”
“As investors, we believe that potential environmental liabilities and cleanup costs should be addressed early on in the process to reduce long-term financial risks, and we’ve proposed best practices to do that,” says Lily Donge, Social Research Analyst at the Calvert Group, Ltd.
The letter to IPAA, which is convening the San Francisco investment conference, asks IPAA companies to adopt industry-wide strategies to:
Protect private property. CBM operators can currently enter and develop wells on private property without landowner consent.Treat or re-inject wastewater from CBM wells. CBM wells dump hundreds of millions of gallons of highly saline water onto the ground and into streams each day, and have damaged crops and threatened fisheries in some communities.Use best available drilling technology to protect domestic drinking water supplies, sensitive lands, and wildlife, and reduce impacts to communities. Currently, CBM operators primarily use the lowest-cost technology, which results in heightened surface impacts, impacts to domestic water wells, noise from compressors, and other problems.Completely reclaim areas disturbed by CBM development. Current federal bonding requirements are inadequate to cover reclamation costs, and often result in taxpayer funding of well cleanup. Ensure full and fair representation of affected people and communities in the decision-making process.The letter states, “As investors, we will be encouraging individual companies among our portfolio holdings to take these steps and seek to promote adoption of these practices across the natural gas industry. We believe that responsible development of coalbed methane resources in ways that are sensitive to the environment and community concerns are in the best long-term interests of our country, natural gas companies, and their shareholders.”
For more background on the issue, you can also read our August advocacy column on coalbed methane and reports on our efforts in Reuters and Social Funds.com.
Steve Lippman, Senior Social Analyst, Trillium Asset Management(415) 392-4806
Elizabeth Laurienzo, Director of Corporate Communications, Calvert Group, Ltd. (301) 657-7047
Adam Werbach, Executive Director, Common Assets Defense Fund(415) 241-2515
October 2, 2003
Mr. Diemer TrueChairmanIndependent Petroleum Association of America (IPAA)1201 15th Street NW, Suite 300Washington, DC 20005
Dear Mr. True:
As institutional investors and financial advisors with over $14 billion in assets, we are writing to raise our concerns over the environmental impacts associated with the rapid development of coalbed methane.
In general, socially responsible investors seek to promote the long-term development of sustainable, renewable sources of energy. Many socially responsible investment funds do invest in companies with natural gas operations, in recognition of the reduced emissions from combustion of natural gas compared to combustion of other fossil fuels, such as coal. However, the current rush to develop coalbed methane as a new energy source in the United States raises significant environmental and social concerns. As one example, according the U.S. Bureau of Land Management, current plans for coalbed methane extraction in Wyoming alone would result in the pumping and discharge of 700 million gallons of potentially contaminated groundwater per day, posing threats to both underground aquifers and local streams and rivers. We believe that natural gas companies can contribute environmentally responsible solutions to the nation’s energy demands, but caution that they need to develop best practices in areas of exploration and production, especially for newer sources such as coalbed methane.
We believe that land use problems, potential protests from landowners and environmentalists, and public media coverage on the impacts of coalbed methane extraction pose a significant risk to the industry’s reputation and may undermine many companies’ stated commitments to environmental responsibility. We are also concerned about current damage claims by ranchers, landowners and environmental groups filed against companies, citing numerous problems with coalbed methane extraction ranging from inadequate mitigation measures to insufficient safeguards for landowners. We are also aware of lengthy appeals processes against the Bureau of Land Management on the Environmental Impact Statement process. As shareholders, we are concerned that these controversies may threaten long-term shareholder value by damaging relationships with state and local governments, limiting companies’ license to operate, and exposing companies to new legal liabilities.
Local communities in Montana, Wyoming, Colorado and New Mexico have raised concerns about numerous impacts they face from irresponsible coalbed methane extraction, including: * the impairment of water quality and quantity;* seepage of methane into drinking water wells and under people’s homes;* the introduction and spread of noxious weeds;* noise from compressor stations, generators, traffic and drilling; and* soil damage, contamination and erosion, and harm to wildlife species and habitat.
We believe that increasingly investors will request from companies documentation of whether environmental safeguards that are beyond compliance have been put in place. In this light, we ask that companies publicly disclose activities and procedures to ensure the following steps: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 processes. 5. Complete reclamation of all disturbed areas and bonding at a level that will guarantee clean-up of all new and existing wells.As investors, we will be encouraging individual companies among our portfolio holdings to take these steps and seek to promote adoption of these practices across the natural gas industry. We believe that responsible development of coalbed methane resources in ways that are sensitive to the environment and community concerns are in the best long-term interests of our country, natural gas companies, and their shareholders. We appreciate your time and attention to these matters and would welcome the opportunity to discuss these issues with you. If you have any questions, please contact Steve Lippman, Trillium Asset Management at (206) 633-7815 and Lily Donge, Calvert Group, Ltd. at (301) 961-4758.
Julie Gorte, Director of Social Research, Calvert Group, Ltd.4550 Montgomery Avenue, Bethesda, MD 20814
Steve Lippman, Senior Social Research Analyst, Trillium Asset Management Corporation369 Pine Street, Suite 711, San Francisco, CA 94104
Steven Heim, Director of Social Research, Boston Common Asset Management, LLC84 State Street, Suite 1000, Boston, MA 02109
Susan Vickers, RSM, Director of Advocacy, Catholic Healthcare West 185 Berry St., Suite 300, San Francisco, CA 94107
Sophia Collier, President, Citizens Funds230 Commerce Way, Portsmouth, New Hampshire NH 03801
Adam Kanzer, General Counsel & Director of Shareholder Activism, Domini Social Investments536 Broadway, 7th Floor, New York, NY 10012
John Harrington, President & CEO, Harrington Investments, Inc.1001 2nd Street, Suite 325 Napa, CA 94559
Hal Brill, President, Natural Investment Services, Inc.P.O. Box 747, Paonia, CO 81428
Anita Green, Vice President of Social Research, Pax World Funds222 State Street, Portsmouth, NH 03801
Deborah Abbey, CEO & Portfolio Manager, Real Assets Investment Management, Inc.1166 Alberni Street, Suite 801, Vancouver, British Columbia V6E 3Z3, Canada
Jerry Gabert, Treasurer and Vice President of Finance, Unitarian Universalist Association25 Beacon Street, Boston, MA 02108
Conrad MacKerron, Senior Social Researcher, Philanthropic & Social Investment Consulting, U.S. Bancorp Piper Jaffray, San Francisco Branch345 California Street, Suite 2200, San Francisco, CA 94104
Tim Smith, Senior Vice President, Walden Asset Management40 Court St., Boston, MA 02108